<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER , 1996
REGISTRATION NO. 333-12437
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
POST-EFFECTIVE
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
CCB FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
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<S> <C> <C>
NORTH CAROLINA 6025 56-1347849
(State or other jurisdiction (Primary Standard (I.R.S. Employer
of incorporation or organization) Industrial Classification Identification No.)
Code No.)
</TABLE>
111 CORCORAN STREET
POST OFFICE BOX 931
DURHAM, NORTH CAROLINA 27702
(919) 683-7777
(Address, including Zip Code, and telephone number, including area code, of
registrant's principal executive office)
ERNEST C. ROESSLER
VICE CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER
111 CORCORAN STREET
POST OFFICE BOX 931
DURHAM, NORTH CAROLINA 27702
(919) 683-7777
(Name, address and telephone number of agent for service)
COPIES TO:
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<S> <C>
ROBERT A. SINGER, ESQ. ELIZABETH L. MOORE, ESQ.
BROOKS, PIERCE, MCLENDON PETREE STOCKTON, L.L.P.
HUMPHREY & LEONARD, L.L.P. 3500 ONE FIRST UNION CENTER
230 NORTH ELM STREET, SUITE 2000 301 SOUTH COLLEGE STREET
POST OFFICE BOX 26000 CHARLOTTE, NORTH CAROLINA 28202
GREENSBORO, NORTH CAROLINA 27420 (704) 338-5082
(910) 373-8850
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF THE PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC:
As soon as practicable after this Post-Effective Amendment No. 1 to the
Registration Statement becomes effective.
THE REGISTRANT HEREBY AMENDS THIS POST-EFFECTIVE AMENDMENT NO. 1 TO THE
REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS
EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH
SPECIFICALLY STATES THAT THIS POST-EFFECTIVE AMENDMENT NO. 1 TO THE REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS POST-EFFECTIVE AMENDMENT NO. 1 TO THE
REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION,
ACTING PURSUANT TO SECTION 8(A), MAY DETERMINE.
<PAGE>
CROSS-REFERENCE SHEET PURSUANT TO ITEM 501 OF REGULATION S-K
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<CAPTION>
CAPTION IN PROSPECTUS/PROXY STATEMENT AND
ITEM OF FORM S-4 PROSPECTUS/PROXY STATEMENT SUPPLEMENT
<C> <S> <C>
A. INFORMATION ABOUT THE TRANSACTION
1. Forepart of Registration Statement and Outside Front Cover
Page of Prospectus........................................... Cover page; Cross-Reference Sheet; Outside Front Cover
Page of Prospectus/Proxy Statement
2. Inside Front and Outside Cover Pages of Prospectus........... Inside Front Cover Page of Prospectus/Proxy Statement;
AVAILABLE INFORMATION
3. Risk Factors, Ratio of Earnings to Fixed Charges and Other
Information.................................................. SUMMARY; SELECTED FINANCIAL INFORMATION; COMPARATIVE
PER SHARE DATA
4. Terms of the Transaction..................................... THE SPECIAL MEETING; THE MERGER; RIGHTS OF DISSENTING
SHAREHOLDERS; CAPITAL STOCK OF CCBF AND SALEM
5. Pro Forma Financial Information.............................. PRO FORMA COMBINED FINANCIAL INFORMATION; PRO FORMA
CAPITALIZATION
6. Material Contracts with the Company Being Acquired........... THE MERGER -- Recommendation and Reasons
7. Additional Information Required for Reoffering by Persons and
Parties Deemed to be Underwriters............................ Not Applicable
8. Interests of Named Experts and Counsel....................... THE MERGER -- Salem Fairness Opinion; LEGAL MATTERS;
EXPERTS
9. Disclosure of Commission Position on Indemnification for
Securities Act Liabilities................................... INDEMNIFICATION
B. INFORMATION ABOUT THE REGISTRANT
10. Information with Respect to S-3 Registrants.................. Not Applicable
11. Incorporation of Certain Information by Reference............ INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE;
SUMMARY; CCB FINANCIAL CORPORATION
12. Information with Respect to S-2 or S-3 Registrants........... Not Applicable
13. Incorporation of Certain Information by Reference............ Not Applicable
14. Information with Respect to Registrants Other Than S-2 or S-3
Registrants.................................................. Not Applicable
C. INFORMATION ABOUT THE COMPANY BEING ACQUIRED
15. Information with Respect to S-3 Companies.................... Not Applicable
16. Information with Respect to S-2 or S-3 Companies............. Not Applicable
17. Information with Respect to Companies Other than S-2 or S-3
Companies.................................................... SUMMARY; SALEM TRUST BANK
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CAPTION IN PROSPECTUS/PROXY STATEMENT AND
ITEM OF FORM S-4 PROSPECTUS/PROXY STATEMENT SUPPLEMENT
<C> <S> <C>
D. VOTING AND MANAGEMENT INFORMATION
18. Information if Proxies, Consents or Authorizations are to be
Solicited.................................................... SUMMARY; THE SPECIAL MEETING; RIGHTS OF DISSENTING
SHAREHOLDERS; Appendix B; THE MERGER -- Required
Shareholder Approvals, and -- Interests of Certain
Persons With Respect to the Merger; CCB FINANCIAL
CORPORATION; -- Beneficial Ownership of CCBF Stock
and -- Management and Additional Information; SALEM
TRUST BANK -- Beneficial Ownership of Salem Stock by
Management and Others, -- Salem Management and
Additional Information, -- Management
Renumeration, -- Employment Agreements, and -- Other
Transactions with Management; INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE
19. Information if Proxies, Consents or Authorizations are not to
be Solicited or in an Exchange Offer......................... Not Applicable
</TABLE>
<PAGE>
SALEM TRUST BANK
2140 COUNTRY CLUB ROAD
WINSTON-SALEM, NORTH CAROLINA 27104
TELEPHONE: (910) 777-1400
NOTICE OF THE RECONVENING OF THE SPECIAL MEETING OF SHAREHOLDERS
NOTICE is hereby given that the Special Meeting of Shareholders of Salem
Trust Bank ("Salem") adjourned on November 21, 1996 will be reconvened at the
Arts Council Theater, 610 Coliseum Drive, Winston-Salem, North Carolina, at
10:00 o'clock, a.m., E.S.T. on Tuesday, January 21, 1997, for the following
purpose:
1. PROPOSAL TO APPROVE PROPOSED MERGER. To consider and vote on a
proposal to approve the Second Amended Agreement of Combination, dated
initially as of July 1, 1996 and amended as of September 6, 1996 and
November 21, 1996, and the related plan of merger (collectively, the
"Amended Merger Agreement"), among Salem, CCB Financial Corporation
("CCBF") and Central Carolina Bank and Trust Company ("CCB Bank") (a copy
of the Agreement as amended as of September 6, 1996 is attached as Appendix
A to the Prospectus/Proxy Statement previously distributed to Salem's
shareholders and a copy of the amendments thereto as of November 21, 1996
comprising the Amended Merger Agreement is attached as Appendix A to the
Prospectus/Proxy Statement Supplement which accompanies this Notice), and
to approve the transactions described therein, including without limitation
the merger of Salem with and into CCB Bank (the "Merger") with the result
that all outstanding shares of Salem's $2.50 par value common stock will be
converted into shares of CCBF's $5.00 par value common stock (each with an
attached preferred stock purchase right); and,
2. OTHER BUSINESS. To transact such other business as properly may be
presented for action at the reconvened Special Meeting.
At the effective time of the Merger, each outstanding share of Salem's
$2.50 par value common stock ("Salem Stock") will be converted into that
fraction of a share of CCBF's $5.00 par value common stock and that fraction of
a CCBF preferred stock purchase right computed under the Exchange Ratio set
forth in the Amended Merger Agreement. UNDER NORTH CAROLINA LAW EACH SALEM
SHAREHOLDER HAS THE RIGHT TO DISSENT FROM THE MERGER AND TO DEMAND PAYMENT OF
THE FAIR VALUE OF HIS OR HER SHARES OF SALEM STOCK. A SALEM SHAREHOLDER'S RIGHT
TO DISSENT IS CONTINGENT UPON HIS OR HER STRICT COMPLIANCE WITH THE REQUIREMENTS
OF ARTICLE 13 OF THE NORTH CAROLINA BUSINESS CORPORATION ACT. THE FULL TEXT OF
ARTICLE 13 IS ATTACHED AS APPENDIX B TO THE PROSPECTUS/PROXY STATEMENT AND IS
INCORPORATED HEREIN BY REFERENCE.
EACH SALEM SHAREHOLDER IS INVITED TO ATTEND THE RECONVENED SPECIAL MEETING
IN PERSON. HOWEVER, TO ENSURE THAT A QUORUM IS PRESENT AT THE RECONVENED SPECIAL
MEETING, EACH SALEM SHAREHOLDER IS REQUESTED TO COMPLETE, SIGN AND DATE THE
ENCLOSED APPOINTMENT OF PROXY AND RETURN IT PROMPTLY TO SALEM IN THE ENCLOSED
STAMPED, RETURN ENVELOPE. SIGNING AND RETURNING AN APPOINTMENT OF PROXY WILL NOT
AFFECT A SALEM SHAREHOLDER'S RIGHT TO ATTEND THE RECONVENED SPECIAL MEETING AND
VOTE IN PERSON.
PREVIOUSLY SUBMITTED APPOINTMENTS OF PROXY WILL NOT BE VOTED AT THE
RECONVENED SPECIAL MEETING. ACCORDINGLY, PLEASE COMPLETE AND RETURN THE
ACCOMPANYING APPOINTMENT OF PROXY TO SALEM AT YOUR EARLIEST CONVENIENCE.
By Order of the Board of Directors
(Signature of Sheeran appears here)
PRESIDENT AND
CHIEF EXECUTIVE OFFICER
November , 1996
SALEM'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT
SALEM'S SHAREHOLDERS VOTE TO APPROVE THE AMENDED MERGER AGREEMENT
<PAGE>
PROSPECTUS/PROXY STATEMENT SUPPLEMENT
(TO PROSPECTUS/PROXY STATEMENT DATED OCTOBER 4, 1996)
CCB FINANCIAL CORPORATION
COMMON STOCK
THE PURPOSES OF THIS PROSPECTUS/PROXY STATEMENT SUPPLEMENT ARE TO PROVIDE
INFORMATION RELATING TO CERTAIN AMENDMENTS TO THE MERGER AGREEMENT ATTACHED AS
APPENDIX A TO THE PROSPECTUS/PROXY STATEMENT, DATED OCTOBER 4, 1996; TO PROVIDE
CERTAIN UPDATED FINANCIAL INFORMATION RELATING TO SALEM AND TO CCBF ON
HISTORICAL AND PRO FORMA COMBINED BASES; AND, TO RE-SOLICIT APPOINTMENTS OF
PROXY FROM SALEM'S SHAREHOLDERS TO BE VOTED AT THE RECONVENED SPECIAL MEETING.
THE INFORMATION INCLUDED IN THIS PROSPECTUS/PROXY STATEMENT SUPPLEMENT SHOULD BE
READ IN CONJUNCTION WITH THE PROSPECTUS/PROXY STATEMENT PURSUANT TO WHICH CCBF
STOCK WAS OFFERED IN CONNECTION WITH THE MERGER. UNLESS OTHERWISE SPECIFICALLY
DEFINED HEREIN, CAPITALIZED TERMS ARE USED IN THIS PROSPECTUS/PROXY STATEMENT
SUPPLEMENT AS SUCH TERMS ARE DEFINED IN THE PROSPECTUS/PROXY STATEMENT. THE
SECTION AND SUBSECTION HEADINGS HEREIN REFER TO THE SECTIONS AND SUBSECTIONS OF
THE PROSPECTUS/PROXY STATEMENT THAT ARE HEREBY SUPPLEMENTED. CROSS-REFERENCES IN
THIS PROSPECTUS/PROXY STATEMENT SUPPLEMENT ARE TO RELEVANT SECTIONS AND
SUBSECTIONS OF THE PROSPECTUS/PROXY STATEMENT AND TO THE RELEVANT SECTIONS AND
SUBSECTIONS HEREIN SUPPLEMENTING, AS APPLICABLE, THOSE SECTIONS AND SUBSECTIONS
OF THE PROSPECTUS/PROXY STATEMENT. EXCEPT AS SUPPLEMENTED HEREBY, THE STATEMENTS
MADE IN THE PROSPECTUS/PROXY STATEMENT CONTINUE IN EFFECT.
IF YOU HAVE DISCARDED THE PROSPECTUS/PROXY STATEMENT PREVIOUSLY RECEIVED BY
YOU AND DESIRE ANOTHER COPY, YOU SHOULD CONTACT NORMAN D. POTTER, SALEM'S CHIEF
FINANCIAL OFFICER AND SECRETARY, AT SALEM TRUST BANK, 2140 COUNTRY CLUB ROAD,
WINSTON-SALEM, NORTH CAROLINA 27104, TELEPHONE (910) 777-1400 AT YOUR EARLIEST
CONVENIENCE.
COVER PAGE OF PROSPECTUS/PROXY STATEMENT
The Special Meeting was called for and convened at 10:00 o'clock a.m., on
Thursday, November 21, 1996. However, the Special Meeting was adjourned for
reconvening at a time, place and date to be noticed to Salem's shareholders for
the reasons discussed below.
Prior to the convening of the Special Meeting, the market price of CCBF
Stock increased significantly from the range of market prices generally existing
at the time the Merger Agreement was initially executed (July 1, 1996) and
subsequently amended (as of September 6, 1996). The Merger Agreement permitted
CCBF and CCB Bank or Salem to terminate the Merger Agreement if the average
closing price of CCBF stock over the 60 trading days preceding the closing of
the Merger was less than $46.78 or more than $57.18. On November 15, 1996, the
closing price for a share of CCBF Stock on the NYSE was $62.00. As a
consequence, during the second week of November, CCBF and Salem began discussing
possible amendments to the provisions of the Merger Agreement relating to the
exchange ratio for the conversion of Salem Stock into CCBF Stock and CCBF Rights
and the rights of the parties to terminate the Merger Agreement. Ultimately, the
Boards of Directors of CCBF and CCB Bank and the Board of Directors of Salem
adopted a Second Amended Agreement of Combination, dated as of November 21, 1996
(the "Amended Merger Agreement"), amending the Merger Agreement attached to the
Prospectus/Proxy Statement as Appendix A generally as follows:
(Bullet) Section 3.1. If the average closing price for a share of CCBF
Stock on the NYSE over the 60 trading days preceding the scheduled
Closing Date (the "Average Price") is equal to or greater than
$46.78, but equal to or less than $57.18, each outstanding share
of Salem Stock (excluding shares held by Salem, CCBF, CCB Bank or
any of their subsidiaries, other than in a fiduciary capacity or
as a result of debts previously contracted, and excluding shares
held by Salem shareholders who exercise their statutory
dissenters' rights in accordance with North Carolina law) will be
converted into .41 of a share of CCBF Stock and .41 of a CCBF
Right. If the Average Price is greater than $57.18, each share of
Salem Stock will be converted into that fraction of a share of
CCBF Stock and that fraction of a CCBF Right computed by dividing
the Average Price into $57.18 and multiplying the resulting
quotient by .41. If such Average Price is less than $46.78, each
share of Salem Stock will be converted into that fraction of a
share of CCBF Stock and that fraction of a CCBF Right computed by
dividing $46.78 by the Average Price and multiplying the resulting
quotient by .41. See "THE MERGER -- Terms of the Merger" and
"RIGHTS OF DISSENTING SHAREHOLDERS."
(Bullet) The parties' rights in the Merger Agreement to terminate that
Agreement if the Average Price of CCBF Stock is less than $46.78
or greater than $57.18 have been deleted.
(Bullet) Salem has been granted a right to terminate the Amended Merger
Agreement if, on or before the Closing Date and prior to the
Effective Time, CCBF announces its merger with and into another
company.
(Bullet) Certain non-substantive changes (e.g. date of execution, name of
document, etc.) have been made.
The amendments contained in the Amended Merger Agreement and relating to
the Exchange Ratio and termination rights are set forth in excerpted form as
Appendix A to this Prospectus/Proxy Statement Supplement. Except as described
above, the provisions of the Merger Agreement, as amended as of September 6,
1996, have been carried forward into the Amended Merger Agreement.
The date of this Prospectus/Proxy Statement Supplement is November , 1996.
<PAGE>
AVAILABLE INFORMATION
CCBF is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "1934 Act") and, in accordance therewith,
files reports, proxy statements and other information with the Securities and
Exchange Commission (the "Commission"). Reports, proxy statements and other
information filed by CCBF can be inspected and copied at the public reference
facilities maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the Commission's Regional Offices
located in Chicago (Northwestern Atrium Center, Suite 1400, 500 West Madison
Street, Chicago, Illinois 60661-2511) and in New York (7 World Trade Center,
13th Floor, New York, New York 10048). Copies of such material can be obtained
by mail from the Public Reference Section of the Commission, 450 Fifth Street,
N.W., Washington, D.C. 20549, at prescribed rates. The Commission maintains a
Web site (http://www.sec.gov) that contains reports, proxies and other
information regarding CCBF and other registrants. Copies of reports, proxy
statements and other information filed by CCBF with the NYSE may be inspected at
20 Broad Street, New York, New York 10005.
CCBF has filed with the Commission a Registration Statement on Form S-4
under the Securities Act of 1933, as amended (the "1933 Act"), and a
Post-Effective Amendment No. 1 to such Registration Statement, with respect to
the CCBF Stock and CCBF Rights offered hereby. As permitted by the rules and
regulations of the Commission, the Prospectus/Proxy Statement and this
Prospectus/Proxy Statement Supplement do not contain all the information set
forth in the Registration Statement, the Post-Effective Amendment No. 1 and the
exhibits and schedules thereto, all of which may be obtained by mail from the
Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, upon payment of the prescribed fees.
AS FURTHER DESCRIBED BELOW, THE PROSPECTUS/PROXY STATEMENT AND THIS
PROSPECTUS/PROXY STATEMENT SUPPLEMENT INCORPORATE BY REFERENCE DOCUMENTS
RELATING TO CCBF WHICH ARE NOT PRESENTED IN THE PROSPECTUS/PROXY STATEMENT OR
HEREIN OR DELIVERED THEREWITH OR HEREWITH. STATEMENTS CONTAINED THEREIN OR
HEREIN OR IN ANY DOCUMENT INCORPORATED THEREIN OR HEREIN BY REFERENCE AS TO THE
CONTENTS OF ANY CONTRACTS OR OTHER DOCUMENTS REFERRED TO THEREIN OR HEREIN ARE
NOT NECESSARILY COMPLETE, AND IN EACH INSTANCE REFERENCE IS MADE TO THE COPY OF
SUCH CONTRACT OR OTHER DOCUMENT FILED AS AN EXHIBIT TO THE REGISTRATION
STATEMENT, THE POST-EFFECTIVE AMENDMENT NO. 1 THERETO, OR SUCH OTHER DOCUMENT,
EACH SUCH STATEMENT BEING QUALIFIED IN ALL RESPECTS BY SUCH REFERENCE. COPIES OF
THOSE DOCUMENTS (OTHER THAN EXHIBITS TO SUCH DOCUMENTS WHICH ARE NOT
SPECIFICALLY INCORPORATED BY REFERENCE INTO SUCH DOCUMENTS) WILL BE PROVIDED
WITHOUT CHARGE UPON REQUEST AS DESCRIBED BELOW. REQUESTS FOR DOCUMENTS REGARDING
CCBF SHOULD BE DIRECTED TO W. HAROLD PARKER, JR., SENIOR VICE PRESIDENT AND
CONTROLLER, CCB FINANCIAL CORPORATION, POST OFFICE BOX 931, DURHAM, N.C. 27702,
TELEPHONE (919) 683-7631. IN ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS
BEFORE THE RECONVENED SPECIAL MEETING, ANY SUCH REQUEST SHOULD BE MADE BY FIVE
(5) BUSINESS DAYS PRIOR TO THE RECONVENED SPECIAL MEETING.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed by CCBF with the Commission (SEC
File No. 0-12358) are incorporated by reference into the Prospectus/Proxy
Statement and this Prospectus/Proxy Statement Supplement: (i) CCBF's Annual
Report on Form 10-K for the year ended December 31, 1995; (ii) CCBF's Quarterly
Reports on Form 10-Q for the quarterly periods ended March 31, 1996, June 30,
1996 and September 30, 1996; (iii) CCBF's Current Reports on Form 8-K dated
April 16, 1996, May 14, 1996, October 4, 1996 and November 26, 1996; and (iv)
the description of CCBF Stock contained in its current report on Form 8-K dated
July 1, 1983, as amended by Form 8-K/A2 dated June 14, 1996, and its Forms 8-A
dated July 29, 1996, as each is amended by CCBF's subsequent reports filed under
the 1934 Act.
In addition, all other documents filed by CCBF pursuant to Section 13(a),
13(c), 14 or 15(d) of the 1934 Act prior to the date the reconvened Special
Meeting has been finally adjourned shall be deemed to be incorporated by
reference herein. Any statements contained in a document incorporated or deemed
to be incorporated by reference herein will be deemed to be modified or
superseded for purposes of the Prospectus/Proxy Statement and this
Prospectus/Proxy Statement Supplement to the extent that a statement contained
therein or herein or in any other subsequently filed document which also is or
is deemed to be incorporated by reference therein or herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part thereof
or hereof.
2
<PAGE>
SUMMARY
THE FOLLOWING IS A SUMMARY OF CERTAIN INFORMATION ABOUT THE RECONVENED
SPECIAL MEETING, THE AMENDED MERGER AGREEMENT AND THE TRANSACTIONS DESCRIBED
THEREIN AND IS NOT TO BE A COMPLETE DESCRIPTION OF ALL MATERIAL FACTS REGARDING
SALEM, CCBF, CCB BANK, THE MERGER OR OTHER MATTERS TO BE CONSIDERED AT THE
RECONVENED SPECIAL MEETING. THE SUMMARY IS QUALIFIED IN ALL RESPECTS BY
REFERENCE TO THE MORE DETAILED INFORMATION INCLUDED IN THE PROSPECTUS/PROXY
STATEMENT AND THIS PROSPECTUS/PROXY STATEMENT SUPPLEMENT, THE APPENDICES THERETO
AND HERETO AND THE DOCUMENTS INCORPORATED THEREIN AND HEREIN BY REFERENCE.
SHAREHOLDERS OF SALEM ARE URGED TO READ CAREFULLY THE ENTIRE PROSPECTUS/PROXY
STATEMENT AND THIS PROSPECTUS/PROXY STATEMENT SUPPLEMENT, INCLUDING ALL
APPENDICES. IF YOU HAVE DISCARDED THE PROSPECTUS/PROXY STATEMENT PREVIOUSLY
RECEIVED BY YOU AND DESIRE ANOTHER COPY, YOU SHOULD CONTACT NORMAN D. POTTER,
SALEM'S CHIEF FINANCIAL OFFICER AND SECRETARY, AT SALEM TRUST BANK, 2140 COUNTRY
CLUB ROAD, WINSTON-SALEM, NORTH CAROLINA 27104, TELEPHONE (910) 777-1400 AT YOUR
EARLIEST CONVENIENCE.
SPECIAL MEETING OF SALEM SHAREHOLDERS
DATE, PLACE AND TIME. The Special Meeting will be reconvened at the Arts
Council Theater, 610 Coliseum Drive, Winston-Salem, North Carolina, on Tuesday,
January 21, 1997 at 10:00 o'clock, a.m., E.S.T.
RECORD DATE. The close of business on October 2, 1996 remains fixed as the
Record Date for the determination of shareholders entitled to notice of and to
vote at the reconvened Special Meeting. Only those Salem shareholders of record
on the Record Date will be eligible to vote at the reconvened Special Meeting.
See "THE SPECIAL MEETING -- Record Date".
REVOCATION OF APPOINTMENTS OF PROXY. Any Salem shareholder who executes an
appointment of proxy has the right to revoke it at any time before it is
exercised by filing with the Secretary of Salem either an instrument revoking it
or a duly executed appointment of proxy bearing a later date, or by attending
the reconvened Special Meeting and announcing his or her intention to vote in
person. See "THE SPECIAL MEETING -- Voting and Revocation of Proxies".
THE MERGER
GENERAL. Salem, CCBF and CCBF's primary banking subsidiary, CCB Bank, have
entered into the Amended Merger Agreement which provides for the Merger and
certain other transactions as described therein. Salem is a North Carolina
commercial bank. At September 30, 1996, Salem had assets of $158 million,
deposits of $139 million, and shareholders' equity of $17 million. Its principal
offices are located at 2140 Country Club Road, Winston-Salem, North Carolina
27104 and its telephone number at that address is (910) 777-1400. See "SALEM
TRUST BANK".
CCBF is a North Carolina corporation which is 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 "BHCA"), as a bank holding company.
CCBF's principal subsidiaries are (i) CCB Bank, a North Carolina commercial bank
headquartered in Durham, North Carolina and (ii) Central Carolina Bank-Georgia,
a Georgia credit card bank headquartered in Columbus, Georgia. CCB Bank's
subsidiaries are CCB Investment and Insurance Service Corporation, Southland
Associates, Inc., and CCBDE, Inc. CCBF merged Graham Savings Bank, Inc., SSB, a
savings bank subsidiary, with and into CCB Bank on October 4, 1996. See "CCB
FINANCIAL CORPORATION -- Subsidiaries". At September 30, 1996, CCBF had
consolidated assets of $5.2 billion, consolidated deposits of $4.4 billion, and
consolidated shareholders' equity of $461.7 million. CCBF's principal offices
are located at 111 Corcoran Street (Post Office Box 931), Durham, North Carolina
27702, and its telephone number at that address is (919) 683-7777. See "CCB
FINANCIAL CORPORATION".
CONVERSION OF SALEM STOCK AND EXCHANGE RATIO. At the Effective Time, each
outstanding share of Salem Stock (other than shares as to which Salem's
shareholders exercise their "Dissenters' Rights" under North Carolina law and
shares held by CCBF, subsidiaries of CCBF or Salem other than in a fiduciary
capacity or as a result of debts previously contracted) will be converted into,
and thereafter may be exchanged for, (a) if the Average Price of a share of CCBF
Stock is equal to or greater than $46.78, but equal to or less than $57.18, .41
of a share of CCBF Stock and .41 of a CCBF Right, (b) if the Average Price is
greater than $57.18, that fraction of a share of CCBF Stock and that fraction of
a CCBF Right computed by dividing the Average Price into $57.18 and multiplying
the resulting quotient by .41, or (c) if the Average Price is less than $46.78,
that fraction of a share of CCBF Stock and that fraction of a CCBF Right
computed by dividing $46.78 by the Average Price and multiplying the resulting
quotient by .41 (the "Exchange Ratio"). See "THE MERGER -- Conversion of Salem
Stock and Stock Options; Exchange Ratio" and " -- Surrender and Exchange of
Certificates", "RIGHTS OF DISSENTING SHAREHOLDERS", and "CAPITAL STOCK OF CCBF
AND SALEM".
3
<PAGE>
RECOMMENDATION AND REASONS. SALEM'S BOARD OF DIRECTORS UNANIMOUSLY
RECOMMENDS THAT SALEM'S SHAREHOLDERS VOTE TO APPROVE THE AMENDED MERGER
AGREEMENT. Salem's Board of Directors has adopted the Amended Merger Agreement
and believes the Merger and the actions to be taken in connection therewith are
in the best interests of Salem and its shareholders, and unanimously recommends
that Salem's shareholders vote FOR approval of the Amended Merger Agreement. In
making its recommendation, the Salem Board considered, among other things, the
opinion of its financial advisor issued prior to the execution of the Amended
Merger Agreement that the proposed consideration to be paid by CCBF to Salem's
shareholders under the Merger Agreement (i.e., .41 of a share of CCBF Stock and
.41 of a CCBF Right for each outstanding share of Salem Stock) was fair to
Salem's shareholders from a financial point of view. The Salem Board has
concluded that the Exchange Ratio under the Amended Merger Agreement should
provide a value to Salem's shareholders comparable to that computed under the
exchange ratio provisions of the Merger Agreement prior to its amendment and, if
the closing price of CCBF Stock on the Closing Date exceeds the Average Price
(and both exceed $57.18), would provide an increase in the value received by
Salem's shareholders over that contemplated in the Merger Agreement. See "THE
MERGER -- Recommendation and Reasons" and " -- Salem Fairness Opinion".
TERMINATION OF AMENDED MERGER AGREEMENT. The Amended Merger Agreement may
be terminated and the Merger abandoned at any time prior to the Effective Time,
whether before or after any requisite shareholder approval, (i) by mutual
consent of the Board of Directors of Salem and the Boards of Directors of CCBF
and CCB Bank; or (ii) by the Board of Directors of Salem or the Boards of
Directors of CCBF and CCB Bank: (A) at any time after March 31, 1997 (unless the
Merger is to be accounted for under the purchase method of accounting, in which
case this date shall be June 30, 1997); (B) if any appropriate regulatory
authority has denied approval of the Merger, or an order, judgment or decree of
any such regulatory authority or court having jurisdiction has imposed any
condition or requirement which would so substantially and adversely impact the
economic or business benefits of the Merger as to render the consummation of the
Merger inadvisable in the reasonable opinion of the Board of Directors of Salem
or the Boards of Directors of CCBF and CCB Bank, and such denial or imposition
has become final and nonappealable; (C) in the event of a material breach by the
other party of any representation, warranty, covenant or other agreement
contained in the Amended Merger Agreement, which breach is not cured within 30
days after written notice thereof is given by the non-breaching party; or (D) if
there has occurred a suit or other proceeding by any governmental regulatory
agency or body to restrain or prohibit the Merger, or a suit by a Salem or CCBF
shareholder seeking to restrain the Merger or seeking material monetary damages
should such transaction be consummated. The Salem Board may terminate the
Amended Merger Agreement if, on or prior to the Closing Date and prior to the
Effective Time, CCBF announces its merger with and into another company. See
"THE MERGER -- Termination of Amended Merger Agreement". The provision of the
Merger Agreement allowing CCBF and CCB Bank of Salem to terminate that Agreement
if the Average Price is less than $46.78 or more than $57.18 has been deleted
and is not contained in the Amended Merger Agreement.
EFFECTIVE TIME. Assuming the receipt of all required approvals, it
currently is expected that the Merger will become effective on January 24, 1997.
See "THE MERGER -- Effective Time and Closing Date". The Board of Directors of
Salem or the Boards of Directors of CCBF and CCB Bank may terminate the Amended
Merger Agreement if the Effective Time shall not have occurred by March 31, 1997
(or June 30, 1997, if the Merger is to be accounted for as a purchase). See "THE
MERGER -- Termination of Amended Merger Agreement".
RIGHTS OF DISSENTING SHAREHOLDERS. Subject to certain conditions, each
Salem shareholder has the right under the North Carolina Business Corporation
Act (the "NCBCA") to "dissent" from the Merger and receive the "fair value" of
the shareholder's shares of Salem Stock in cash ("Dissenters' Rights"). A Salem
shareholder who (i) does not vote in favor of the Amended Merger Agreement, (ii)
submits timely written notice of intent to demand payment for the shareholder's
shares, (iii) demands payment and deposits the shareholder's share certificates
by the date set forth in and in accordance with the terms and conditions of the
"dissenters' notice" sent to such shareholder, and (iv) otherwise satisfies the
requirements specified in Appendix B to the Prospectus/Proxy Statement, will be
offered the amount Salem estimates to be the fair value of the shareholder's
shares of Salem Stock, plus accrued interest to the date of payment, and will be
paid such amount in cash provided the shareholder agrees in writing to accept
such amount in full satisfaction of the shareholder's demand. In order to
exercise Dissenters' Rights, a Salem shareholder must follow carefully all steps
described in Appendix B. See "RIGHTS OF DISSENTING SHAREHOLDERS" and Appendix B
to the Prospectus/Proxy Statement. If you have discarded your Prospectus/Proxy
Statement, one will be provided to you upon request. A Salem shareholder who
returns a signed appointment of proxy, but fails to provide instructions as to
the manner in which such shares are to be voted, will be deemed to have voted in
favor of the Amended Merger Agreement and will not be entitled to assert
Dissenters' Rights.
4
<PAGE>
CCBF STOCK AND SALEM STOCK; DIVIDENDS
CCBF STOCK AND SALEM STOCK. Transactions in CCBF Stock were quoted on the
National Market System of The Nasdaq Stock Market, Inc. (the "Nasdaq National
Market") until August 13, 1996. On August 14, 1996, CCBF Stock was listed on the
NYSE, and the reporting of transactions in CCBF Stock on the Nasdaq National
Market terminated. As of September 30, 1996, there were 15,061,334 shares of
CCBF Stock outstanding and held by approximately 7,400 holders of record.
Currently there is no established market on which Salem Stock is regularly
traded nor are transactions in Salem Stock reported by any quotations system.
Purchases and sales of Salem Stock occur, from time to time, in private
transactions in an informal match market. As of the Record Date, there were
1,841,232 shares of Salem Stock outstanding and held by approximately 509
holders of record.
The following table sets forth for the periods indicated (i) information on
the price range of CCBF Stock and shows the high and low closing sales prices as
quoted by the Nasdaq National Market or reported by the NYSE, as applicable,
(ii) the high and low sales prices of privately negotiated transactions in Salem
Stock of which Salem is aware, and (iii) the cash dividends declared per share
by each of CCBF and Salem. All sales prices for CCBF Stock and Salem Stock are
shown without retail markups, markdowns, or commissions. Because transactions in
Salem Stock occur in private transactions and Salem may not be aware of all such
transactions occurring during the periods indicated, the sales prices for Salem
Stock shown should not be taken as indicative of the market value of Salem Stock
at any specific time or of the existence of any established trading market for
Salem Stock.
<TABLE>
<CAPTION>
CCBF STOCK SALEM STOCK
HIGH LOW DIVIDEND HIGH LOW DIVIDEND
<S> <C> <C> <C> <C> <C> <C>
1996
1st Quarter...................................................... $55.75 $49.25 $.38 $14.00 $13.50 $.10(2)
2nd Quarter...................................................... 54.75 49.75 .38 14.50 14.50 --
3rd Quarter...................................................... 55.00 49.50 .42 14.50 14.50 --
4th Quarter (1).................................................. 62.00 54.75 .42 14.50 14.50 --
1995
1st Quarter...................................................... 38.75 34.00 .34 9.00 9.00 --
2nd Quarter...................................................... 42.75 38.00 .34 9.13 9.00 --
3rd Quarter...................................................... 51.63 41.75 .38 12.25 9.75 --
4th Quarter...................................................... 56.50 48.50 .38 13.50 12.25 --
1994
1st Quarter...................................................... 37.50 32.75 .32 8.00 8.00 --
2nd Quarter...................................................... 40.00 33.25 .32 8.00 8.00 --
3rd Quarter...................................................... 44.50 39.25 .34 8.50 8.00 --
4th Quarter...................................................... 44.00 32.75 .34 9.00 8.63 .08
</TABLE>
(1) Through November 15, 1996.
(2) Although this dividend was declared in January, 1996, it represents a
dividend to shareholders based on 1995 net income.
The following table sets forth the closing sales prices per share of CCBF
Stock, the sales prices per share of Salem Stock of which Salem is aware, and
the per share prices of Salem Stock equivalent to the closing sales prices of
CCBF Stock (which prices represent the closing prices per share of CCBF Stock
multiplied by the Exchange Ratio) on May 13, 1996, the business day preceding
the public announcement of the Merger, on October 2, 1996, the most recent
practicable business day prior to the date of the Prospectus/Proxy Statement,
and on November 15, 1996, the most recent practicable business day prior to the
date of this Prospectus/Proxy Statement Prospectus:
<TABLE>
<CAPTION>
EQUIVALENT PER
PRICE PER SHARE AT CCBF STOCK SALEM STOCK SHARE PRICE
<S> <C> <C> <C>
May 13, 1996............................................... $52.75 14.50(1) $21.63
October 2, 1996............................................ 55.25 14.50(2) 22.65
November 15, 1996.......................................... 62.00 14.50(2) 24.22(3)
</TABLE>
(1) Sales price of trade of Salem Stock on April 30, 1996, the last trade in
Salem Stock known by Salem's management to have occurred before May 13,
1996.
(2) No transactions in Salem Stock are known by Salem's management to have
occurred since April 30, 1996.
5
<PAGE>
(3) Assumes Average Price of $60.01 (the average closing price for the first 14
days of the 60 trading day period ending January 23, 1997).
SELECTED FINANCIAL INFORMATION
The following tables set forth certain selected consolidated financial
information for CCBF and Salem on a historical basis and for CCBF on an
unaudited pro forma combined basis. This financial information has been based
on, and should be read in conjunction with, CCBF's audited financial statements
and interim unaudited financial statements, including the related notes thereto,
which are incorporated herein by reference, see "INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE", and Salem's audited financial statements and interim
unaudited financial statements, including the related notes thereto, which are
set forth herein. In the opinion of the respective managements of CCBF and
Salem, all adjustments necessary for a fair presentation of results of interim
periods of CCBF and Salem (none of which were other than normal accruals) have
been included.
The selected unaudited pro forma combined financial information has been
prepared using historical financial information for CCBF and Salem and assuming
that the Merger had been effective prior to the periods presented and was
accounted for under the pooling-of-interests method of accounting. For a
description of the pooling-of-interests accounting method with respect to the
Merger and the related effects on the historical financial statements of CCBF,
see "THE MERGER -- Accounting Treatment". The pro forma combined share
information was computed by adding CCBF's historical share information and the
resultant of multiplying Salem's historical share information by the Exchange
Ratio. The Exchange Ratio was calculated by dividing the Average Price as of
November 15, 1996 of $60.01 (the "Assumed CCBF Average Price") into $57.18 and
multiplying the resulting quotient by .41. The pro forma combined financial
information presented is not necessarily indicative of actual results that might
have been achieved had the Merger been consummated prior to the periods
presented, and is not indicative of future results that may be obtained on a
combined basis. The pro forma combined financial information does not reflect
any Merger-related expenses which may be recognized or cost savings from
operating efficiencies which may be realized in connection with the Merger.
Current estimates of Merger-related expenses are $1.4 million. CCBF currently
anticipates cost savings of approximately $1.5 million associated with possible
operating efficiencies and synergies, but no such savings are assured. It is
anticipated that any such cost savings will be achieved, if at all, only in the
fiscal quarters following the quarter in which the expenses of the Merger are
recognized.
6
<PAGE>
CCB FINANCIAL CORPORATION
<TABLE>
<CAPTION>
NINE MONTHS
ENDED SEPTEMBER 30
(UNAUDITED) YEARS ENDED DECEMBER 31
1996 1995 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS EXCEPT PER SHARE DATA)
SUMMARY OF OPERATIONS
Interest income....................... $ 294,537 285,019 383,514 309,899 254,912 241,589 269,638
Interest expense...................... 134,433 132,941 179,404 126,366 101,956 105,766 143,989
Net interest income................... 160,104 152,078 204,110 183,533 152,956 135,823 125,649
Provision for loan and
lease losses........................ 9,000 5,776 8,183 9,279 7,106 7,831 9,331
Net interest income after
provision........................... 151,104 146,302 195,927 174,254 145,850 127,992 116,318
Other income.......................... 45,563 39,888 53,267 48,630 46,617 39,570 41,261
Net investment securities gains
(losses)............................ 510 (982) (978) 357 2,962 2,073 605
Other expenses (1).................... 121,659 123,106 160,223 147,287 129,452 116,114 110,983
Income before income taxes and
cumulative changes in accounting
principles.......................... 75,518 62,102 87,993 75,954 65,977 53,521 47,201
Income taxes (2)...................... 24,367 21,305 30,133 30,843 21,913 18,238 14,470
Income before cumulative changes in
accounting principles............... 51,151 40,797 57,860 45,111 44,064 35,283 32,731
Cumulative changes in accounting
principles (3)...................... -- -- -- -- (1,371) -- --
Net income............................ $ 51,151 40,797 57,860 45,111 42,693 35,283 32,731
PER SHARE
Income before cumulative changes in
accounting principles:
Primary............................. $ 3.40 2.73 3.87 2.94 3.10 2.60 2.42
Fully diluted (4)................... 3.40 2.73 3.87 2.94 3.05 2.52 2.35
Net income:
Primary............................. 3.40 2.73 3.87 2.94 3.00 2.60 2.42
Fully diluted (4)................... 3.40 2.73 3.87 2.94 2.95 2.52 2.35
Cash dividends........................ 1.18 1.06 1.44 1.32 1.24 1.14 1.047
Book value............................ 30.65 27.73 28.98 24.75 24.43 22.42 20.66
Average shares outstanding:
Primary............................. 15,042 14,948 14,949 15,354 14,230 13,580 13,539
Fully diluted (4)................... 15,042 14,948 14,949 15,354 14,612 14,494 14,476
AVERAGE BALANCES
Assets................................ $5,001,830 4,767,516 4,811,108 4,297,775 3,613,333 3,095,352 2,983,978
Loans and lease financing............. 3,462,469 3,234,469 3,251,613 2,823,525 2,299,599 2,018,812 1,979,879
Earning assets........................ 4,717,983 4,477,320 4,521,780 4,021,814 3,365,274 2,875,280 2,766,431
Deposits.............................. 4,272,649 4,109,736 4,148,526 3,676,139 3,137,037 2,687,980 2,584,251
Interest-bearing liabilities.......... 3,944,877 3,795,894 3,824,793 3,376,509 2,820,219 2,412,176 2,368,185
Shareholders' equity.................. 443,582 391,092 397,504 382,884 330,679 289,291 265,743
</TABLE>
7
<PAGE>
CCB FINANCIAL CORPORATION (CONTINUED)
<TABLE>
<CAPTION>
NINE MONTHS
ENDED SEPTEMBER 30
(UNAUDITED) YEARS ENDED DECEMBER 31
1996 1995 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS EXCEPT PER SHARE DATA)
SELECTED PERIOD END BALANCES
Assets............................ $5,157,844 4,902,122 5,089,786 4,720,688 4,186,578 3,225,929 3,072,968
Loans and lease financing......... 3,622,345 3,267,536 3,345,345 3,158,863 2,651,100 2,033,829 1,999,955
Reserve for loan and lease
losses.......................... 47,254 42,979 43,578 41,046 34,190 25,936 23,171
Deposits.......................... 4,397,815 4,231,360 4,297,411 4,057,680 3,601,227 2,802,141 2,660,737
Shareholders' equity.............. 461,704 414,610 433,517 371,151 375,224 306,773 279,992
RATIOS (ANNUALIZED)
Income before cumulative changes
in accounting principles to:
Average assets.................. 1.37% 1.14 1.20 1.05 1.22 1.14 1.10
Average shareholders'
equity....................... 15.40 13.95 14.56 11.78 13.33 12.20 12.32
Net income to:
Average assets.................. 1.37 1.14 1.20 1.05 1.18 1.14 1.10
Average shareholders'
equity....................... 15.40 13.95 14.56 11.78 12.91 12.20 12.32
Net interest margin, taxable
equivalent (5).................. 4.70 4.73 4.70 4.75 4.76 4.88 4.72
Net loan and lease losses to
average loans and lease
financing....................... .21 .16 .17 .17 .20 .25 .37
Dividend payout ratio............. 34.71 38.83 37.21 44.90 41.33 43.85 43.26
</TABLE>
(1) Other expenses for the nine months ended September 30, 1996 include an FDIC
special assessment of $8.4 million to recapitalize the Savings Association
Insurance Fund. The after-tax effect was to decrease net income by $.33 per
share. Other expenses in 1995 and 1994 include merger-related expense of
$10.3 million in 1995 related to CCBF's merger with Security Capital Bancorp
("SCBC") and $1.1 million in 1994 related to SCBC's acquisition of a savings
and loan association. As a result, income per share was decreased by $.49
per share in 1995 and $.04 per share in 1994.
(2) During the third quarter of 1996, a tax benefit of $1.6 million was recorded
for forgiveness of the recapture of tax bad debt reserves of a savings bank
subsidiary which previously would have been required upon its merger with a
commercial bank. Net income per share was increased by $.10 as a result
thereof. Income taxes for 1994 include a one-time charge of approximately
$5.6 million of deferred tax liabilities recorded in conjunction with the
merger of SCBC's three savings bank subsidiaries into its commercial bank
subsidiary. As a result, income per share was decreased by $.37 for the
year.
(3) The cumulative changes in accounting principles reflect the 1993 adoptions
of Statement of Financial Accounting Standards No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions" ("SFAS 106")
which resulted in a one-time net charge of $2.3 million ($3.7 million
pre-tax) in recognition of the entire Accumulated Postretirement Benefit
Obligation, and Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" ("SFAS 109") which resulted in a one-time
benefit of $900,000.
(4) Assumes full conversion of convertible subordinated debentures issued by
CCBF in 1985. The convertible subordinated debentures were called for
redemption during 1993 and substantially all were converted into CCBF Stock.
(5) Net interest margin is computed by dividing taxable equivalent net interest
income by average earnings assets.
8
<PAGE>
SALEM TRUST BANK
<TABLE>
<CAPTION>
NINE MONTHS
ENDED SEPTEMBER 30
(UNAUDITED) YEARS ENDED DECEMBER 31
1996 1995 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS EXCEPT PER SHARE DATA)
SUMMARY OF OPERATIONS
Interest income....................... $ 9,307 6,595 9,337 5,320 4,457 4,490 5,230
Interest expense...................... 4,605 3,074 4,571 2,397 2,307 2,664 3,459
Net interest income................... 4,702 3,521 4,766 2,923 2,150 1,826 1,771
Provision for loan losses............. 132 338 545 50 -- 40 118
Net interest income after provision... 4,570 3,183 4,221 2,873 2,150 1,786 1,653
Other income.......................... 896 556 928 646 434 167 79
Other expenses........................ 3,086 2,513 3,385 2,210 1,876 1,403 1,232
Income before income taxes and
cumulative change in accounting
principles.......................... 2,380 1,226 1,764 1,309 708 550 500
Income taxes.......................... 928 595 720 506 250 196 123
Income before cumulative change in
accounting principles............... 1,452 631 1,044 803 458 354 377
Cumulative change in accounting
principles (1)...................... -- -- -- -- -- 61 --
Net income............................ $ 1,452 631 1,044 803 458 415 377
PER SHARE
Net income:
Primary............................. $ .83 .49 .72 .76 .44 .40 .36
Fully diluted (2)................... .80 .46 .67 .70 .42 .40 .36
Cash dividends........................ .10(3) -- -- .08 -- -- --
Book value............................ 9.36 8.27 8.52 7.29 6.60 6.16 5.76
Average shares outstanding:
Primary............................. 1,744 1,292 1,448 1,051 1,040 1,040 1,035
Fully diluted (2)................... 1,835 1,505 1,685 1,267 1,207 1,040 1,035
AVERAGE BALANCES
Assets................................ $156,336 103,229 113,881 83,481 80,884 76,319 66,805
Loans................................. 112,854 82,601 87,414 61,111 59,388 55,702 46,917
Earning assets........................ 150,307 98,119 107,750 77,812 76,439 72,570 63,425
Deposits.............................. 138,230 89,670 98,414 71,555 71,626 69,584 60,328
Interest-bearing liabilities.......... 127,912 83,990 93,055 69,040 67,463 65,055 57,728
Stockholders' equity.................. 15,578 10,313 11,104 7,226 6,618 6,215 5,837
SELECTED PERIOD END BALANCES
Assets................................ $158,069 137,348 154,091 90,545 88,066 86,088 79,999
Loans................................. 116,707 100,068 106,231 66,966 60,447 58,500 59,213
Allowance for loan losses............. 1,434 1,095 1,302 757 714 714 674
Deposits.............................. 139,187 120,686 136,451 79,316 78,314 79,042 73,367
Stockholders' equity.................. 17,227 13,199 13,608 7,581 6,861 6,404 5,989
RATIOS (ANNUALIZED)
Net income to:
Average assets...................... 1.24% .82 .92 .96 .57 .54 .56
Average stockholders' equity........ 12.45 8.18 9.40 11.11 6.92 6.68 6.46
Net interest margin, taxable
equivalent (4)...................... 4.24 4.81 4.43 3.78 2.84 2.54 2.81
Net loan losses to average loans...... -- -- -- .01 -- -- --
Dividend payout ratio................. 12.05 -- -- 10.53 -- -- --
</TABLE>
(1) The cumulative change in accounting principles reflects the 1992 adoption of
SFAS 109 which resulted in a one-time benefit of $61,000.
(2) Assumes full conversion of convertible subordinated notes issued in 1993.
The convertible subordinated notes were called for redemption in 1996 and
substantially all were converted into Salem Stock.
(3) Although this dividend was declared in January, 1996, it represents a
dividend to shareholders based on 1995 net income.
(4) Net interest margin is computed by dividing taxable equivalent net interest
income by average earning assets.
9
<PAGE>
CCB FINANCIAL CORPORATION PRO FORMA COMBINED
<TABLE>
<CAPTION>
NINE MONTHS
ENDED SEPTEMBER 30
(UNAUDITED) YEARS ENDED DECEMBER 31
1996 1995 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS EXCEPT PER SHARE DATA)
SUMMARY OF OPERATIONS
Interest income................... $ 303,844 291,614 392,851 315,219 259,369 246,079 274,868
Interest expense.................. 139,038 136,015 183,975 128,763 104,263 108,430 147,448
Net interest income............... 164,806 155,599 208,876 186,456 155,106 137,649 127,420
Provision for loan and lease
losses.......................... 9,132 6,114 8,728 9,329 7,106 7,871 9,449
Net interest income after
provision....................... 155,674 149,485 200,148 177,127 148,000 129,778 117,971
Other income...................... 46,459 40,444 54,195 49,276 47,051 39,737 41,340
Net investment securities gains
(losses)........................ 510 (982) (978) 357 2,962 2,073 605
Other expenses (1)................ 124,745 125,619 163,608 149,497 131,328 117,517 112,215
Income before income taxes and
cumulative changes in accounting
principles...................... 77,898 63,328 89,757 77,263 66,685 54,071 47,701
Income taxes (2).................. 25,295 21,900 30,853 31,349 22,163 18,434 14,593
Income before cumulative changes
in accounting principles........ 52,603 41,428 58,904 45,914 44,522 35,637 33,108
Cumulative changes in accounting
principles (3).................. -- -- -- -- (1,371) 61 --
Net income........................ $ 52,603 41,428 58,904 45,914 43,151 35,698 33,108
PER SHARE
Income before cumulative changes
in accounting principles:
Primary......................... $ 3.35 2.68 3.80 2.91 3.04 2.55 2.37
Fully diluted (4)............... 3.34 2.67 3.78 2.90 2.99 2.48 2.31
Net income:
Primary......................... 3.35 2.68 3.80 2.91 2.95 2.55 2.37
Fully diluted (4)............... 3.34 2.67 3.78 2.90 2.90 2.48 2.31
Cash dividends (5)................ 1.18 1.06 1.44 1.32 1.24 1.14 1.047
Book value........................ 30.35 27.47 28.69 24.59 24.24 22.23 20.49
Average shares outstanding:
Primary......................... 15,722 15,452 15,514 15,764 14,636 13,985 13,943
Fully diluted (4)............... 15,757 15,535 15,606 15,848 15,082 14,899 14,880
AVERAGE BALANCES
Assets............................ $5,158,166 4,870,745 4,924,989 4,381,256 3,694,217 3,171,671 3,050,783
Loans and lease financing......... 3,575,323 3,317,070 3,339,027 2,884,636 2,358,987 2,074,514 2,026,796
Earning assets.................... 4,868,290 4,575,439 4,629,530 4,099,626 3,441,713 2,947,850 2,829,856
Deposits.......................... 4,410,879 4,199,406 4,246,940 3,747,694 3,208,663 2,757,564 2,644,579
Interest-bearing liabilities...... 4,072,789 3,879,884 3,917,848 3,445,549 2,887,682 2,477,231 2,425,913
Shareholders' equity.............. 459,160 401,405 408,608 390,110 337,297 295,506 271,580
</TABLE>
10
<PAGE>
CCB FINANCIAL CORPORATION PRO FORMA COMBINED (CONTINUED)
<TABLE>
<CAPTION>
NINE MONTHS
ENDED SEPTEMBER 30
(UNAUDITED) YEARS ENDED DECEMBER 31
1996 1995 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS EXCEPT PER SHARE DATA)
SELECTED PERIOD END BALANCES
Assets............................ $5,315,913 5,039,470 5,243,877 4,811,233 4,274,644 3,312,017 3,152,967
Loans and lease financing......... 3,739,052 3,367,604 3,451,576 3,225,829 2,711,547 2,092,329 2,059,168
Reserve for loan and lease
losses.......................... 48,688 44,074 44,880 41,803 34,904 26,650 23,845
Deposits.......................... 4,537,002 4,352,046 4,433,862 4,136,996 3,679,541 2,881,183 2,734,104
Shareholders' equity.............. 478,931 427,809 447,125 378,732 382,085 313,177 285,981
RATIOS (ANNUALIZED)
Income before cumulative changes
in accounting principles to:
Average assets.................. 1.36% 1.14 1.20 1.05 1.21 1.12 1.09
Average shareholders'
equity....................... 15.30 13.80 14.42 11.77 13.20 12.06 12.19
Net income to:
Average assets.................. 1.36 1.14 1.20 1.05 1.17 1.13 1.09
Average shareholders'
equity....................... 15.30 13.80 14.42 11.77 12.79 12.08 12.19
Net interest margin, taxable
equivalent (6).................. 4.68 4.74 4.70 4.73 4.72 4.90 4.76
Net loan and lease losses to
average loans and lease
financing....................... .20 .15 .17 .17 .20 .24 .36
Dividend payout ratio (5)......... 35.22 39.55 37.89 45.36 42.03 44.71 44.18
</TABLE>
(1) Other expenses for the nine months ended September 30, 1996 include an FDIC
special assessment of $8.4 million to recapitalize the Savings Association
Insurance Fund. The after-tax effect was to decrease net income by $.32 per
share. Other expenses in 1995 and 1994 include merger-related expense of
$10.3 million in 1995 related to CCBF's merger with SCBC and $1.1 million in
1994 related to SCBC's acquisition of a savings and loan association. The
after-tax effect of the merger-related expense was to decrease net income
per share by $.47 per share in 1995 and $.04 per share in 1994.
(2) During the third quarter of 1996, a tax benefit of $1.6 million was recorded
for forgiveness of the recapture of tax bad debt reserves of a savings bank
subsidiary which previously would have been required upon its merger with a
commercial bank. Net income per share was increased by $.10 as a result
thereof. Income taxes for 1994 include a one-time charge of approximately
$5.6 million of deferred tax liabilities recorded in conjunction with the
merger of SCBC's three savings subsidiaries into its commercial bank
subsidiary. As a result, income per share was decreased by $.35 for the
year.
(3) The 1993 cumulative changes in accounting principles reflect CCBF's adoption
of SFAS 106 which resulted in a one-time net charge of $2.3 million ($3.7
million pre-tax) and adoption of SFAS 109 which resulted in a one-time
benefit of $900,000. The 1992 cumulative change in accounting principles
reflects Salem's adoption of SFAS 109 which resulted in a one-time benefit
of $61,000.
(4) Assumes (i) full conversion of convertible subordinated debentures issued by
CCBF in 1985 which were outstanding until 1993 when substantially all were
converted into CCBF Stock and (ii) full conversion of convertible
subordinated notes issued by Salem in 1993 which were outstanding until 1996
when substantially all were converted into Salem's Stock.
(5) CCBF pro forma combined dividends per share represent historical dividends
per share paid by CCBF.
(6) Net interest margin is computed by dividing taxable equivalent net interest
income by average earning assets.
11
<PAGE>
COMPARATIVE PER SHARE DATA
The following unaudited consolidated financial information reflects certain
comparative per share data at the dates and for the periods presented relating
to (i) net income, book value and cash dividends per common share of CCBF Stock
and Salem Stock on a historical basis, and (ii) net income, book value and cash
dividends per common share on a pro forma combined and equivalent per share of
Salem Stock basis (each assuming the Merger became effective prior to the
periods presented and was accounted for as a pooling-of-interests). See "THE
MERGER -- Accounting Treatment". The data presented should be read in
conjunction with and has been derived from the historical consolidated financial
statements of CCBF and the related notes thereto, incorporated herein by
reference, and the historical financial statements of Salem and the related
notes thereto, contained herein, and in conjunction with the unaudited pro forma
combined condensed financial information, including the related notes thereto,
included elsewhere in this Prospectus/Proxy Statement Supplement. See "PRO FORMA
COMBINED CONDENSED FINANCIAL INFORMATION".
<TABLE>
<CAPTION>
AT AT
SEPTEMBER 30, DECEMBER 31,
1996 1995
<S> <C> <C>
BOOK VALUE PER COMMON SHARE:
CCBF (1)...................................................................................... $ 30.65 28.98
Salem (1)..................................................................................... 9.36 8.52
Pro Forma Combined (2)........................................................................ 30.35 28.69
Equivalent per share of Salem Stock (3)....................................................... 11.84 11.19
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS
ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
1996 1995 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C> <C>
CASH DIVIDENDS PER COMMON SHARE:
CCBF................................................................ $1.18 1.06 1.44 1.32 1.24 1.14 1.047
Salem............................................................... .10(4) -- -- .08 -- -- --
Pro Forma Combined (5).............................................. 1.18 1.06 1.44 1.32 1.24 1.14 1.047
Equivalent per share of Salem Stock (3)............................. .46 .41 .56 .51 .48 .44 .41
INCOME BEFORE CUMULATIVE CHANGES IN ACCOUNTING PRINCIPLES PER PRIMARY
COMMON SHARE:
CCBF................................................................ 3.40 2.73 3.87 2.94 3.10 2.60 2.42
Salem............................................................... .83 .49 .72 .76 .44 .34 .36
Pro Forma Combined (6).............................................. 3.35 2.68 3.80 2.91 3.04 2.55 2.37
Equivalent per share of Salem Stock (3)............................. 1.31 1.05 1.48 1.13 1.19 .99 .92
INCOME BEFORE CUMULATIVE CHANGE IN ACCOUNTING PRINCIPLES PER FULLY
DILUTED COMMON SHARE (7):
CCBF................................................................ 3.40 2.73 3.87 2.94 3.05 2.52 2.35
Salem............................................................... .80 .46 .67 .70 .42 .34 .36
Pro Forma Combined (8).............................................. 3.34 2.67 3.78 2.90 2.99 2.48 2.31
Equivalent per share of Salem Stock (3)............................. 1.30 1.04 1.47 1.13 1.17 .97 .90
</TABLE>
(1) CCBF and Salem historical book values per share are computed using period
end shares outstanding and do not include common share equivalents.
(2) The pro forma combined book values per share of CCBF Stock are based upon
the combined historical total common equity for CCBF and Salem divided by
total pro forma shares of CCBF Stock, assuming conversion of the Salem Stock
at the Exchange Ratio using the Assumed CCBF Average Price.
(3) Salem pro forma equivalent per share amounts are computed by multiplying the
CCBF pro forma combined amounts by the Exchange Ratio using the Assumed CCBF
Average Price.
(4) Although this dividend was declared in January, 1996, it represents a
dividend to shareholders based on 1995 net income.
(5) CCBF pro forma combined dividends per share represent historical dividends
per share paid by CCBF.
(6) The pro forma combined income per primary common share before cumulative
changes in accounting principles is based on the combined historical income
before cumulative changes in accounting principles of CCBF and Salem divided
by the pro forma combined weighted average primary common shares of CCBF.
(7) Assumes (i) full conversion of convertible subordinated debentures issued by
CCBF in 1985 which were called for redemption during 1993 and substantially
all were converted into shares of CCBF Stock, and (ii) full conversion of
convertible subordinated notes issued by Salem in 1993 which were
outstanding until 1996 when substantially all were converted into shares of
Salem Stock.
(8) The pro forma combined income before cumulative changes in accounting
principles per fully diluted share is based on the combined historical
income before cumulative changes in accounting principles of CCBF and Salem
divided by the weighted average pro forma combined fully diluted common
shares of CCBF.
12
<PAGE>
THE SPECIAL MEETING
GENERAL; PROPOSALS TO BE CONSIDERED
The Prospectus/Proxy Statement was furnished, and this Prospectus/Proxy
Statement Supplement is being furnished, to holders of Salem Stock in connection
with the solicitation of proxies by Salem's Board of Directors for use at the
Special Meeting (and the reconvening of the Special Meeting) which was called to
consider and vote upon (i) a proposal to approve the Amended Merger Agreement,
and (ii) to transact such other business as may properly come before the
reconvened Special Meeting or any further adjournments thereof. Each copy of
this Prospectus/Proxy Statement Supplement mailed to holders of Salem Stock is
accompanied by an appointment of proxy for use at the reconvened Special
Meeting.
HOLDERS OF SALEM STOCK ARE URGED TO COMPLETE, DATE AND SIGN THE APPOINTMENT
OF PROXY WHICH ACCOMPANIES THEIR COPY OF THIS PROSPECTUS/PROXY STATEMENT
SUPPLEMENT AND TO RETURN IT IMMEDIATELY TO SALEM.
APPOINTMENTS OF PROXY COMPLETED AND RETURNED IN RESPONSE TO THE
PROSPECTUS/PROXY STATEMENT WILL NOT BE USED AT THE RECONVENED SPECIAL MEETING.
IN ORDER TO VOTE BY PROXY AT THE RECONVENED SPECIAL MEETING THE ACCOMPANYING
APPOINTMENT OF PROXY MUST BE COMPLETED, DATED, SIGNED AND RETURNED TO SALEM.
DATE, PLACE AND TIME
The reconvened Special Meeting will be held at Arts Council Theater, 610
Coliseum Drive, Winston-Salem, North Carolina on Tuesday, January 21, 1997 at
10:00 o'clock, a.m., E.S.T.
RECORD DATE
The Record Date fixed by Salem's Board of Directors, the close of business
on October 2, 1996, for the determination of the holders of Salem Stock entitled
to receive notice and to vote at the Special Meeting remains the Record Date for
such determination in connection with the reconvened Special Meeting.
VOTING AND REVOCATION OF PROXIES
Proxies previously submitted in response to the Prospectus/Proxy Statement
will not be voted at the reconvened Special Meeting. New proxies are being
solicited pursuant to this Prospectus/Proxy Statement Supplement. Shares of
Salem Stock represented by an appointment of proxy properly signed and received
at or prior to the reconvened Special Meeting will be voted as instructed
therein, unless subsequently revoked by the death or incapacity of the
shareholder executing it, and notice of such death or incapacity is filed with
the Secretary of Salem or with any other person authorized to tabulate votes on
behalf of Salem before such shares are voted. If an appointment of proxy is
signed and returned without indicating any voting instructions, shares of Salem
Stock represented thereby will be voted FOR the Amended Merger Agreement. An
appointment of proxy may be revoked by the person giving it at any time before
the shares represented thereby are voted by the filing with the Secretary of
Salem prior to or at the reconvened Special Meeting of an instrument revoking it
or of a duly executed appointment of proxy bearing a later date, or by voting in
person at the reconvened Special Meeting. All written notices of revocation and
other communications with respect to revocation of Salem proxies should be
addressed as follows: Salem Trust Bank, 2140 Country Club Road, Winston-Salem,
North Carolina 27104, Attn: Norman D. Potter, Chief Financial Officer and
Secretary. Attendance at the reconvened Special Meeting will not in and of
itself constitute revocation of an appointment of proxy.
The Board of Directors of Salem is not aware of any business to be acted
upon at the reconvened Special Meeting other than as described herein. If,
however, other matters are properly brought before the reconvened Special
Meeting, or any further adjournments thereof, the Proxies appointed for the
reconvened Special Meeting will have discretionary authority to vote on such
matters in accordance with their best judgment; provided, however, that such
discretionary authority will only be exercised to the extent permissible under
the applicable state law and federal securities law.
RECOMMENDATION AND REASONS
Salem's Board of Directors has unanimously adopted the Amended Merger
Agreement. The Board believes the Merger will provide Salem's shareholders with
an increase in the value of their stockholdings, an increase in the current
individual return on their investments, and an opportunity to participate in
further appreciation in the value of the shares of CCBF Stock they acquire in
the Merger. The Board believes the combination of Salem and CCBF will allow
Salem's shareholders to
13
<PAGE>
participate in the ownership of a larger entity which will be able to compete
more effectively in the economic and competitive environments facing financial
institutions than would Salem on an independent basis. On this basis, Salem's
Board has concluded that the Merger is fair to, and in the best interests of,
Salem's shareholders, and has adopted and determined to recommend that Salem's
shareholders approve the Amended Merger Agreement. See "THE
MERGER -- Recommendation and Reasons".
THE MERGER
THE FOLLOWING SUPPLEMENTS THE SUMMARY OF INFORMATION ABOUT THE MERGER AND
CERTAIN OF THE IMPORTANT TERMS AND CONDITIONS OF THE MERGER AGREEMENT AND THE
OTHER TRANSACTIONS DESCRIBED THEREIN SET FORTH IN THE PROSPECTUS/PROXY
STATEMENT, AND IS NOT INTENDED TO BE A COMPLETE DESCRIPTION OF ALL MATERIAL
FACTS REGARDING THE MERGER. THIS SUPPLEMENTAL DISCUSSION AND SUCH SUMMARY IS
QUALIFIED IN ALL RESPECTS BY REFERENCE TO THE FULL MERGER AGREEMENT ATTACHED AS
APPENDIX A TO THE PROSPECTUS/PROXY STATEMENT, THE AMENDMENTS TO THE MERGER
AGREEMENT ATTACHED AS APPENDIX A TO THIS PROSPECTUS/PROXY STATEMENT SUPPLEMENT
COMPRISING THE AMENDED MERGER AGREEMENT, THE STATUTES REGARDING DISSENTERS'
RIGHTS ATTACHED AS APPENDIX B TO THE PROSPECTUS/PROXY STATEMENT, AND THE OTHER
APPENDICES TO THE PROSPECTUS/PROXY STATEMENT (EACH OF WHICH IS INCORPORATED
HEREIN BY REFERENCE). ALL SALEM SHAREHOLDERS ARE URGED TO READ THE MERGER
AGREEMENT, APPENDIX A TO THIS PROSPECTUS/PROXY STATEMENT SUPPLEMENT, AND THE
OTHER APPENDICES IN THEIR ENTIRETY.
CONVERSION OF SALEM STOCK AND SALEM OPTIONS; EXCHANGE RATIO
At the Effective Time, and without any further action on the part of Salem
or its shareholders, each outstanding share of Salem Stock (other than shares
held by CCBF, subsidiaries of CCBF or Salem, and other than shares as to which
Salem shareholders properly exercise Dissenters' Rights) automatically will be
converted into and become, and thereafter may be exchanged for a fraction of a
newly issued share of CCBF Stock and a fraction of a CCBF Right. The Exchange
Ratio set forth in the Amended Merger Agreement provides that such fraction will
be: (a) if the Average Price is equal to or greater than $46.78, but equal to or
less than $57.18, .41, (b) if the Average Price is greater than $57.18, the
fraction computed by dividing $57.18 by the Average Price and multiplying the
resulting quotient by .41; or (c) if the Average Price is less than $46.78, the
fraction computed by dividing $46.78 by the Average Price and multiplying the
resulting quotient by .41.
At the Effective Time, all rights with respect to then outstanding Salem
Options, whether or not then exercisable, will be converted into (at the
Exchange Ratio) and will become rights with respect to CCBF Stock, and CCBF will
assume Salem's obligations with respect to each such Salem Option in accordance
with the terms of the applicable Salem Option Plan under which such Salem Option
was granted and the related option agreement; provided, however, that pursuant
to the Salem Option Plans all unvested Salem Options will become fully vested as
a consequence of the Merger. See " -- Interests of Certain Persons with Respect
to the Merger".
RECOMMENDATION AND REASONS
SALEM'S BOARD OF DIRECTORS HAS UNANIMOUSLY ADOPTED THE AMENDED MERGER
AGREEMENT AND RECOMMENDS THAT SALEM'S SHAREHOLDERS VOTE "FOR" APPROVAL OF THE
AMENDED MERGER AGREEMENT AND THE MERGER.
At the time the Merger Agreement was initially entered into (July 1, 1996)
and the time it was first amended (as of September 6, 1996), CCBF Stock
generally was trading within a range of $50.00 to $53.00 per share. The initial
Merger Agreement provided that if the closing sales price of CCBF Stock on the
NYSE on the Closing Date was less than $46.78 or more than $57.18 either CCBF
and CCB Bank or Salem could terminate the Merger Agreement. The parties
subsequently amended the Merger Agreement as of September 6, 1996 to provide
that if the Average Price of CCBF Stock was less than $46.78 or more than
$57.18, such termination rights would be available.
The 60 trading day period preceding January 24, 1997 commenced on October
29, 1996. During the first 14 days of that period (October 29th through November
15th), the closing price of CCBF Stock on the NYSE rose from $57.00 to $62.00
per share, and the average closing price for those 14 days was $60.01.
As a consequence of this trend in the market price of CCBF Stock, CCBF and
Salem entered into discussions about amending the Merger Agreement to establish
a revised exchange ratio providing that, assuming the Average Price of CCBF
Stock remains in excess of $57.18 (and the closing price of CCBF Stock on the
Closing Date equals the Average Price), Salem's shareholders would receive at
the Effective Time for each share of Salem Stock held CCBF Stock having a market
14
<PAGE>
value of at least $23.44 ($57.18 multiplied by .41), and providing further that
if the closing price of CCBF Stock on the Closing Date exceeds the Average
Price, Salem's shareholders would receive additional value equal to the excess
of such closing price over the Average Price multiplied by the Exchange Ratio.
For example, if the Average Price were $60.01 (the Average Price for October
29th through November 15th) and the closing price on the Closing Date were
$62.00 (the closing price on November 15th), Salem's shareholders would receive
.391 of a share of CCBF Stock for each of their shares of Salem Stock, a value
in CCBF Stock as of the Effective Time of $24.24 ($62.00 multiplied by .391). If
the closing price of CCBF Stock on the Closing Date is less than the Average
Price, Salem's shareholders would receive less than $23.44 per share of Salem
Stock. Salem also requested in these discussions, and CCBF and CCB Bank agreed
to, a further modification to the Exchange Ratio calculation designed to provide
that, assuming the market price of CCBF Stock at the Effective Time is less than
$46.78, in certain circumstances Salem's shareholders would receive CCBF Stock
having a market value of at least $19.18 ($46.78 multiplied by .41). For
example, if the Average Price were $44.00 and the closing price on the Closing
Date were an amount equal to or greater than the Average Price (e.g. $45.00),
Salem's shareholders would receive .436 of a share of CCBF Stock for each of
their shares of Salem Stock, a value in CCBF Stock at the Effective Time of
$19.62. It should be noted, however, that the closing price of CCBF Stock on,
and the Average Price as of, January 24, 1997 may be higher or lower than the
figures used in the foregoing examples or may be within the range of $46.78 to
$57.18.
The amendments to the exchange ratio provisions of the Merger Agreement
agreed upon by CCBF, CCB Bank and Salem are described in the explanation of the
Exchange Ratio provisions of the Amended Merger Agreement herein and are set
forth in Appendix A hereto.
The modifications to the exchange ratio provisions of the Merger Agreement
resulting in the Exchange Ratio provisions of the Amended Merger Agreement
necessitated the deletion from the Amended Merger Agreement of the provision of
the Merger Agreement permitting CCBF and CCB Bank or Salem to terminate the
Merger Agreement if the Average Price is less than $46.78 or more than $57.18.
As part of this negotiation process, Salem requested, and CCBF and CCB Bank
agreed to, a new termination right for Salem. If, on or prior to the Closing
Date and prior to the Effective Time, CCBF announces its merger with and into
another company, Salem may terminate the Amended Merger Agreement.
In the judgment of the Salem Board, the Exchange Ratio provisions of the
Amended Merger Agreement, considered in light of the current level of CCBF
Stock's market price, are reasonable and in the best interests of Salem and its
shareholders.
AMENDMENT OF AMENDED MERGER AGREEMENT; WAIVER
Prior to the Effective Time, any provision of the Amended Merger Agreement
may be waived by the party entitled to the benefit of such provision; provided,
however, that no condition may be waived which, if not satisfied, would result
in a violation of any law or applicable governmental regulation. The Amended
Merger Agreement may be amended, modified or supplemented at any time prior to
the Effective Time, and whether before or after the reconvened Special Meeting,
by an agreement in writing approved by Salem's, CCBF's and CCB Bank's respective
Boards of Directors. However, following the reconvened Special Meeting and
approval of the Amended Merger Agreement by CCB Bank's shareholder, no changes
involving material matters, including the manner or basis in which shares of
Salem Stock will be converted into and exchanged for CCBF Stock, may be made
without the approval of Salem's shareholders and CCB Bank's shareholder.
TERMINATION OF AMENDED MERGER AGREEMENT
The Amended Merger Agreement may be terminated, whether before or after the
reconvened Special Meeting, upon the mutual consent of the Board of Directors of
Salem and the Boards of Directors of CCBF and CCB Bank, and may be terminated by
the Board of Directors of either Salem or CCBF and CCB Bank in the event, among
other things, (i) of a material breach by the other party of any
representations, warranty, covenant or other agreement in the Amended Merger
Agreement which is not cured within 30 days after written notice to the party
committing such breach; (ii) that any regulatory authority has denied approval
of any of the transactions contemplated by the Amended Merger Agreement, or that
an order, judgment or decree from any regulatory authority or any court having
competent jurisdiction has imposed any condition or requirement which would so
substantially and adversely impact the economic or business benefits of the
Merger to such party as to render inadvisable in the reasonable opinion of such
party's Board of Directors the consummation of the Merger (provided that such
denial or imposition has become final and nonappealable); (iii) of the
occurrence of a suit or other proceeding by any regulatory authority or other
governmental body or agency to restrain or prohibit any of the transactions
contemplated by the Amended Merger Agreement, or a suit by a Salem or CCBF
shareholder seeking to restrain such transactions or to obtain material money
damages should such transactions be consummated (unless counsel for the party
wishing to proceed with the Merger renders an opinion that such a suit is likely
to be resolved in a way which would not deprive any party of the
15
<PAGE>
material benefits of the Merger or in a way which would not result in
substantial money damages to one or more directors of such party which would not
be covered by insurance); or (iv) that the Effective Time shall not have
occurred on or before March 31, 1997; provided, however, that if
pooling-of-interests accounting treatment is not permissible, this date shall be
extended to June 30, 1997.
Additionally, Salem may terminate the Amended Merger Agreement if, on or
before the Closing Date and prior to the Effective Time, CCBF announces its
merger with and into another company. The provision of the Merger Agreement
allowing CCBF and CCB Bank or Salem to terminate that Agreement if the Average
Price is less than $46.78 or more than $57.18 has been deleted and is not
contained in the Amended Merger Agreement.
EFFECTIVE TIME AND CLOSING DATE
It is currently anticipated that the Closing Date will be, and the
Effective Time will occur on, January 24, 1997.
16
<PAGE>
PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION
The following unaudited Pro Forma Combined Condensed Balance Sheet and
Statements of Income and accompanying notes are presented to show the impact of
the Merger on CCBF's and Salem's historical financial position and results of
operations. The Merger is reflected in the Pro Forma Combined Condensed Balance
Sheet and Statements of Income under the pooling-of-interests method of
accounting. CCBF currently intends for the Merger to be accounted for under the
pooling-of-interests method. However, if application of such accounting method
should not be permissible, the Merger would be accounted for under the purchase
method of accounting. See "THE MERGER -- Accounting Treatment" and
" -- Conditions to Merger". Under the purchase method of accounting, the
acquiring corporation records at its costs the acquired assets less liabilities
assumed. The difference between the cost of the acquired enterprise and the sum
of the fair values of tangible and identifiable intangible assets less
liabilities assumed is recorded as goodwill. The reported income of an acquiring
corporation includes the operations of the acquired enterprise after
acquisition, adjusted for amortization of any assets arising from the
acquisition.
The unaudited Pro Forma Combined Condensed Balance Sheet presented assumes
that the Merger was consummated on September 30, 1996 and the unaudited Pro
Forma Combined Condensed Statements of Income assume that the Merger was
consummated at the beginning of each period presented.
The pro forma earnings are not necessarily indicative of actual results
that might have been achieved had the Merger been consummated at the beginning
of the periods presented, and may not be indicative of future results that will
be obtained on a combined basis. The Pro Forma Combined Condensed Balance Sheet
and Statements of Income do not reflect any Merger-related expenses which may be
recognized or cost savings from operating efficiencies which may be realized in
connection with the Merger. Current estimates of Merger-related expenses are
$1.4 million. CCBF currently anticipates cost savings of approximately $1.5
million associated with these possible operating efficiencies and synergies, but
no such savings are assured. It is anticipated that any such cost savings will
not be achieved until the fiscal quarters following the quarter in which the
expenses of the Merger are recognized.
17
<PAGE>
PRO FORMA COMBINED CONDENSED BALANCE SHEET
AS OF SEPTEMBER 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
CCBF
PRO FORMA PRO FORMA
CCBF SALEM ADJUSTMENTS COMBINED
<S> <C> <C> <C> <C>
(IN THOUSANDS)
ASSETS
Cash and due from banks................................................... $ 190,217 5,884 -- 196,101
Time deposits in other banks.............................................. 60,137 -- -- 60,137
Federal funds sold and other short-term investments....................... 170,800 14,055 -- 184,855
Investment securities:
Available for sale...................................................... 904,857 2,462 -- 907,319
Held to maturity........................................................ 74,197 16,805 -- 91,002
Loans and lease financing................................................. 3,622,345 116,707 -- 3,739,052
Less reserve for loan and lease losses.................................. 47,254 1,434 -- 48,688
Net loans and lease financing........................................ 3,575,091 115,273 -- 3,690,364
Premises and equipment.................................................... 66,273 1,865 -- 68,138
Other assets.............................................................. 116,272 1,725 -- 117,997
Total assets......................................................... $5,157,844 158,069 -- 5,315,913
LIABILITIES
Deposits:
Noninterest-bearing..................................................... $ 554,294 16,823 -- 571,117
Interest-bearing........................................................ 3,843,521 122,364 -- 3,965,885
Total deposits....................................................... 4,397,815 139,187 -- 4,537,002
Short-term borrowed funds................................................. 143,058 -- -- 143,058
Long-term debt............................................................ 59,046 -- -- 59,046
Other liabilities......................................................... 96,221 1,655 -- 97,876
Total liabilities.................................................... 4,696,140 140,842 -- 4,836,982
SHAREHOLDERS' EQUITY
Common stock.............................................................. 75,307 4,603 (1,013)(1) 78,897
Additional paid-in capital................................................ 90,253 8,063 1,013(1) 99,329
Retained earnings......................................................... 294,632 4,561 -- 299,193(2)
Unrealized gain on investment securities available for sale............... 2,504 -- -- 2,504
Less: Unearned common stock held by management
recognition plans....................................................... (992) -- -- (992)
Total shareholders' equity........................................... 461,704 17,227 -- 478,931
Total liabilities and shareholders' equity........................... $5,157,844 158,069 -- 5,315,913
</TABLE>
(1) Using an Exchange Ratio based on the Assumed CCBF Average Price for
conversion of Salem Stock into CCBF Stock. At September 30, 1996, CCBF and
Salem had 15,061,334 and 1,841,232 shares outstanding, respectively.
(2) The pro forma combined retained earnings do not reflect any Merger-related
expenses which may be recognized or cost savings from operating efficiencies
which may be realized in connection with the Merger.
18
<PAGE>
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
CCBF
PRO FORMA
CCBF SALEM COMBINED (1)
<S> <C> <C> <C>
(DOLLARS IN THOUSANDS)
INTEREST INCOME
Loans and leases................................................................... $238,042 7,779 245,821
Investment securities.............................................................. 45,445 785 46,230
Other.............................................................................. 11,050 743 11,793
Total interest income........................................................... 294,537 9,307 303,844
INTEREST EXPENSE
Deposits........................................................................... 126,938 4,564 131,502
Long-term debt and other borrowings................................................ 7,495 41 7,536
Total interest expense.......................................................... 134,433 4,605 139,038
Net interest income.................................................................. 160,104 4,702 164,806
Provision for loan and lease losses.................................................. 9,000 132 9,132
NET INTEREST INCOME AFTER PROVISION FOR LOAN AND LEASE LOSSES........................ 151,104 4,570 155,674
OTHER INCOME
Service charges on deposit accounts................................................ 21,571 107 21,678
Nondeposit fees and commissions.................................................... 12,424 776 13,200
Merchant discount.................................................................. 4,114 -- 4,114
Other.............................................................................. 7,454 13 7,467
Investment securities gains, net................................................... 510 -- 510
Total other income.............................................................. 46,073 896 46,969
OTHER EXPENSES
Personnel expense.................................................................. 61,419 1,906 63,325
Net occupancy and equipment expense................................................ 16,261 322 16,583
FDIC special assessment............................................................ 8,400 -- 8,400
Other operating expenses........................................................... 35,579 858 36,437
Total other expenses............................................................ 121,659 3,086 124,745
INCOME BEFORE INCOME TAXES........................................................... 75,518 2,380 77,898
Income taxes......................................................................... 24,367 928 25,295
NET INCOME........................................................................... $ 51,151 1,452 52,603
INCOME PER SHARE:
Primary............................................................................ $ 3.40 .83 3.35
Fully diluted...................................................................... 3.40 .80 3.34
WEIGHTED AVERAGE SHARES OUTSTANDING:
Primary............................................................................ 15,041,590 1,743,707 15,721,636(2)
Fully diluted...................................................................... 15,041,590 1,835,019 15,757,247(2)
</TABLE>
(1) No pro forma adjustments are reflected in the Pro Forma Combined Condensed
Statement of Income.
(2) Using an Exchange Ratio based on the Assumed CCBF Average Price for
conversion of Salem Stock into CCBF Stock.
19
<PAGE>
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
CCBF
PRO FORMA
CCBF SALEM COMBINED (1)
<S> <C> <C> <C>
(DOLLARS IN THOUSANDS)
INTEREST INCOME
Loans and leases................................................................... $227,018 5,931 232,949
Investment securities.............................................................. 46,472 154 46,626
Other.............................................................................. 11,529 510 12,039
Total interest income........................................................... 285,019 6,595 291,614
INTEREST EXPENSE
Deposits........................................................................... 124,880 2,972 127,852
Long-term debt and other borrowings................................................ 8,061 102 8,163
Total interest expense.......................................................... 132,941 3,074 136,015
Net interest income.................................................................. 152,078 3,521 155,599
Provision for loan and lease losses.................................................. 5,776 338 6,114
NET INTEREST INCOME AFTER PROVISION FOR LOAN AND LEASE LOSSES........................ 146,302 3,183 149,485
OTHER INCOME
Service charges on deposit accounts................................................ 18,937 57 18,994
Nondeposit fees and commissions.................................................... 10,419 465 10,884
Other.............................................................................. 10,532 34 10,566
Investment securities losses, net.................................................. (982) -- (982)
Total other income.............................................................. 38,906 556 39,462
OTHER EXPENSES
Personnel expense.................................................................. 59,039 1,545 60,584
Net occupancy and equipment expense................................................ 16,224 263 16,487
Other operating expenses........................................................... 37,510 705 38,215
Merger-related expense............................................................. 10,333 -- 10,333
Total other expenses............................................................ 123,106 2,513 125,619
INCOME BEFORE INCOME TAXES........................................................... 62,102 1,226 63,328
Income taxes......................................................................... 21,305 595 21,900
NET INCOME........................................................................... $ 40,797 631 41,428
NET INCOME PER SHARE:
Primary............................................................................ $ 2.73 .49 2.68
Fully diluted...................................................................... 2.73 .46 2.67
WEIGHTED AVERAGE SHARES OUTSTANDING:
Primary............................................................................ 14,947,700 1,292,033 15,451,593(2)
Fully diluted...................................................................... 14,947,700 1,505,328 15,534,778(2)
</TABLE>
(1) No pro forma adjustments are reflected in the Pro Forma Combined Condensed
Statement of Income.
(2) Using an Exchange Ratio based on the Assumed CCBF Average Price for
conversion of Salem Stock into CCBF Stock.
20
<PAGE>
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
CCBF
PRO FORMA
CCBF SALEM COMBINED (1)
<S> <C> <C> <C>
(DOLLARS IN THOUSANDS)
INTEREST INCOME
Loans and leases.................................................................... $305,165 8,145 313,310
Investment securities............................................................... 61,281 267 61,548
Other............................................................................... 17,068 925 17,993
Total interest income............................................................ 383,514 9,337 392,851
INTEREST EXPENSE
Deposits............................................................................ 168,983 4,437 173,420
Long-term debt and other borrowings................................................. 10,421 134 10,555
Total interest expense........................................................... 179,404 4,571 183,975
Net interest income................................................................... 204,110 4,766 208,876
Provision for loan and lease losses................................................... 8,183 545 8,728
NET INTEREST INCOME AFTER PROVISION FOR LOAN AND LEASE LOSSES......................... 195,927 4,221 200,148
OTHER INCOME
Service charges on deposit accounts................................................. 25,600 99 25,699
Non-deposit fees and commissions.................................................... 18,827 471 19,298
Other............................................................................... 8,840 358 9,198
Investment securities losses, net................................................... (978) -- (978)
Total other income............................................................... 52,289 928 53,217
OTHER EXPENSES
Personnel........................................................................... 79,298 2,061 81,359
Net occupancy and equipment......................................................... 20,929 353 21,282
Deposit and other insurance......................................................... 7,096 87 7,183
Merger-related expenses............................................................. 10,333 -- 10,333
Other operating..................................................................... 42,567 884 43,451
Total other expenses............................................................. 160,223 3,385 163,608
Income before income taxes............................................................ 87,993 1,764 89,757
Income taxes.......................................................................... 30,133 720 30,853
NET INCOME............................................................................ $ 57,860 1,044 58,904
NET INCOME PER SHARE:
Primary............................................................................. $ 3.87 .72 3.80
Fully diluted....................................................................... 3.87 .67 3.78
WEIGHTED AVERAGE SHARES OUTSTANDING:
Primary............................................................................. 14,949,063 1,447,700 15,513,666(2)
Fully diluted....................................................................... 14,949,063 1,684,659 15,606,080(2)
</TABLE>
(1) No pro forma adjustments are reflected in the Pro Forma Combined Condensed
Statement of Income.
(2) Using an Exchange Ratio based on the Assumed CCBF Average Price for
conversion of Salem Stock into CCBF Stock.
21
<PAGE>
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1994
(UNAUDITED)
<TABLE>
<CAPTION>
CCBF
PRO FORMA
CCBF SALEM COMBINED (1)
<S> <C> <C> <C>
(DOLLARS IN THOUSANDS)
INTEREST INCOME
Loans and leases.................................................................... $243,577 4,620 248,197
Investment securities............................................................... 58,301 319 58,620
Other............................................................................... 8,021 381 8,402
Total interest income............................................................ 309,899 5,320 315,219
INTEREST EXPENSE
Deposits............................................................................ 117,408 2,267 119,675
Long-term debt and other borrowings................................................. 8,958 130 9,088
Total interest expense........................................................... 126,366 2,397 128,763
Net interest income................................................................... 183,533 2,923 186,456
Provision for loan and lease losses................................................... 9,279 50 9,329
NET INTEREST INCOME AFTER PROVISION FOR LOAN AND LEASE LOSSES......................... 174,254 2,873 177,127
OTHER INCOME
Service charges on deposit accounts................................................. 23,452 78 23,530
Non-deposit fees and commissions.................................................... 18,923 315 19,238
Other............................................................................... 6,255 253 6,508
Investment securities gains, net.................................................... 357 -- 357
Total other income............................................................... 48,987 646 49,633
OTHER EXPENSES
Personnel........................................................................... 71,990 1,312 73,302
Net occupancy and equipment......................................................... 21,492 228 21,720
Deposit and other insurance......................................................... 9,032 170 9,202
Merger-related expense.............................................................. 1,100 -- 1,100
Other operating..................................................................... 43,673 500 44,173
Total other expenses............................................................. 147,287 2,210 149,497
Income before income taxes............................................................ 75,954 1,309 77,263
Income taxes.......................................................................... 30,843 506 31,349
NET INCOME............................................................................ $ 45,111 803 45,914
NET INCOME PER SHARE:
Primary............................................................................. $ 2.94 .76 2.91
Fully diluted....................................................................... 2.94 .70 2.90
WEIGHTED AVERAGE SHARES OUTSTANDING:
Primary............................................................................. 15,354,319 1,050,534 15,764,027(2)
Fully diluted....................................................................... 15,354,319 1,267,064 15,848,474(2)
</TABLE>
(1) No pro forma adjustments are reflected in the Pro Forma Combined Condensed
Statement of Income.
(2) Using an Exchange Ratio based on the Assumed CCBF Average Price for
conversion of Salem Stock into CCBF Stock.
22
<PAGE>
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1993
(UNAUDITED)
<TABLE>
<CAPTION>
CCBF
PRO FORMA
CCBF SALEM COMBINED (1)
<S> <C> <C> <C>
(DOLLARS IN THOUSANDS)
INTEREST INCOME
Loans and leases.................................................................... $196,588 3,872 200,460
Investment securities............................................................... 53,011 319 53,330
Other............................................................................... 5,313 266 5,579
Total interest income............................................................ 254,912 4,457 259,369
INTEREST EXPENSE
Deposits............................................................................ 97,194 2,200 99,394
Long-term debt and other borrowings................................................. 4,762 107 4,869
Total interest expense........................................................... 101,956 2,307 104,263
Net interest income................................................................... 152,956 2,150 155,106
Provision for loan and lease losses................................................... 7,106 -- 7,106
NET INTEREST INCOME AFTER PROVISION FOR LOAN AND LEASE LOSSES......................... 145,850 2,150 148,000
OTHER INCOME
Service charges on deposit accounts................................................. 23,184 95 23,279
Non-deposit fees and commissions.................................................... 16,143 131 16,274
Other............................................................................... 7,290 208 7,498
Investment securities gains, net.................................................... 2,962 -- 2,962
Total other income............................................................... 49,579 434 50,013
OTHER EXPENSES
Personnel........................................................................... 66,718 1,034 67,752
Net occupancy and equipment......................................................... 20,034 182 20,216
Deposit and other insurance......................................................... 7,300 171 7,471
Other operating..................................................................... 35,400 489 35,889
Total other expenses............................................................. 129,452 1,876 131,328
Income before income taxes and cumulative changes in accounting principles............ 65,977 708 66,685
Income taxes.......................................................................... 21,913 250 22,163
INCOME BEFORE CUMULATIVE CHANGES IN ACCOUNTING PRINCIPLES (2)......................... $ 44,064 458 44,522
INCOME BEFORE CUMULATIVE CHANGES IN ACCOUNTING PRINCIPLE PER SHARE (2):
Primary............................................................................. $ 3.10 .44 3.04
Fully diluted....................................................................... 3.05 .42 2.99
WEIGHTED AVERAGE SHARES OUTSTANDING
Primary............................................................................. 14,230,099 1,039,676 14,635,573(3)
Fully diluted....................................................................... 14,611,692 1,206,702 15,082,306(3)
</TABLE>
(1) No pro forma adjustments are reflected in the Pro Forma Combined Condensed
Statement of Income.
(2) Income before cumulative changes in accounting principles and primary and
fully diluted income per share before cumulative changes in accounting
principles do not include the cumulative effect of changes in accounting
principles resulting from the adoption by CCBF on January 1, 1993 of SFAS
106 and SFAS 109. The impact of adoption of SFAS 106 and SFAS 109 on net
income, primary net income per share and fully diluted net income per share
was a net charge of $1,371,000, $(.10) and $(.09), respectively.
(3) Using an Exchange Ratio based on the Assumed CCBF Average Price for
conversion of Salem Stock into CCBF Stock.
23
<PAGE>
PRO FORMA CAPITALIZATION
The following table sets forth: (i) the unaudited historical capitalization
of CCBF as of September 30, 1996; (ii) the unaudited historical capitalization
of Salem as of September 30, 1996; and (iii) the unaudited pro forma
capitalization of CCBF and Salem assuming the Merger had been consummated on
September 30, 1996. This financial information has been based on, and should be
read in conjunction with, CCBF's unaudited financial statements, including the
related notes thereto, which are incorporated by reference in this
Prospectus/Proxy Statement Supplement (see "INCORPORATION OF CERTAIN DOCUMENTS
BY REFERENCE"), and Salem's interim unaudited financial statements, including
the related notes thereto, which are attached hereto and incorporated herein by
reference.
<TABLE>
<CAPTION>
PRO FORMA
CCBF SALEM COMBINED
<S> <C> <C> <C>
(DOLLARS IN THOUSANDS)
LONG-TERM DEBT
CCBF:
Advances from Federal Home Loan Bank with varying maturities to 2016 with rates
from 3.0% to 9.25% (1)........................................................... $ 25,929 25,929
6 3/4% subordinated notes due 2003................................................ 32,985 32,985
Other long-term debt.............................................................. 132 132
Salem................................................................................ --
Total long-term debt............................................................ 59,046 -- 59,046
SHAREHOLDERS' EQUITY
CCBF:
Serial preferred stock. Authorized 5,000,000 shares; none issued.................. -- --
Common stock, $5 par value; 50,000,000 shares authorized; 15,061,334 shares issued
and 15,779,414 pro forma combined issued, respectively (2)....................... 75,307 78,897
Additional paid-in capital........................................................ 90,253 99,329
Retained earnings (3)............................................................. 294,632 299,193
Plus: Unrealized gain on investment securities available for sale................. 2,504 2,504
Less: Unearned common stock held by management recognition plans.................. (992) (992)
Salem:
Preferred stock, $25.00 par value; 60,000 shares authorized; none issued.......... --
Common stock, $2.50 par value; 5,000,000 shares authorized,
1,841,232 issued................................................................ 4,603
Additional paid-in capital........................................................ 8,063
Retained earnings................................................................. 4,561
Total shareholders' equity...................................................... 461,704 17,227 478,931
Total long-term debt and shareholders' equity................................... $520,750 17,227 537,977
</TABLE>
(1) These obligations are direct obligations of subsidiaries of CCBF and, as
such, constitute claims against such subsidiaries prior to CCBF's equity
interest therein.
(2) Using an Exchange Ratio based on the Assumed Average CCBF Stock Price for
conversion of Salem Stock into CCBF Stock.
(3) The pro forma combined retained earnings do not reflect any Merger-related
expenses which may be recognized or cost savings from operating efficiencies
which may be realized in connection with the Merger.
24
<PAGE>
SALEM TRUST BANK
DESCRIPTION OF BUSINESS
Salem is a state-chartered financial institution that is engaged in general
commercial and retail banking in Forsyth and New Hanover Counties, North
Carolina. Salem operates a single office in each of Winston-Salem and
Wilmington, North Carolina.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion is intended to complement Salem's unaudited
financial statements as of September 30, 1996 and 1995 and its audited financial
statements as of December 31, 1995 and 1994 and for the three-years ended
December 31, 1995 and should be read in conjunction therewith.
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
NET INCOME. Net income for the nine months ended September 30, 1996 totaled
$1,452,000, an $821,000 increase over the same period in 1995. The increase was
due primarily to a higher volume of loans. Primary earnings per share for the
nine months ended September 30, 1996 amounted to $.83 compared to $.49 for the
comparable period in 1995. Fully diluted earnings per share for the same periods
were $.80 and $.46, respectively. Return on assets equaled 1.24% for the 1996
period compared to .82% for 1995. Return on average stockholders equity was
12.45% for the first nine months of 1996 and 8.18% for the same period in 1995.
Net income for the year ended December 31, 1995 was $1 million which
represented a 30.1% increase over net income of $803,000 for 1994. Despite this
increase, primary earnings per share declined $.04 from the $.76 earned in 1994
due to the higher number of average shares outstanding during 1995. The
increased average shares outstanding resulted from Salem's 1995 secondary stock
offering which increased average shares outstanding by 37.8% from year end 1994
to year end 1995.
Net income for 1994 increased 75.5% from $458,000 in 1993 to $803,000 in
1994. Primary earnings per share increased $.32 to $.76 per share for the year
ended December 31, 1994. Fully diluted earnings per share totaled $.70 compared
to $.42 in 1993. Return on average assets and average stockholders equity was
.96% and 11.11%, respectively, for 1994 compared to .57% and 6.92%,
respectively, for 1993.
INTEREST-EARNING ASSETS. Salem's financial condition and results of
operations can be analyzed in part by reviewing the changes and trends in its
interest-earning assets and interest-bearing liabilities. Table 1 sets forth
average balance sheets and net interest income analyses for the nine-month
periods ended September 30, 1996 and 1995 and Table 3 discloses the same
analyses for the three-year period ended December 31, 1995.
25
<PAGE>
TABLE 1
AVERAGE BALANCES AND NET INTEREST INCOME ANALYSIS
NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(TAXABLE EQUIVALENT BASIS -- IN THOUSANDS) (1)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30
<S> <C> <C> <C> <C> <C> <C>
1996 1995
<CAPTION>
INTEREST AVERAGE INTEREST AVERAGE
AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/
BALANCE EXPENSE RATE BALANCE EXPENSE RATE
<S> <C> <C> <C> <C> <C> <C>
EARNING ASSETS:
Loans (2)...................................................... $112,854 7,779 9.21% 82,601 5,931 9.60
U.S. Treasury and U.S. Government agencies and corporations.... 16,785 756 6.02 3,284 141 5.74
States and political subdivisions.............................. 1,484 70 6.30 91 3 4.41
Equity and other securities.................................... 414 32 10.32 287 16 7.45
Other earning assets........................................... 18,770 743 5.29 11,856 510 5.75
Total earning assets........................................... 150,307 9,380 8.34% 98,119 6,601 8.99
NON-EARNING ASSETS:
Cash and due from banks........................................ 4,276 3,681
Premises and equipment......................................... 1,884 1,782
All other assets, net.......................................... (131) (353)
Total assets................................................... $156,336 103,229
INTEREST-BEARING LIABILITIES:
Savings and time deposits...................................... $126,997 4,564 4.80% 81,733 2,972 4.86
Other borrowed funds........................................... 915 41 5.99 2,257 102 6.04
Total interest-bearing liabilities............................. 127,912 4,605 4.81% 83,990 3,074 4.89
OTHER LIABILITIES AND SHAREHOLDERS' EQUITY:
Demand deposits................................................ 11,233 7,937
Other liabilities.............................................. 1,613 989
Shareholders' equity........................................... 15,578 10,313
Total liabilities and shareholders' equity..................... $156,336 103,229
NET INTEREST INCOME AND NET INTEREST MARGIN (3)................ $4,775 4.24% 3,527 4.81
INTEREST RATE SPREAD (4)....................................... 3.53% 4.10
</TABLE>
(1) The taxable equivalent basis is computed using 35% federal and 7.75% state
tax rates where applicable.
(2) Loan fees of $194,000 and $149,000 for the nine months ended September 30,
1996 and 1995, 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 1, average earning assets at September 30, 1996 grew
$52.2 million (or 53%) from the September 30, 1995 level. Average loan growth
during this period of $30.3 million was due primarily to increased loan demand
from the Wilmington office which opened in the first quarter of 1995.
26
<PAGE>
Table 2 presents Salem's outstanding loans by category as of September 30,
1996 and 1995 and for each of the past five years:
TABLE 2
LOANS
(IN THOUSANDS)
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30 AS OF DECEMBER 31
<S> <C> <C> <C> <C> <C> <C> <C>
1996 1995 1995 1994 1993 1992 1991
Commercial, financial and agricultural........... $ 19,902 16,934 18,307 9,879 9,765 9,395 16,758
Real estate -- construction...................... 18,027 9,247 12,253 4,259 2,040 3,035 2,820
Real estate -- mortgage.......................... 74,818 70,052 71,297 48,765 43,965 41,309 34,186
Installment loans to individuals................. 3,292 3,213 3,736 3,512 3,940 4,216 5,029
Credit card receivables.......................... 668 622 638 551 737 545 420
Total loans and lease financing.................. $116,707 100,068 106,231 66,966 60,447 58,500 59,213
</TABLE>
Despite increases in average loans, loans as a percentage of total average
interest-earning assets fell from 84% for the nine months ended September 30,
1995 to 75% for the same period in 1996. The shift from loans to lower-yielding
investment securities and other interest-earning assets was a result of
management's decision to improve Salem's overall liquidity position. The mix of
average interest-earning assets also shifted during the year ended December 31,
1995. Average loans outstanding comprised 81% of average earning assets for 1995
compared to 79% for 1994. This shift occurred due to strong loan demand.
27
<PAGE>
As shown in Table 3, average earning assets for the year ended December 31,
1995 grew $30 million over the level for the prior year, with average loan
growth comprising $26.3 million of the increase. Most of this growth resulted
from the opening of the Wilmington office. The higher loan levels were funded
primarily by increases in savings and time deposits.
TABLE 3
AVERAGE BALANCES AND NET INTEREST INCOME ANALYSIS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(TAXABLE EQUIVALENT BASIS -- IN THOUSANDS) (1)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1995 1994 1993
<CAPTION>
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 (2)....................................... $ 87,414 8,145 9.32% 61,111 4,620 7.56 59,388 3,872
U.S. Treasury and U.S. Government agencies and
corporations.................................. 4,215 241 5.72 5,800 259 4.47 5,655 239
States and political subdivisions............... 74 5 6.76 313 16 5.11 377 13
Equity and other securities..................... 458 31 6.77 1,077 62 5.76 995 90
Other earning assets............................ 15,589 925 5.93 9,511 380 4.00 10,024 266
Total earning assets............................ 107,750 9,347 8.67% 77,812 5,337 6.86 76,439 4,480
NON-EARNING ASSETS:
Cash and due from banks......................... 3,736 2,349 2,478
Premises and equipment.......................... 1,809 1,741 1,735
All other assets, net........................... 586 1,579 232
Total assets.................................... $113,881 83,481 80,884
INTEREST-BEARING LIABILITIES:
Savings and time deposits....................... $ 89,860 4,437 4.94% 65,025 2,267 3.49 65,424 2,199
Other borrowed funds............................ 3,195 134 4.19 4,015 130 3.24 2,039 107
Total interest-bearing liabilities.............. 93,055 4,571 4.91% 69,040 2,397 3.47 67,463 2,306
OTHER LIABILITIES AND SHAREHOLDERS' EQUITY:
Demand deposits................................. 8,554 6,530 6,202
Other liabilities............................... 1,168 685 601
Shareholders' equity............................ 11,104 7,226 6,618
Total liabilities and shareholders' equity...... $113,881 83,481 80,884
NET INTEREST INCOME AND NET INTEREST
MARGIN (3).................................... $4,776 4.43% 2,940 3.78 2,174
Interest rate spread (4)........................ 3.76% 3.39
<CAPTION>
<S> <C>
[ta][ta] 1993
AVERAGE
YIELD/
RATE
<S> <C>
EARNING ASSETS:
Loans (2)....................................... 6.52
U.S. Treasury and U.S. Government agencies and
corporations.................................. 4.23
States and political subdivisions............... 3.45
Equity and other securities..................... 9.05
Other earning assets............................ 2.65
Total earning assets............................ 5.86
NON-EARNING ASSETS:
Cash and due from banks.........................
Premises and equipment..........................
All other assets, net...........................
Total assets....................................
INTEREST-BEARING LIABILITIES:
Savings and time deposits....................... 3.36
Other borrowed funds............................ 5.25
Total interest-bearing liabilities.............. 3.42
OTHER LIABILITIES AND SHAREHOLDERS' EQUITY:
Demand deposits.................................
Other liabilities...............................
Shareholders' equity............................
Total liabilities and shareholders' equity......
NET INTEREST INCOME AND NET INTEREST
MARGIN (3).................................... 2.84
Interest rate spread (4)........................ 2.44
</TABLE>
(1) The taxable equivalent basis is computed using 35% federal and 7.75% state
tax rates where applicable.
(2) The average loan balances include nonaccruing loans. Loan fees of $194,000,
$88,000 and $76,000 for the years ended December 31, 1995, 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.
Salem's investment securities portfolio is comprised primarily of U. S.
Government and state, county and municipal obligations. The portfolio can be
segregated into three possible categories: available for sale, held to maturity
and held for trading. Salem categorizes the majority of its investment
securities as held to maturity. Salem has never held any investments for
trading. Table 4 sets forth detailed schedules of investment securities as of
September 30, 1996 and 1995 and as of December 31 for the three-year period
ended December 31, 1995. As of September 30, 1996 and December 31, 1995, the
carrying value of Salem's investments held to maturity exceeded their market
value by $150,000 and $14,000, respectively.
28
<PAGE>
TABLE 4
INVESTMENT SECURITIES PORTFOLIO
(IN THOUSANDS)
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30 AS OF DECEMBER 31
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1996 1995 1995 1994 1993
<CAPTION>
AMORTIZED CARRYING AMORTIZED CARRYING AMORTIZED CARRYING AMORTIZED CARRYING AMORTIZED
COST VALUE COST VALUE COST VALUE COST VALUE COST
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SECURITIES AVAILABLE FOR
SALE
States and political
subdivisions............ $ 2,000 2,000 -- -- -- -- -- -- --
Equity securities......... 462 462 295 295 295 295 269 269 --
Total securities
available
for sale............ $ 2,462 2,462 295 295 295 295 269 269 --
Maturity and Yield
Schedule as of September
30, 1996
<CAPTION>
WEIGHTED
CARRYING AVERAGE
VALUE YIELD
<S> <C> <C>
States and political
subdivisions:
Within 1 year........... $ 2,000 5.25%
Equity securities......... 462 5.50
Total securities
available
for sale............ $ 2,462 5.30%
<CAPTION>
AS OF SEPTEMBER 30 AS OF DECEMBER 31
1996 1995 1995 1994 1993
CARRYING MARKET CARRYING MARKET CARRYING MARKET CARRYING MARKET CARRYING
VALUE VALUE VALUE VALUE VALUE VALUE VALUE VALUE VALUE
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SECURITIES HELD TO
MATURITY
U.S. Treasury............. $ 7,477 7,415 1,492 1,494 500 503 1,476 1,466 1,482
U.S. Governmental agencies
and corporations........ 9,303 9,216 1,489 1,485 16,650 16,632 2,975 2,941 3,982
States and political
subdivisions............ 25 24 24 25 24 25 500 498 --
Corporate debt and other
securities.............. -- -- -- -- -- -- -- -- 2,821
Total securities held
to
maturity............ $16,805 16,655 3,005 3,004 17,174 17,160 4,951 4,905 8,285
Maturity and Yield
Schedule as of September
30, 1996
<CAPTION>
WEIGHTED
CARRYING AVERAGE
VALUE YIELD
<S> <C> <C>
U.S. Treasury:
Within 1 year........... $ 2,515 5.49%
After 1 but within 5
years................... 4,962 5.74
Total U.S. Treasury... 7,477 5.66
U.S. Governmental agencies
and corporations:
Within 1 year........... 7,307 5.32
After 1 but within 5
years................... 1,996 6.39
Total U.S. Govenmental
agencies and
corporations........ 9,303 5.55
States and political
subdivisions:
After 1 but within 5
years................... 25 5.26
Total securities held
to
maturity............ $16,805 5.60%
<CAPTION>
<S> <C>
1993
CARRYING
VALUE
<S> <C>
SECURITIES AVAILABLE FOR
SALE
States and political
subdivisions............ --
Equity securities......... --
Total securities
available
for sale............ --
1993
MARKET
VALUE
<S> <C>
SECURITIES HELD TO
MATURITY
U.S. Treasury............. 1,480
U.S. Governmental agencies
and corporations........ 3,988
States and political
subdivisions............ --
Corporate debt and other
securities.............. 2,801
Total securities held
to maturity......... 8,269
</TABLE>
29
<PAGE>
INTEREST-BEARING LIABILITIES. Interest-bearing liabilities, Salem's primary
source of funding, are mainly comprised of savings and time deposits. Table 5
provides a summary of average total deposits and average rates paid thereon as
of September 30, 1996 and 1995 and for the three-year period ended December 31,
1995. Demand deposits comprise approximately 10% of total deposits and serve as
an interest-free funding source for interest-earning assets. Included within
savings and time deposits are higher-costing deposits in denominations greater
than $100,000. For the nine months ended September 30, 1996 and year ended
December 31, 1995, average deposits greater than $100,000 amounted to $52.7
million and $48.8 million, respectively.
TABLE 5
AVERAGE TOTAL DEPOSITS AND RATES
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30 YEARS ENDED DECEMBER 31
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1996 1995 1995 1994 1993
<CAPTION>
BALANCE RATE BALANCE RATE BALANCE RATE BALANCE RATE BALANCE
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Savings and time deposits:
Savings and NOW accounts................. $ 10,831 1.63% 8,298 2.11 8,638 2.06 7,298 1.99 6,087
Money market accounts.................... 28,986 3.86 19,071 3.55 20,538 3.66 19,459 2.72 20,386
Time deposits............................ 87,180 5.51 54,364 5.74 60,684 5.78 38,268 4.16 38,951
Total savings and time deposits.......... 126,997 4.80% 81,733 4.86 89,860 4.94 65,025 3.49 65,424
Demand deposits.......................... 11,233 7,937 8,554 6,530 6,202
Total deposits........................... $138,230 89,670 98,414 71,555 71,626
<CAPTION>
<S> <C>
1993
RATE
<S> <C>
Savings and time deposits:
Savings and NOW accounts................. 2.14
Money market accounts.................... 2.60
Time deposits............................ 3.95
Total savings and time deposits.......... 3.36
Demand deposits..........................
Total deposits...........................
</TABLE>
Salem's convertible subordinated notes are included within other borrowed
funds in Table 1 and Table 2. The notes, which bore interest at 6%, were called
in May 1996 and averaged $913,000 in the nine months ended September 30, 1996
and $2.1 million for the same period in 1995. No convertible subordinated notes
were outstanding at September 30, 1996.
NET INTEREST INCOME. Net interest income, which is Salem's principal source
of earnings, has increased steadily over the past three years in conjunction
with its balance sheet growth. Tables 1, 2 and 6 present information about net
interest income earned and the effects of changes in rate and volume thereon.
As shown in Table 6, decreases in rates earned on interest-earning assets
during the nine-month period in 1996 ($447,000) were more than offset by
increases in interest income due to higher volume ($3.2 million). However, due
to the previously discussed shift in the mix of interest-earning assets and the
changes in rates earned, the yield on interest-earning assets fell from 8.99% in
1995 to 8.34% in 1996. Interest expense was impacted by the lower rates paid on
savings and time deposits which was more than offset by the higher volume of
accounts. The rate paid on other borrowed funds remained relatively constant
from September 30, 1995 to September 30, 1996. As a result of these factors, the
rate paid on interest-bearing liabilities fell from 4.89% for the nine-month
period ended September 30, 1995 to 4.81% for 1996. Consequently, the net
interest margin on a taxable equivalent basis fell from 4.81% for 1995 to 4.24%
for 1996 and the interest rate spread tightened from 4.10% to 3.53% for the same
periods.
30
<PAGE>
TABLE 6
VOLUME AND RATE VARIANCE ANALYSIS
(TAXABLE EQUIVALENT BASIS -- IN THOUSANDS) (1)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
<S> <C> <C> <C> <C> <C> <C> <C>
NINE MONTHS ENDED
SEPTEMBER 30, 1996 1995 1994
<CAPTION>
VOLUME RATE TOTAL VOLUME RATE TOTAL VOLUME
VARIANCE (2) VARIANCE (2) VARIANCE VARIANCE (2) VARIANCE (2) VARIANCE VARIANCE (2)
<S> <C> <C> <C> <C> <C> <C> <C>
INTEREST INCOME:
Loans...................... $2,243 (395) 1,848 2,283 1,242 3,525 119
U.S. Treasury and U.S.
Government agencies and
corporations............... 608 7 615 (81) 63 (18) 6
States and political
subdivisions............... 65 2 67 (15) 4 (11) (2)
Equity and other
securities................. 9 7 16 (40) 9 (31) 7
Other earning assets....... 301 (68) 233 314 231 545 (16)
Total interest income.... 3,226 (447) 2,779 2,461 1,549 4,010 114
INTEREST EXPENSE:
Savings and time
deposits................... 1,653 (61) 1,592 1,038 1,132 2,170 (14)
Other borrowed funds....... (60) (1) (61) (30) 34 4 75
Total interest expense... 1,593 (62) 1,531 1,008 1,166 2,174 61
INCREASE (DECREASE) IN NET
INTEREST INCOME.......... $1,633 (385) 1,248 1,453 383 1,836 53
<CAPTION>
<S> <<C> <C>
YEARS ENDED DECEMBER 31
1994
RATE TOTAL
VARIANCE (2) VARIANCE
<S> <<C> <C>
INTEREST INCOME:
Loans...................... 629 748
U.S. Treasury and U.S.
Government agencies and
corporations............... 14 20
States and political
subdivisions............... 5 3
Equity and other
securities................. (35) (28)
Other earning assets....... 130 114
Total interest income.... 743 857
INTEREST EXPENSE:
Savings and time
deposits................... 82 68
Other borrowed funds....... (52) 23
Total interest expense... 30 91
INCREASE (DECREASE) IN NET
INTEREST INCOME.......... 713 766
</TABLE>
(1) The taxable equivalent basis is computed using 35% federal and 7.75% state
tax rates 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 absolute value of the two
variances.
For the year ended December 31, 1995, average yields on earning assets
increased significantly from those earned in 1994. Loan yields increased from
7.56% in 1994 to 9.32% in 1995 due to a higher volume of loans earning higher
rates. Increases in volume accounted for two-thirds of the increase in loan
interest income as reflected in Table 6. Rates paid on savings and time deposits
increased from 3.49% for 1994 to 4.94% for 1995 due to increased volume and
increased rate. A new time deposit product offered in the Wilmington market
caused the cost of interest-bearing deposits to go up 50 to 60 basis points but
brought in significant amounts of deposits. The combination of these factors
resulted in the net interest margin rising 65 basis points to 4.43% and the
interest rate spread growing 37 basis points during 1995.
OTHER INCOME AND EXPENSES. Other income rose $340,000 in the nine months
ended September 30, 1996 from the $556,000 earned in the 1995 period. Service
charges on deposit accounts rose to $107,000 from 1995's $57,000 due to the
previously discussed increased deposit volume. Income from trust activities
increased $113,000 from 1995 due to the higher level of assets managed. Salem's
trust operations provide investment management services to individuals and
companies and operational services to institutional clients. Salem's investment
operations provide discount brokerage services to individuals and institutional
clients. Fees from investment operations decreased $11,000 to $83,000 due to
decreased trading volumes. Salem's mortgage operations generate income through
the sale of mortgage loans that are originated by Salem or are purchased by it
for resale. All purchased loans are presold to secondary market investors prior
to their purchase by Salem. Income from the mortgage operation increased $74,000
to $335,000 for the nine months ended June 30, 1996.
Other expenses, comprised primarily of personnel expenses, increased
$573,000 from 1995's level to $3.1 million for the nine months ended September
30, 1996. Personnel expense increased $361,000 due in part to the Wilmington
branch being open only four months during the nine months ended September 30,
1995 but all of the nine month period ended September 30, 1996. Equipment and
occupancy expense increased between the two nine-month periods for the same
reason. Deposit and other insurance experienced a significant drop from $78,000
for the nine months ended September 30, 1995 to $25,000 for the same period in
1996 due to a reduction in FDIC deposit premium rates.
The provision for loan losses fell from $338,000 for the nine months ended
September 30, 1995 to $132,000 for the same period in 1996. The decreased
provision was due primarily to the low level of nonperforming assets and
nonaccrual loans as will be discussed below.
31
<PAGE>
For the year ended December 31, 1995, other income increased $282,000. Of
that increase, $239,000 is due to higher levels of activity in Salem's mortgage,
trust and investment operations. Mortgage operations increased due in part to
the opening of a mortgage origination office in Wilmington and due to improved
overall volumes. As of December 31, 1995, the trust operation managed assets
totaling $195.4 million versus $78.4 million at year end 1994. The investment
operation had assets in brokerage accounts totaling $21.2 million at year end
1995 compared to $26.2 million at year end 1994.
Other expenses increased $1.2 million in 1995 over 1994. The largest
increase was experienced in personnel expense, $750,000, due primarily to the
opening of the Wilmington office during 1995. Net occupancy and equipment also
increased $125,000 for this same reason. FDIC insurance expense fell 48% to
$88,000 for 1995 due to the previously discussed reduction in deposit assessment
rates.
The provision for loan losses totaled $545,000 for 1995 compared to $50,000
for 1994. The increased provision was a result of the dramatic loan growth
experienced in 1995, not from an increase in nonperforming loans.
For the year ended December 31, 1994, other income increased $212,000 over
the prior year's level. The largest increases were experienced in higher levels
of fees earned from the mortgage, trust and investment operations. Assets
managed by trust operations grew from $36.5 million at year end 1993 to $78.4
million at year end 1994. Other expenses increased $333,000 from 1993 to 1994
due primarily to increased personnel expense. Salem made a $50,000 provision for
loan losses in 1994; no provision was deemed necessary in 1993 due to the level
of the allowance for loan losses in comparison to the perceived risks in the
loan portfolio.
Table 7 sets forth certain of Salem's operating efficiency ratios. Salem's
noninterest income as a percentage of average assets has improved steadily over
the prior three years due to the previously discussed increases in fee revenues.
The noninterest expense items as a percentage of average assets for both the
nine months ended September 30, 1995 and the year ended December 31, 1995 were
adversely impacted by non-recurring expenses incurred in the March 1995 opening
of the Wilmington office, including overtime paid to employees, marketing
expenses and legal and consulting fees. Salem's operating efficiency ratio
(noninterest income as a percentage of net interest income and other income) has
improved steadily from year end 1993 through September 30, 1996.
TABLE 7
OPERATING EFFICIENCY RATIOS (ANNUALIZED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30 YEARS ENDED DECEMBER 31
<S> <C> <C> <C> <C> <C>
1996 1995 1995 1994 1993
As a percentage of average assets:
Noninterest income................................................... .77% .72 .81 .77 .54
Personnel expense.................................................... 1.63 2.00 1.81 1.57 1.28
Occupancy and equipment expense...................................... .28 .34 .31 .27 .23
Other operating expense.............................................. .73 .91 .85 .80 .81
Total noninterest expense............................................ 2.64 3.25 2.97 2.64 2.32
Net overhead (noninterest expense less noninterest income)........... 1.87% 2.53 2.16 1.87 1.78
Noninterest expense as a percentage of net interest income and other
income (1)........................................................... 54.42% 61.55 59.34 61.63 71.93
</TABLE>
(1) The taxable equivalent basis is computed using 35% federal and 7.75% state
tax rates where applicable.
NONPERFORMING LOANS
Nonperforming loans consist of nonaccrual and restructured loans. Risk
assets are comprised of nonperforming loans and accruing loans 90 days or more
past due. As shown in Table 8, Salem has experienced very few instances of non-
performing loans or risk assets over the past five years.
32
<PAGE>
TABLE 8
NONPERFORMING AND RISK ASSETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30 AS OF DECEMBER 31
<S> <C> <C> <C> <C> <C> <C> <C>
1996 1995 1995 1994 1993 1992 1991
Nonaccrual loans...................................... $ -- -- -- 1 -- -- --
Restructured loans.................................... -- 5 -- 6 7 8 8
Total nonperforming assets.......................... -- 5 -- 7 7 8 8
Accruing loans 90 days or more past due............... -- -- -- -- 50 -- --
Total risk assets..................................... $ -- 5 -- 7 57 8 8
Ratio of nonperforming assets to:
Loans outstanding................................... -- % -- -- .01 .01 .01 .01
Total assets........................................ -- -- -- .01 .01 .01 .01
Ratio of risk assets to:
Loans outstanding................................... -- -- -- .01 .09 .01 .01
Total assets........................................ -- -- -- .01 .06 .01 .01
Allowance for loan losses to risk assets.............. -- x 219.00 -- 108.14 12.53 89.25 84.25
</TABLE>
ALLOWANCE FOR LOAN LOSSES
Salem's management analyzes the growth and risk characteristics of the loan
portfolio under current and anticipated future economic conditions to evaluate
the adequacy of the allowance for loan losses. The financial condition of the
borrower, value of collateral and general economic projections are among the
factors considered in evaluation of the allowance's adequacy. Management strives
to maintain the allowance at a level sufficient to absorb both potential losses
on identified nonperforming assets as well as projected general losses. The
allowance for loan losses stood at $1.4 million as of September 30, 1996 and
$1.3 million as of December 31, 1995. Table 9 summarizes the allowance for loan
losses for the nine months ended September 30, 1996 and 1995 and for the prior
five years and Table 10 sets forth the allocation of the allowance for loan
losses to the various types of loans as of September 30, 1996 and 1995 and as of
the end of the year for the prior five years. Management considers the allowance
at September 30, 1996 adequate to absorb future losses that relate to loans
outstanding as of that date.
TABLE 9
SUMMARY OF LOAN LOSS EXPERIENCE
AND THE ALLOWANCE FOR LOAN LOSSES
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30 YEARS ENDED DECEMBER 31
<S> <C> <C> <C> <C> <C> <C> <C>
1996 1995 1995 1994 1993 1992 1991
Balance at beginning of period............................ $ 1,302 757 757 714 714 674 556
Loan losses charged to allowance:
Installment loans to individuals........................ -- -- -- (9) -- -- --
Credit card receivables................................. -- -- -- (1) -- -- --
Total loan losses charged to allowance................ -- -- -- (10) -- -- --
Recoveries of loans previously charged off:
Installment loans to individuals........................ -- -- -- 3 -- -- --
Net charge-offs........................................... -- -- -- (7) -- -- --
Provision charged to operations........................... 132 338 545 50 -- 40 118
Balance at end of period.................................. $ 1,434 1,095 1,302 757 714 714 674
Loans outstanding at end of period........................ $116,707 100,068 106,231 66,966 60,447 58,500 59,213
Ratio of allowance for loan losses to loans outstanding at
end of period........................................... 1.27% 1.09 1.23 1.13 1.18 1.22 1.14
Average loans outstanding................................. $112,854 82,601 87,414 61,111 59,388 55,702 46,917
Ratio of net charge-offs of loans to average loans........ --% -- -- 0.01 -- -- --
</TABLE>
33
<PAGE>
TABLE 10
ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES (1)
(IN THOUSANDS)
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30 AS OF DECEMBER 31
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1996 1995 1995 1994 1993
<CAPTION>
% OF % OF % OF % OF
AMOUNT OF LOAN IN AMOUNT OF LOAN IN AMOUNT OF LOAN IN AMOUNT OF LOAN IN AMOUNT OF
ALLOWANCE EACH ALLOWANCE EACH ALLOWANCE EACH ALLOWANCE EACH ALLOWANCE
ALLOCATED CATEGORY ALLOCATED CATEGORY ALLOCATED CATEGORY ALLOCATED CATEGORY ALLOCATED
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial, financial
and agricultural...... $ 359 17.1 274 16.9 326 17.2 190 14.8 179
Real
estate-construction... 215 15.4 164 9.2 195 11.6 113 6.4 107
Real estate-mortgage.... 215 64.1 164 70.0 195 67.1 113 72.8 107
Installment loans to
individuals........... 359 2.8 274 3.3 326 3.5 189 5.2 179
Credit card
receivables........... 143 .6 109 .6 130 .6 76 .8 71
Unallocated portion of
reserve............... 143 -- 110 -- 130 -- 76 -- 71
Total................... $ 1,434 100.0% 1,095 100.0 1,302 100.0 757 100.0 714
<CAPTION>
<S> <C> <C> <C> <C> <C>
AS OF DECEMBER 31
1992 1991
% OF % OF % OF
LOAN IN AMOUNT OF LOAN IN AMOUNT OF LOAN IN
EACH ALLOWANCE EACH ALLOWANCE EACH
CATEGORY ALLOCATED CATEGORY ALLOCATED CATEGORY
<S> <C> <C> <C> <C> <C>
Commercial, financial
and agricultural...... 16.2 179 16.1 169 28.3
Real
estate-construction... 3.4 107 5.2 101 4.8
Real estate-mortgage.... 72.7 107 70.6 101 57.7
Installment loans to
individuals........... 6.5 179 7.2 169 8.5
Credit card
receivables........... 1.2 71 .9 67 .7
Unallocated portion of
reserve............... -- 71 -- 67 --
Total................... 100.0 714 100.0 674 100.0
</TABLE>
(1) The allocation of the allowance for loan losses by loan type is based on
management's on-going evaluation of the adequacy of the allowance for loan
losses as referenced above. Since the factors involved in such an evaluation
are subject to change, the allocation of the allowance 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.
34
<PAGE>
CAPITAL RESOURCES
Prior to 1995, Salem's primary source of equity capital was the retention
of earnings. During May of 1996, Salem's convertible subordinated notes were
called for redemption and substantially all were converted into shares of
Salem's stock which added $2.1 million of equity capital. During 1995, Salem
completed a $5 million secondary stock offering which resulted in the issuance
of 556,000 additional shares of Salem Stock. The net proceeds from the offering
were used primarily for Salem's expansion in the Wilmington market. The majority
of these shares were purchased by residents of the Wilmington market.
Dividends of $.10 and $.08 per share were paid in the nine months ended
September 30, 1996 and the year ended December 31, 1994, respectively. No
dividends were paid in 1995 or prior to 1994.
Banks are required to comply with the risk-based capital guidelines which
require a minimum ratio of total capital to risk-weighted assets of 8%. At least
half of the total capital is required to be "Tier 1" capital, principally
consisting of common shareholders equity, noncumulative perpetual preferred
stock, and a limited amount of cumulative perpetual preferred stock less certain
goodwill items. The remainder, "Tier 2" capital, may consist of a limited amount
of subordinated debt, certain hybrid capital instruments and other debt
securities, perpetual preferred stock, and a limited amount of the general
reserve for loan and lease losses. In addition to the risk-based capital
guidelines, regulatory agencies have adopted a minimum leverage capital ratio
under which a bank must maintain a minimum level of Tier 1 capital to average
total consolidated assets of at least 3% in the case of a bank which has the
highest regulatory examination rating and is not contemplating significant
growth or expansion. All other banks are expected to maintain a leverage capital
ratio of at least 1% to 2% above the stated minimum.
Salem continues to maintain higher capital ratios than required under
regulatory guidelines. Salem's Tier 1 capital, total capital and leverage ratios
are 16.08%, 17.33% and 11.04%, respectively, at September 30, 1996.
LIQUIDITY AND INTEREST-SENSITIVITY
Liquidity is the ability to meet present and future financial obligations,
particularly the funding of loans or withdrawal of deposits. Management ensures
adequate liquidity by maintaining a significant portion of Salem's earning
assets in short-term instruments that are easily convertible to cash and by
monitoring and improving its ability to attract deposits and alternative sources
of funds in the money and capital markets.
Deposits from Salem's customers are its primary source of funding. Core
deposits, defined as deposits less than $100,000, grew 27% from September 30,
1995 to September 30, 1996. In addition, Salem utilizes deposits greater than
$100,000 as a source of funding. During the nine months ended September 30,
1996, these deposits averaged from 35% to 40% of total average deposits. Due to
the nature of Salem's business, individual deposit relationships are higher than
those at a traditional commercial bank. Consequently, unlike traditional
commercial banks, Salem considers deposits greater than $100,000 to be
relatively stable. At September 30, 1996, time deposits in amounts of $100,000
or more totaled $53.8 million. The following is a remaining maturity schedule of
these deposits (in thousands):
<TABLE>
<CAPTION>
3 OVER 3
MONTHS THROUGH OVER 6
OR LESS 6 MONTHS MONTHS TOTAL
<S> <C> <C> <C> <C>
Jumbo deposits............................... $25,985 25,664 2,130 $ 53,779
</TABLE>
Another source of funding was Salem's convertible subordinated notes until
their call and redemption in May of 1996. In February 1993, Salem issued $2.1
million of these notes bearing interest at 6%. Additional sources of liquidity
are short-term borrowed funds such as federal funds purchased or repurchase
agreements. In addition, Salem has the ability to access a $10 million line of
credit maintained with the Federal Home Loan Bank. Maturities of investment
securities also provide liquidity.
Management is also concerned with managing Salem's balance sheet to
maintain relatively stable net interest margins despite changes in the interest
rate environment. This objective is achieved by balancing the impact of changes
in interest rates on interest-sensitive assets and interest-sensitive
liabilities. Management monitors Salem's interest-sensitivity by means of gap
analyses prepared on a periodic basis. Table 11 sets forth Salem's gap analysis
as of September 30, 1996. In reviewing this gap analysis, it is important to
note that such an analysis represents Salem's sensitivity position as of a point
in time and can be changed significantly by management within a short period of
time.
35
<PAGE>
TABLE 11
INTEREST-SENSITIVITY ANALYSIS (1)
(IN THOUSANDS)
<TABLE>
<CAPTION>
3 MONTH NON-
3 MONTH TO 1 YEAR TOTAL INTEREST
SENSITIVE SENSITIVE SENSITIVE SENSITIVE TOTAL
<S> <C> <C> <C> <C> <C>
Earning assets:
Federal funds sold and other short-term investments................... $ 14,055 -- 14,055 -- 14,055
Investment securities................................................. 10,606 4,199 14,805 4,462 19,267
Loans................................................................. 105,611 3,238 108,849 7,858 116,707
Total earning assets................................................ 130,272 7,437 137,709 12,320 150,029
Interest-bearing liabilities:
Savings deposits...................................................... 36,938 -- 36,938 -- 36,938
Other time deposits................................................... 40,425 42,949 83,374 2,052 85,426
Total interest-bearing liabilities.................................. 77,363 42,949 120,312 2,052 122,364
Interest-sensitivity gap.............................................. $ 52,909 (35,512) 17,397
Cumulative gap........................................................ $ 52,909 17,397
Cumulative ratio of interest-sensitive assets to interest-sensitive
liabilities......................................................... 1.68x 1.14
Cumulative gap to total earning assets................................ 40.61% 12.63
</TABLE>
(1) Assets and liabilities that mature in one year 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.
Salem utilizes strategic pricing of asset and liability accounts to control
interest rate volatility. Most of Salem's loans are tied to the prime rate which
would result in greater asset sensitivity. However, most of Salem's deposits
also are of shorter-term and would reprice soon after changes in the prime rate.
While there is some lag before interest-bearing deposits reprice, Salem's
strategy is to match up the repricing periods of their interest-earning assets
and interest-bearing liabilities as much as possible. Table 12 presents a
schedule of loan maturity distribution and interest rate sensitivity at
September 30, 1996 and December 31, 1995.
TABLE 12
MATURITIES AND SENSITIVITIES OF LOANS TO CHANGES IN INTEREST RATES
(IN THOUSANDS)
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1996 AS OF DECEMBER 31, 1995
<S> <C> <C> <C> <C> <C>
COMMERCIAL, COMMERCIAL,
FINANCIAL AND REAL ESTATE- FINANCIAL AND REAL ESTATE-
AGRICULTURAL CONSTRUCTION TOTAL AGRICULTURAL CONSTRUCTION
Due in one year or less......................... $10,748 18,027 28,775 12,631 12,253
Due after one year through five years:
Fixed interest rates.......................... 1,198 -- 1,198 1,025 --
Floating interest rates....................... 7,359 -- 7,359 4,101 --
Due after five years:
Fixed interest rates.......................... 83 -- 83 110 --
Floating interest rates....................... 514 -- 514 440 --
Total........................................... $19,902 18,027 37,929 18,307 12,253
<CAPTION>
<S> <C>
AS OF DECEMBER 31,
1995
TOTAL
Due in one year or less......................... 24,884
Due after one year through five years:
Fixed interest rates.......................... 1,025
Floating interest rates....................... 4,101
Due after five years:
Fixed interest rates.......................... 110
Floating interest rates....................... 440
Total........................................... 30,560
</TABLE>
Salem does not utilize off-balance sheet or synthetic hedge instruments such as
derivatives to control interest rate volatility.
36
<PAGE>
ACCOUNTING ISSUES
In March 1995, the FASB issued SFAS No. 121, "Accounting for Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of," which
establishes accounting standards for the impairment of long-lived assets,
certain identifiable intangibles, and goodwill related to those assets to be
held and used and for those to be disposed of. This statement requires that
long-lived assets and certain intangibles be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying value may not be
recoverable. Adoption of SFAS No. 121 is required for fiscal years beginning
after December 15, 1995. Salem adopted this statement on January 1, 1996 without
any impact on its financial statements.
Salem adopted SFAS No. 123, "Accounting for Stock-Based Compensation" on
January 1, 1996. SFAS No. 123 establishes a fair value method of accounting for
such compensation plans. Stock-based compensation plans include all arrangements
by which employees receive shares of stock or other equity instruments of the
employer or in which an entity issues its equity instruments to acquire goods or
services from nonemployees. Under SFAS No. 123, these types of transactions must
be accounted for based on the fair value of the consideration received or the
fair value of the equity instrument issued, whichever is more reliably measured.
While SFAS No. 123 encourages all entities to adopt the fair value method of
accounting, it does allow an entity to continue to measure the compensation cost
of stock compensation plans using the intrinsic value based method of accounting
prescribed by Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees" ("APB Opinion No. 25"). Most fixed stock option plans (the
most common type of stock compensation plan) have no intrinsic value at grant
date, and under APB Opinion No. 25 no compensation cost is recognized. Entities
electing to continue using the guidance under APB Opinion No. 25 must make pro
forma disclosures of net income and earnings per share as if the fair value
method of accounting prescribed by SFAS No. 123 had been applied. Salem intends
to continue measuring stock compensation expense under APB Opinion No. 25.
In May 1995, the FASB issued SFAS No. 122, "Accounting for Mortgage
Servicing Rights, an amendment of Statement No. 65." The statement amends SFAS
No. 65 to require that the rights to service mortgage loans for others, however
those servicing rights are acquired, be recognized as separate assets,
eliminating the previously existing accounting distinction between servicing
rights acquired through purchase transactions and those acquired through loan
originations. SFAS No. 122 is required to be adopted and applied prospectively
for fiscal years beginning after December 15, 1995 to transactions involving the
sale or securitization of mortgage loans with servicing rights retained. Salem
adopted this statement on January 1, 1996 without any impact on its financial
statements.
SFAS No. 125, "Accounting for Transfers and Servicing of Financial Assets
and Extinguishments of Liabilities" ("SFAS No. 125") was issued in June of 1996.
It provides accounting and reporting standards for transfers and servicing of
financial assets and extinguishments of liabilities using a financial-components
approach that focuses on control of the asset or liability. SFAS No. 125
requires that an entity recognize only assets it controls and liabilities it has
incurred and should derecognize assets only when control has been surrendered
and derecognize liabilities only when they have been extinguished. Adoption of
SFAS No. 125 will impact transactions in which the transferor has some
continuing involvement with the assets transferred or with the transferee
including recourse, servicing, agreements to reacquire and options written or
held. SFAS No. 125 is effective for transfers and servicing of financial assets
and extinguishments of liabilities occurring after December 31, 1996, and is to
be applied prospectively. Earlier or retroactive application of SFAS No. 125 is
not permitted. Salem is in the process of assessing the impact of adopting SFAS
No. 125 but does not believe that its adoption will have a material impact upon
Salem's financial condition or results of operations.
37
<PAGE>
SUPERVISION AND REGULATION
The following table sets forth the regulatory capital positions of CCBF and
Salem on a historical basis, and of CCBF on a pro forma combined basis, as of
September 30, 1996:
<TABLE>
<CAPTION>
RISK-BASED CAPITAL
LEVERAGE CAPITAL TIER 1 TOTAL
AMOUNT % OF ASSETS AMOUNT % OF ASSETS AMOUNT % OF ASSETS
<S> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
CCBF
Actual......................................... $429,365 8.53 $429,365 11.66 $508,379 13.81
Minimum capital standard....................... 110,432 3.00 147,243 4.00 294,485 8.00
Excess of actual regulatory over minimum
regulatory capital standard................. $318,933 5.53 $282,122 7.66 $213,894 5.81
SALEM
Actual......................................... $ 17,227 11.04 $ 17,227 16.08 $ 18,566 17.33
Minimum capital standard....................... 3,213 3.00 4,284 4.00 8,568 8.00
Excess of actual regulatory over minimum
regulatory capital standard................. $ 14,014 8.04 $ 12,943 12.08 $ 9,998 9.33
CCBF PRO FORMA COMBINED
Actual......................................... $446,592 8.60 $446,592 11.79 $526,945 13.91
Minimum capital standard....................... 113,645 3.00 151,527 4.00 303,053 8.00
Excess of actual regulatory over minimum
regulatory capital standard................. $332,947 5.60 $295,065 7.79 $223,892 5.91
</TABLE>
The following table sets forth the regulatory capital positions of CCB Bank
and Salem on a historical basis, and of CCB Bank on a pro forma combined basis,
as of September 30, 1996:
<TABLE>
<CAPTION>
RISK-BASED CAPITAL
LEVERAGE CAPITAL TIER 1 TOTAL
AMOUNT % OF ASSETS AMOUNT % OF ASSETS AMOUNT % OF ASSETS
<S> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
CCB BANK
Actual......................................... $413,805 8.37 $413,805 11.40 $462,420 12.74
Minimum capital standard....................... 108,930 3.00 145,240 4.00 290,480 8.00
Excess of actual regulatory over minimum
regulatory capital standard................. $304,875 5.37 $268,565 7.40 $171,940 4.74
SALEM
Actual......................................... $ 17,227 11.04 $ 17,227 16.08 $ 18,566 17.33
Minimum capital standard....................... 3,213 3.00 4,284 4.00 8,568 8.00
Excess of actual regulatory over minimum
regulatory capital standard................. $ 14,014 8.04 $ 12,943 12.08 $ 9,998 9.33
CCB BANK PRO FORMA COMBINED
Actual......................................... $431,032 8.45 $431,032 11.53 $480,986 12.87
Minimum capital standard....................... 112,143 3.00 149,524 4.00 299,048 8.00
Excess of actual regulatory over minimum
regulatory capital standard................. $318,889 5.45 $281,508 7.53 $181,938 4.87
</TABLE>
38
<PAGE>
REGULATION OF GRAHAM SAVINGS
Until October 4, 1996, Graham Savings Bank, Inc., SSB. was a North
Carolina-chartered savings bank and a subsidiary of CCBF. On that date, Graham
Savings was merged with and into CCB Bank.
CAPITAL STOCK OF CCBF AND SALEM
AUTHORIZED CAPITAL STOCK
Salem's authorized capital stock consists of 5,000,000 shares of common
stock $2.50 par value per share, of which 1,841,232 shares were issued and
outstanding at September 30, 1996.
CCBF's authorized capital stock consists of 50,000,000 shares of $5.00 par
value common stock of which 15,061,334 shares were issued and outstanding at
September 30, 1996, and 5,000,000 shares of serial preferred stock, none of
which were issued and outstanding at that date.
OTHER MATTERS
Salem's Board of Directors does not intend to bring any matter before the
reconvened Special Meeting other than as specifically set forth in the
Prospectus/Proxy Statement, this Prospectus/Proxy Statement Supplement and the
accompanying Notice, and the Board knows of no other business that properly may
be brought before the reconvened Special Meeting by any other person. However,
should other matters properly be presented for action at the reconvened Special
Meeting, the Proxies representing Salem shareholders at the reconvened Special
Meeting, or their substitutes, will be authorized to vote shares of Salem Stock
represented by those appointments of proxy according to their best judgment on
such matters.
39
<PAGE>
APPENDIX A
TO PROSPECTUS/PROXY STATEMENT SUPPLEMENT
EXCERPTED AMENDMENTS
SECTION 3.1
3.1 CONVERSION OF SHARES. Subject to the provisions of this Article III, at
the Effective Time, by virtue of the Merger and without any action on the part
of the holders thereof, each of the shares of common stock, $2.50 par value per
share, of Salem (the "Salem Common Stock") issued and outstanding immediately
prior to the Effective Time (excluding shares held by CCBF, Salem, any CCBF
Subsidiary or any Salem Subsidiary, in each case other than in a fiduciary
capacity or as a result of debts previously contracted, and excluding shares
held by Salem Dissenting Shareholders) shall be converted into and become the
right to receive (a) if the CCBF Stock Price for the sixty (60) trading days
preceding the scheduled Closing Date is equal to or less than $57.18, but equal
to or more than $46.78, .41 of a share of the common stock, $5.00 par value per
share, of CCBF (the "CCBF Common Stock") and .41 of a preferred share purchase
right (a "CCBF Rights") as described in CCBF's Shareholder Rights Plan, adopted
February 26, 1990 (the "CCBF Rights Plan"), (b) if the CCBF Stock Price for the
sixty (60) trading days preceding the scheduled Closing Date is greater than
$57.18, that fraction of a share of CCBF Common Stock and that fraction of an
attached CCBF Right equal to $57.18 divided by such CCBF Stock Price, with the
resulting quotient then being multiplied by .41, or (c) if the CCBF Stock Price
for the sixty (60) trading days preceding the scheduled Closing Date is less
than $46.78, that fraction of a share of CCBF Common Stock and that fraction of
an attached CCBF Right equal to $46.78 divided by such CCBF Stock Price, with
the resulting quotient then being multiplied by .41 (the "Exchange Ratio"). Each
of the shares of CCBF Common Stock (and the attached CCBF Rights) and any shares
of any CCBF Subsidiary outstanding immediately prior to the Effective Time shall
continue to be issued and outstanding, and shall not be converted, exchanged or
altered in any manner as a result of the Merger.
SECTION 10.1(G)
10.1 TERMINATION. Nothwithstanding any other provision of this Agreement,
and notwithstanding the approval of this Agreement, the Merger, and the other
transactions contemplated hereby by the shareholder of CCB Bank or the
shareholders of Salem, or each entity's shareholders, this Agreement may be
terminated and such transactions abandoned at any time prior to the Effective
Time:
* * *
(g) upon notice to CCBF and CCB Bank, by the Board of Directors of Salem if
CCBF announces, on or prior to the Closing Date and prior to the Effective Time,
that CCBF will merge with and into another company.
A-1
<PAGE>
INDEX TO SALEM
FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Unaudited Financial Statements
Balance Sheets as of September 30, 1996 and 1995..................................................................... F-2
Statements of Income for the Nine Months Ended September 30, 1996 and 1995........................................... F-3
Statements of Stockholders' Equity for the Nine Months Ended September 30, 1996 and 1995............................. F-4
Statements of Cash Flows for the Nine Months Ended September 30, 1996 and 1995....................................... F-5
Notes to Financial Statements........................................................................................ F-6
</TABLE>
F-1
<PAGE>
SALEM TRUST BANK
BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
(UNAUDITED) (UNAUDITED)
SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30,
1996 1995 1995
<S> <C> <C> <C>
ASSETS:
Cash and due from banks.......................................................... $ 5,884 6,145 5,301
Federal funds sold............................................................... 14,055 22,665 27,140
Investment securities:
Available for sale............................................................. 2,462 295 295
Held to maturity (market values of $16,655, $17,160 and $3,004)................ 16,805 17,174 3,005
Loans (notes 2 and 4)............................................................ 116,707 106,231 100,068
Less allowance for loan losses (note 3)........................................ 1,434 1,302 1,095
Loans, net.................................................................. 115,273 104,929 98,973
Premises and equipment........................................................... 1,865 1,890 1,848
Other assets..................................................................... 1,725 993 786
Total assets.............................................................. $ 158,069 154,091 137,348
LIABILITIES:
Deposits:
Noninterest bearing............................................................ $ 16,823 16,473 12,263
Interest-bearing............................................................... 122,364 119,978 108,423
Total deposits.............................................................. 139,187 136,451 120,686
Long-term debt (note 5).......................................................... -- 2,118 2,118
Other liabilities................................................................ 1,655 1,914 1,345
Total liabilities......................................................... 140,842 140,483 124,149
STOCKHOLDERS' EQUITY:
Preferred stock, $25.00 par value; authorized 60,000 shares...................... -- -- --
Common stock, $2.50 par value; authorized 5,000,000 shares; 1,841,232 1,597,132,
and 1,596,732 shares issued.................................................... 4,603 3,993 3,992
Additional paid-in capital....................................................... 8,063 6,345 6,350
Retained earnings................................................................ 4,561 3,270 2,857
Total stockholders' equity................................................ 17,227 13,608 13,199
Total liabilities and stockholders' equity................................ $ 158,069 154,091 137,348
</TABLE>
See accompanying notes to financial statements.
F-2
<PAGE>
SALEM TRUST BANK
STATEMENTS OF INCOME
(UNAUDITED, DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
1996 1995
<S> <C> <C>
INTEREST INCOME:
Loans................................................................................................ $7,779 5,931
Investment securities................................................................................ 785 154
Other................................................................................................ 743 510
Total interest income............................................................................. 9,307 6,595
INTEREST EXPENSE:
Deposits............................................................................................... 4,564 2,972
Long-term debt and other borrowings.................................................................... 41 102
Total interest expense............................................................................ 4,605 3,074
NET INTEREST INCOME.................................................................................... 4,702 3,521
Provision for loan losses (note 3)..................................................................... 132 338
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES.................................................... 4,570 3,183
OTHER INCOME:
Service charges on deposit accounts.................................................................... 107 57
Non-deposit fees and commissions....................................................................... 776 465
Other.................................................................................................. 13 34
Total other income................................................................................ 896 556
OTHER EXPENSES:
Personnel expense...................................................................................... 1,906 1,545
Net occupancy expense.................................................................................. 180 142
Equipment expense...................................................................................... 142 121
FDIC insurance......................................................................................... 25 78
Other operating expenses............................................................................... 833 627
Total other expenses.............................................................................. 3,086 2,513
INCOME BEFORE INCOME TAXES............................................................................. 2,380 1,226
Income taxes........................................................................................... 928 595
NET INCOME............................................................................................. $1,452 631
INCOME PER SHARE:
Primary.............................................................................................. $ .83 .49
Fully diluted........................................................................................ .80 .46
WEIGHTED AVERAGE SHARES OUTSTANDING:
Primary.............................................................................................. 1,743,707 1,292,033
Fully diluted........................................................................................ 1,835,019 1,505,328
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE>
SALEM TRUST BANK
STATEMENTS OF STOCKHOLDERS' EQUITY
(UNAUDITED, IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONAL TOTAL
COMMON PAID-IN RETAINED STOCKHOLDERS'
STOCK CAPITAL EARNINGS EQUITY
<S> <C> <C> <C> <C>
Balance December 31, 1994.................................................... $2,599 2,756 2,226 7,581
Net income................................................................... -- -- 631 631
Stock offering............................................................... 1,389 3,583 -- 4,972
Conversion of subordinated notes............................................. 4 11 -- 15
Balance September 30, 1995................................................... $3,992 6,350 2,857 13,199
Balance December 31, 1995.................................................... $3,993 6,345 3,270 13,608
Net income................................................................... -- -- 1,452 1,452
Stock options exercised...................................................... 80 130 -- 210
Cash dividends ($.10 per share).............................................. -- -- (161) (161)
Conversion of subordinated notes............................................. 530 1,588 -- 2,118
Balance September 30, 1996................................................... $4,603 8,063 4,561 17,227
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE>
SALEM TRUST BANK
STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(UNAUDITED, IN THOUSANDS)
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
OPERATING ACTIVITIES:
Net income.............................................................................................. $ 1,452 631
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation.......................................................................................... 114 102
Net amortization and accretion of investment securities............................................... (138) (22)
Provision for loan losses............................................................................. 132 338
Increase in deferred costs on loan originations....................................................... (11) (37)
Purchases and originations of loans for sale.......................................................... (21,692) (44,317)
Proceeds from sale of loans........................................................................... 24,348 44,791
Increase in other assets.............................................................................. (732) (260)
Increase (decrease) in other liabilities.............................................................. (259) 331
NET CASH PROVIDED BY OPERATING ACTIVITIES.......................................................... 3,214 1,557
INVESTING ACTIVITIES:
Maturities of interest-bearing deposits................................................................. -- 100
Proceeds from maturities of investment securities held to maturity...................................... 14,255 3,468
Purchases of investment securities held to maturity..................................................... (13,748) (1,500)
Purchases of investment securities available for sale................................................... (2,167) (26)
Net originations of loans............................................................................... (13,121) (33,539)
Purchases of premises and equipment..................................................................... (89) (254)
NET CASH USED BY INVESTING ACTIVITIES.............................................................. (14,870) (31,751)
FINANCING ACTIVITIES:
Net increase in deposit accounts........................................................................ 2,736 41,370
Net decrease in short-term borrowed funds............................................................... -- (500)
Exercise of stock options............................................................................... 210 --
Proceeds from issuance of common stock.................................................................. -- 4,972
Cash dividends.......................................................................................... (161) --
NET CASH PROVIDED BY FINANCING ACTIVITIES.......................................................... 2,785 45,842
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS.................................................... (8,871) 15,648
Cash and cash equivalents at January 1.................................................................. 28,810 16,793
CASH AND CASH EQUIVALENTS AT SEPTEMBER 30............................................................... $19,939 32,441
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid during the period......................................................................... $ 4,894 2,599
Income taxes paid during the period..................................................................... 875 695
NONCASH TRANSACTIONS:
Conversion of convertible subordinated notes to common stock............................................ $ 2,118 15
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE>
SALEM TRUST BANK
NOTES TO FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 1996 AND 1995
(1) MANAGEMENT OPINION
The financial statements of Salem Trust Bank ("Salem") as of September 30,
1996 and 1995 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.
(2) LOANS
A summary of loans at September 30, 1996 and 1995 follows (in thousands):
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Commercial, financial and agricultural......................................... $ 19,902 16,934
Real estate-construction....................................................... 18,027 9,247
Real estate-mortgage........................................................... 74,818 70,052
Installment loans to individuals............................................... 3,292 3,213
Credit card receivables........................................................ 668 622
Total loans and lease financing.............................................. $116,707 100,068
</TABLE>
Loans held for sale totaled $571,000 and $2,346,000 at September 30, 1996
and 1995, respectively, and are reported at the lower of aggregate cost or
market.
At September 30, 1996 and 1995, Salem had no impaired loans.
(3) ALLOWANCE FOR LOAN LOSSES
Following is a summary of the allowance for loan losses for the nine months
ended September 30, 1996 and 1995 (in thousands):
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Balance at beginning of year........................................................ $1,302 757
Provision charged to operations..................................................... 132 338
Balance at end of period............................................................ $1,434 1,095
</TABLE>
(4) NONPERFORMING ASSETS
As of September 30, 1996, Salem had no nonperforming assets. Nonperforming
assets at September 30, 1995 were comprised of $5,000 of restructured loans.
(5) SUBORDINATED NOTES
In May 1996, Salem called its convertible subordinated notes which bore
interest at 6.00%. Substantially all subordinated notes were converted into
shares of Salem's $2.50 par value common stock.
(6) 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 Salem.
(7) ACCOUNTING ISSUES
Salem adopted SFAS No. 123, "Accounting for Stock-Based Compensation" on
January 1, 1996. SFAS No. 123 establishes a fair value method of accounting for
such compensation plans. Stock-based compensation plans include all arrangements
by which employees receive shares of stock or other equity instruments of the
employer or in which an entity issues its
F-6
<PAGE>
SALEM TRUST BANK
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
(7) ACCOUNTING ISSUES -- Continued
equity instruments to acquire goods or services from nonemployees. Under SFAS
No. 123, these types of transactions must be accounted for based on the fair
value of the consideration received or the fair value of the equity instrument
issued, whichever is more reliably measured. While SFAS No. 123 encourages all
entities to adopt the fair value method of accounting, it does allow an entity
to continue to measure the compensation cost of stock compensation plans using
the intrinsic value based method of accounting prescribed by Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees"
("APB Opinion No. 25"). Salem intends to continue measuring stock compensation
expense under APB Opinion No. 25.
F-7
<PAGE>
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The NCBCA provides for indemnification by a corporation of its officers,
directors, employees and agents, and any person who is or was serving at the
corporation's request as a director, officer, employee or agent of another
entity or enterprise or as a trustee or administrator under an employee benefit
plan, against liability and expenses, including reasonable attorneys' fees, in
any proceeding (including without limitation a proceeding brought by or on
behalf of the corporation itself) arising out of their status as such or their
activities in any of the foregoing capacities.
PERMISSIBLE INDEMNIFICATION. Under the NCBCA, a corporation may, but is not
required to, indemnify any such person against liability and expenses incurred
in any such proceeding, provided such person conducted himself or herself in
good faith and (i) in the case of conduct in his or her official corporate
capacity, reasonably believed that his or her conduct was in the corporation's
best interests, and (ii) in all other cases, reasonably believed that his or her
conduct was at least not opposed to the corporation's best interests; and, in
the case of a criminal proceeding, where he or she had no reasonable cause to
believe his or her conduct was unlawful. However, a corporation may not
indemnify such person either in connection with a proceeding by or in the right
of the corporation in which such person was adjudged liable to the corporation,
or in connection with any other proceeding charging improper personal benefit to
such person (whether or not involving action in an official capacity) in which
such person was adjudged liable on the basis that personal benefit was
improperly received.
MANDATORY INDEMNIFICATION. Unless limited by the corporation's charter, the
NCBCA requires a corporation to indemnify a director or officer of the
corporation who is wholly successful, on the merits or otherwise, in the defense
of any proceeding to which such person was a party because he or she is or was a
director or officer of the corporation against reasonable expenses incurred in
connection with the proceeding.
ADVANCE FOR EXPENSES. Expenses incurred by a director, officer, employee or
agent of the corporation in defending a proceeding may be paid by the
corporation in advance of the final disposition of the proceeding as authorized
by the board of directors in the specific case, or as authorized by the charter
or bylaws or by any applicable resolution or contract, upon receipt of an
undertaking by or on behalf of such person to repay amounts advanced unless it
ultimately is determined that such person is entitled to be indemnified by the
corporation against such expenses.
COURT-ORDERED INDEMNIFICATION. Unless otherwise provided in the
corporation's charter, a director or officer of the corporation who is a party
to a proceeding may apply for indemnification to the court conducting the
proceeding or to another court of competent jurisdiction. On receipt of an
application, the court, after giving any notice the court deems necessary, may
order indemnification if it determines either (i) that the director or officer
is entitled to mandatory indemnification as described above, in which case the
court also will order the corporation to pay the reasonable expenses incurred to
obtain the court-ordered indemnification, or (ii) that the director or officer
is fairly and reasonable entitled to indemnification in view of all the relevant
circumstances, whether or not such person met the requisite standard of conduct
or was adjudged liable to the corporation in connection with a proceeding by or
in the right of the corporation or on the basis that personal benefit was
improperly received in connection with any other proceeding so charging (but if
adjudged so liable, indemnification is limited to reasonable expenses incurred).
VOLUNTARY INDEMNIFICATION. In addition to and separate and apart from
"permissible" and "mandatory" indemnification described above, a corporation
may, by charter, bylaw, contract or resolution, indemnify or agree to indemnify
any one or more of its directors, officers, employees or agents against
liability and expenses in any proceeding (including any proceeding brought by or
on behalf of the corporation itself) arising out of their status as such or
their activities in any of the foregoing capacities. However, the corporation
may not indemnify or agree to indemnify a person against liability or expenses
he or she may incur on account of activities which were at the time taken known
or believed by such person to be clearly in conflict with the best interests of
the corporation. Any provision in a corporation's charter or bylaws or in a
contract or resolution may include provisions for recovery from the corporation
of reasonable costs, expenses and attorneys' fees in connection with the
enforcement of rights to indemnification granted therein and may further include
provisions establishing reasonable procedures for determining and enforcing such
rights.
PARTIES ENTITLED TO INDEMNIFICATION. The NCBCA defines "director" to
include ex-directors and the estate or personal representative of a director.
Unless its charter provides otherwise, a corporation may indemnify and advance
expenses to an officer, employee or agent of the corporation to the same extent
as to a director and also may indemnify and advance expenses to an officer,
employee or agent who is not a director to the extent, consistent with public
policy, as may be provided in its charter or bylaws, by general or specific
action of its board of directors, or by contract.
II-1
<PAGE>
INDEMNIFICATION BY REGISTRANT. Subject to such restrictions on
indemnification as are imposed under federal securities laws, Registrant's
Bylaws provide for indemnification of its directors, officers, employees and
agents to the fullest extent permitted by law, and require its Board of
Directors to take all actions necessary and appropriate to authorize such
indemnification.
Under the NCBCA, a corporation also may purchase insurance on behalf of any
person who is or was a director or officer against any liability arising out of
his status as such. Registrant currently maintains a directors' and officers'
liability insurance policy.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
The following exhibits and financial statement schedules are filed as part
of this Post-Effective Amendment No. 1 to the Registration Statement or
incorporated herein by reference:
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT NUMBER
PURSUANT TO
ITEM 601 OF
REGULATION S-K DESCRIPTION OF EXHIBIT
<C> <S>
2 Amended Agreement of Combination among CCB Financial Corporation, Central Carolina Bank and Trust
Company and Salem Trust Bank (included as and incorporated from Appendix A of the Prospectus/Proxy
Statement filed as a part of the Registration Statement).
2.1 Excerpted amendments from Second Amended Agreement of Combination among CCB Financial Corporation,
Central Carolina Bank and Trust Company and Salem Trust Bank (included as and incorporated from
Appendix A of the Prospectus/Proxy Statement Supplement filed as a part of this Post-Effective
Amendment No. 1 to the Registration Statement).
3.1 Registrant's Restated Articles of Incorporation, as amended (incorporated by reference from Exhibit 3
of Registrant's Form 8-K dated May 19, 1995).
3.2 Rights Agreement dated February 26, 1990 between Registrant and Central Carolina Bank and Trust
Company (incorporated by reference from Exhibit 4 of Registrant's Current Report on Form 8-K dated
February 16, 1990).
3.3 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 Registrant's Registration Statement No. 33-50793 on Form S-3.
3.4 Registrant's Bylaws, as amended and restated on October 22, 1996, are incorporated by reference from
Exhibit 3 of Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 1996.
5 Opinion and Consent of Brooks, Pierce, McLendon, Humphrey & Leonard, L.L.P. as to legality of shares
being registered. (Previously Filed)
8 Opinion of KPMG Peat Marwick LLP as to tax matters (Previously Filed)
10.1 Form of amended employment agreement with Gordon H. T. Sheeran (Previously Filed)
10.2 Form of amended employment agreement with Norman D. Potter (Previously Filed)
10.3 Form of amended employment agreement with William S. Green (Previously Filed)
10.4 Form of amended employment agreement with Deborah S. Marshall (Previously Filed)
21 List of Registrant's Subsidiaries (incorporated by reference from Note 1 to consolidated financial
statements contained in Registrant's Annual Report on Form 10-K for the fiscal year ended December 31,
1995.)
23.1 Consent of Brooks, Pierce, McLendon, Humphrey & Leonard, L.L.P. (contained in the previously filed
Exhibit 5 above)
23.2 Consent of KPMG Peat Marwick LLP (Previously Filed)
23.3 Consent of KPMG Peat Marwick LLP (Previously Filed)
23.4 Consent of KPMG Peat Marwick LLP (Previously Filed)
23.5 Consent of The Carson Medlin Company (Previously Filed)
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NUMBER
PURSUANT TO
ITEM 601 OF
REGULATION S-K DESCRIPTION OF EXHIBIT
<C> <S>
24 Powers of Attorney (Previously Filed)
99.1 Form of appointment of proxy to be used in connection with the Special Meeting of Shareholders of
Salem Trust Bank (Previously Filed)
99.2 Amended form of appointment of proxy to be used in connection with the reconvened Special Meeting of
Shareholders of Salem Trust Bank
</TABLE>
(b) Financial Statement Schedules.
All financial statement schedules are omitted as substantially all the
required information is contained in the Registrant's consolidated financial
statements which are incorporated herein by reference or is not applicable. The
opinion of The Carson Medlin Company to the Board of Directors of Salem Trust
Bank is included as Appendix C of the Prospectus/Proxy Statement previously
filed as a part of the Registration Statement.
ITEM 22. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933 (the "1933 Act"),
each filing of the Registrant's annual report pursuant to Section 13(a) or
Section 15(d) of the Securities Exchange Act of 1934 ("1934 Act") (and, where
applicable, each filing of an employee benefit plan's annual report pursuant to
Section 15(d) of the 1934 Act) that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered herein, and the offering of such securities
at the time shall be deemed to be the initial bona fide offering thereof.
(b) Insofar as indemnification for liabilities arising under the 1933 Act
may be permitted to directors, officers, or controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, Registrant has
been advised that, in the opinion of the Securities and Exchange Commission,
such indemnification is against public policy as expressed in the 1933 Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person in connection with
the securities being registered, the Registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the 1933 Act and will be governed by
the final adjudication of such issue.
(c) The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the Prospectus/Proxy
Statement and/or the Prospectus/Proxy Statement Supplement pursuant to Items 4,
10(b), 11 or 13 of this Form, within one business day of receipt of such
request, and to send the incorporated documents by first class mail or other
equally prompt means. This includes information contained in documents filed
subsequent to the effective date of the Registration Statement through the date
of responding to the request.
(d) The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement, as amended by the Post-Effective
Amendment No. 1, when it became effective.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
had duly caused this Post-Effective Amendment No. 1 to the Registration
Statement on Form S-4 to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Durham, State of North Carolina, on November 26,
1996.
CCB FINANCIAL CORPORATION
By: /s/ ERNEST C. ROESSLER
ERNEST C. ROESSLER
VICE CHAIRMAN, PRESIDENT AND CHIEF
EXECUTIVE OFFICER
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 1 to the Registration Statement on Form S-4 has
been signed by the following persons in the capacities and on the dates
indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/s/ ERNEST C. ROESSLER Vice Chairman, President, Chief Executive November 26, 1996
Officer and Director (principal executive
ERNEST C. ROESSLER officer)
/s/ W. HAROLD PARKER, JR. Senior Vice President and Controller November 26, 1996
(principal financial and accounting
W. HAROLD PARKER, JR. officer)
* W. L. BURNS, JR. Chairman of the Board of Directors November 26, 1996
W. L. BURNS, JR.
* JOHN M. BARNHARDT Director November 26, 1996
JOHN M. BARNHARDT
Director November 26, 1996
J. HARPER BEALL, III
* JAMES B. BRAME, JR. Director November 26, 1996
JAMES B. BRAME, JR.
Director November 26, 1996
TIMOTHY B. BURNETT
* EDWARD S. HOLMES Director November 26, 1996
EDWARD S. HOLMES
Director November 26, 1996
BONNIE MCELVEEN-HUNTER
* DAVID B. JORDAN Vice Chairman and Director November 26, 1996
DAVID B. JORDAN
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
Director November 26, 1996
OWEN G. KENAN
<S> <C> <C>
* EUGENE J. MCDONALD Director November 26, 1996
EUGENE J. MCDONALD
Director November 26, 1996
HAMILTON W. MCKAY, JR., M.D.
Director November 26, 1996
GEORGE J. MORROW
* ERIC B. MUNSON Director November 26, 1996
ERIC B. MUNSON
* MILES J. SMITH Director November 26, 1996
MILES J. SMITH, JR.
* JIMMY K. STEGALL Director November 26, 1996
JIMMY K. STEGALL
Director November 26, 1996
H. ALLEN TATE
* JAMES L. WILLIAMSON Director November 26, 1996
JAMES L. WILLIAMSON
* DR. PHAIL WYNN, JR. Director November 26, 1996
DR. PHAIL WYNN, JR.
*By: /s/ W. HAROLD PARKER, JR.
W. HAROLD PARKER, JR.
ATTORNEY-IN-FACT
</TABLE>
II-5
<PAGE>
EXHIBITS
<PAGE>
EXHIBITS INDEX
<TABLE>
<CAPTION>
EXHIBIT NUMBER
PURSUANT TO
ITEM 601 OF SEQUENTIAL
REGULATION S-K DESCRIPTION OF EXHIBIT PAGE NO.
<C> <S> <C>
2 Amended Agreement of Combination among CCB Financial Corporation,
Central Carolina Bank and Trust Company and Salem Trust Bank (included
as and incorporated from Appendix A of the Prospectus/Proxy Statement
filed as a part of the Registration Statement).
2.1 Excerpted amendments from Second Amended Agreement of Combination among
CCB Financial Corporation, Central Carolina Bank and Trust Company and
Salem Trust Bank (included as and incorporated from Appendix A of the
Prospectus/Proxy Statement Supplement filed as a part of this
Post-Effective Amendment No. 1 to the Registration Statement).
3.1 Registrant's Restated Articles of Incorporation, as amended
(incorporated by reference from Exhibit 3 of Registrant's Form 8-K dated
May 19, 1995).
3.2 Rights Agreement dated February 26, 1990 between Registrant and Central
Carolina Bank and Trust Company (incorporated by reference from Exhibit
4 of Registrant's Current Report on Form 8-K dated February 16, 1990).
3.3 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 Registrant's Registration Statement No.
33-50793 on Form S-3.
3.4 Registrant's Bylaws, as amended and restated on October 22, 1996, are
incorporated by reference from Exhibit 3 of Registrant's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1996.
5 Opinion and Consent of Brooks, Pierce, McLendon, Humphrey & Leonard,
L.L.P. as to legality of shares being registered (Previously Filed)
8 Opinion of KPMG Peat Marwick LLP as to tax matters (Previously Filed)
10.1 Form of amended employment agreement with Gordon H. T. Sheeran
(Previously Filed)
10.2 Form of amended employment agreement with Norman D. Potter (Previously
Filed)
10.3 Form of amended employment agreement with William S. Green (Previously
Filed)
10.4 Form of amended employment agreement with Deborah S. Marshall
(Previously Filed)
21 List of Registrant's Subsidiaries (incorporated by reference from Note 1
to consolidated financial statements contained in Registrant's Annual
Report on Form 10-K for the fiscal year ended December 31, 1995.)
23.1 Consent of Brooks, Pierce, McLendon, Humphrey & Leonard, L.L.P.
(contained in the previously filed Exhibit 5 above)
23.2 Consent of KPMG Peat Marwick LLP (Previously Filed)
23.3 Consent of KPMG Peat Marwick LLP (Previously Filed)
23.4 Consent of KPMG Peat Marwick LLP (Previously Filed)
23.5 Consent of The Carson Medlin Company (Previously Filed)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NUMBER
PURSUANT TO
ITEM 601 OF SEQUENTIAL
REGULATION S-K DESCRIPTION OF EXHIBIT PAGE NO.
24 Powers of Attorney (Previously Filed)
<C> <S> <C>
99.1 Form of appointment of proxy to be used in connection with the Special
Meeting of Shareholders of Salem Trust Bank (Previously Filed)
99.2 Amended form of appointment of proxy to be used in connection with the
reconvened Special Meeting of Shareholders of Salem Trust Bank
</TABLE>
<PAGE>
SALEM TRUST BANK
2140 Country Club Road
Winston-Salem, North Carolina 27104
REVOCABLE APPOINTMENT OF PROXY
SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints Gordon H.T. Sheeran and James E. Holmes, Jr.
(the "Proxies"), or either of them, with full power of substitution and hereby
authorizes them to represent and vote, as directed below, all shares of the
common stock of Salem Trust Bank ("Salem") held of record by the undersigned on
October 2, 1996 at the reconvened Special Meeting of Shareholders of Salem (the
"Reconvened Special Meeting") to be held at the Arts Council Theater, 610
Coliseum Drive, Winston-Salem, North Carolina, at 10:00 o'clock, a.m., E.S.T. on
Tuesday, January 21, 1997, and at any further adjournments thereof. The
undersigned hereby directs that the shares represented by this appointment of
proxy be voted as follows on the proposals listed below:
1. PROPOSAL TO APPROVE MERGER. Proposal to approve the Second Amended
Agreement of Combination, dated initially as of July 1, 1996 and amended
as of September 6, 1996 and November 21, 1996, and the related plan of
merger (collectively, the "Merger Agreement"), among Salem, CCB Financial
Corporation ("CCBF") and Central Carolina Bank and Trust Company ("CCB
Bank"), and to approve the transactions described therein, including
without limitation the merger of Salem into CCB Bank with the result that
all outstanding shares of Salem's $2.50 par value common stock will be
converted into shares of CCBF's $5.00 par value common stock.
( ) FOR ( ) AGAINST ( ) ABSTAIN
2. OTHER BUSINESS. On such other matters as properly come before the
Reconvened Special Meeting, the Proxies are authorized to vote the shares
represented by this appointment of proxy in accordance with their best
judgment.
PLEASE MARK, SIGN AND DATE THIS APPOINTMENT OF PROXY ON THE REVERSE SIDE AND
PROMPTLY RETURN IT USING THE ENCLOSED ENVELOPE.
<PAGE>
<PAGE>
THE SHARES REPRESENTED BY THIS APPOINTMENT OF PROXY WILL BE VOTED AS DIRECTED
ABOVE. IN THE ABSENCE OF ANY DIRECTION, THE PROXIES WILL VOTE THE SHARES
REPRESENTED BY THIS APPOINTMENT OF PROXY FOR PROPOSAL 1. SHOULD OTHER MATTERS
PROPERLY COME BEFORE THE RECONVENED SPECIAL MEETING, THE PROXIES WILL BE
AUTHORIZED TO VOTE THE SHARES REPRESENTED BY THIS APPOINTMENT OF PROXY IN
ACCORDANCE WITH THEIR BEST JUDGMENT. THIS APPOINTMENT OF PROXY MAY BE REVOKED BY
THE HOLDER OF THE SHARES TO WHICH IT RELATES AT ANY TIME BEFORE IT IS EXERCISED
BY FILING WITH THE SECRETARY OF SALEM A WRITTEN INSTRUMENT REVOKING IT OR A DULY
EXECUTED APPOINTMENT OF PROXY BEARING A LATER DATE OR BY ATTENDING THE
RECONVENED SPECIAL MEETING AND ANNOUNCING HIS OR HER INTENTION TO VOTE IN
PERSON.
By signing this proxy, the undersigned hereby acknowledges receipt of the
Notice of the Reconvening of the Special Meeting dated November , 1996, the
accompanying Prospectus/Proxy Statement Supplement, and the previously
distributed Prospectus/Proxy Statement dated October 4, 1996.
Dated: , 199
Signature of Owner of Shares
Signature of Joint Owner of
Shares, if any
INSTRUCTION: Please sign above
exactly as your name appears on
this appointment of proxy. Joint
owners of shares should both sign.
Fiduciaries or other persons
signing in a representative
capacity should indicate the
authorized capacity in which they
are signing.
IMPORTANT: TO ENSURE THAT A QUORUM IS PRESENT AT THE RECONVENED SPECIAL MEETING,
PLEASE SEND IN YOUR APPOINTMENT OF PROXY WHETHER OR NOT YOU PLAN TO ATTEND. EVEN
IF YOU SEND IN YOUR APPOINTMENT OF PROXY, YOU WILL BE ABLE TO VOTE IN PERSON AT
THE RECONVENED SPECIAL MEETING IF YOU SO DESIRE.
<PAGE>
