<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 6, 1997
REGISTRATION NO. 333-25705
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
PRE-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 Identification No.)
Classification
Code No.)
</TABLE>
111 CORCORAN STREET
POST OFFICE BOX 931
DURHAM, NORTH CAROLINA 27702-0931
(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
CCB FINANCIAL CORPORATION
111 CORCORAN STREET
POST OFFICE BOX 931
DURHAM, NORTH CAROLINA 27702-0931
(919) 683-7777
(Name, address and telephone number of agent for service)
COPIES TO:
<TABLE>
<S> <C>
ROBERT A. SINGER, ESQ. FRANK M. CONNER, III, ESQ.
BROOKS, PIERCE, MCLENDON ALSTON & BIRD LLP
HUMPHREY & LEONARD, L.L.P. NORTH BUILDING, SUITE 250
230 NORTH ELM STREET, SUITE 2000 601 PENNSYLVANIA AVENUE, N.W.
POST OFFICE BOX 26000 WASHINGTON, D.C. 20004-2601
GREENSBORO, NORTH CAROLINA 27420 (202) 508-3300
(910) 373-8850
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF THE PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
THE REGISTRANT HEREBY AMENDS THIS 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 REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(A), MAY
DETERMINE.
<PAGE>
CCB FINANCIAL CORPORATION
111 CORCORAN STREET
POST OFFICE BOX 931
DURHAM, NORTH CAROLINA 27702
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON JULY 31, 1997
NOTICE is hereby given that a Special Meeting of Shareholders of CCB
Financial Corporation ("CCBF") will be held at the Durham Omni Hotel, 201 Foster
Street, Durham, North Carolina (for your convenience a map with directions to
the Durham Omni Hotel and parking facilities appears on the outside back cover
of the accompanying Prospectus/Joint Proxy Statement), at 11:00 o'clock, a.m.,
E.D.S.T., on July 31, 1997, for the following purposes:
1. PROPOSAL TO APPROVE MERGER. To consider and vote on a proposal to
approve an Agreement and Plan of Reorganization, dated as of February
17, 1997, between CCBF and American Federal Bank, FSB ("AFB") and the
related Plan of Merger and Combination (collectively, the "Merger
Agreement") (a copy of which Merger Agreement is attached as Appendix A
to the Prospectus/Joint Proxy Statement which accompanies this Notice),
and to approve the transactions described therein, including without
limitation the issuance of up to a maximum of 5,102,030 shares of CCBF's
$5.00 par value common stock (each with an attached preferred stock
purchase right) to effect the combination of AFB and CCBF through the
merger of a newly formed, interim savings bank subsidiary of CCBF into
AFB (the "Merger"), with the result that AFB will become a wholly-owned
subsidiary of CCBF; and
2. OTHER BUSINESS. To transact such other business as properly may be
presented for action at the Special Meeting.
EACH CCBF SHAREHOLDER IS INVITED TO ATTEND THE SPECIAL MEETING IN PERSON.
HOWEVER, TO ENSURE THAT A QUORUM IS PRESENT AT THE SPECIAL MEETING, EACH CCBF
SHAREHOLDER IS REQUESTED TO COMPLETE, SIGN AND DATE THE ENCLOSED APPOINTMENT OF
PROXY AND RETURN IT PROMPTLY TO CCBF IN THE ENCLOSED STAMPED, RETURN ENVELOPE.
SIGNING AND RETURNING AN APPOINTMENT OF PROXY WILL NOT AFFECT A CCBF
SHAREHOLDER'S RIGHT TO ATTEND THE SPECIAL MEETING AND VOTE IN PERSON.
By Order of the Board of Directors
ERNEST C. ROESSLER
VICE CHAIRMAN, PRESIDENT AND
CHIEF EXECUTIVE OFFICER
Durham, North Carolina
June , 1997
CCBF'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT
ALL CCBF SHAREHOLDERS VOTE TO APPROVE THE MERGER AGREEMENT
<PAGE>
AMERICAN FEDERAL BANK, FSB
300 EAST MCBEE AVENUE
GREENVILLE, SOUTH CAROLINA 29601
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON JULY 31, 1997
NOTICE is hereby given that a Special Meeting of Shareholders ("AFB Special
Meeting") of American Federal Bank, FSB ("AFB") will be held in the Board Room
of the Greater Greenville Chamber of Commerce Building, 24 Cleveland Street,
Greenville, South Carolina at 11:00 o'clock, a.m., E.D.S.T. on July 31, 1997,
for the following purposes:
1. PROPOSED MERGER. To consider and vote on a proposal to approve an
Agreement and Plan of Reorganization, dated as of February 17, 1997,
between AFB and CCB Financial Corporation ("CCBF") and the related Plan
of Merger and Combination (collectively, the "Merger Agreement") (a copy
of which Merger Agreement is attached as Appendix A to the
Prospectus/Joint Proxy Statement which accompanies this Notice),
pursuant to which a newly-formed, wholly-owned interim thrift subsidiary
of CCBF will merge with and into AFB, with the result that AFB will
become a wholly-owned subsidiary of CCBF, and each share of the $1.00
par value common stock of AFB will be converted into the right to
receive .445 of a share of the $5.00 par value common stock of CCBF and
cash in lieu of any fractional share, as described in the accompanying
Prospectus/Joint Proxy Statement; and
2. OTHER BUSINESS. To transact such other business as properly may be
presented for action at the AFB Special Meeting.
Shareholders of AFB of record at the close of business on June 10, 1997,
are entitled to notice of and to vote at the AFB Special Meeting. YOU ARE
CORDIALLY INVITED TO ATTEND THE AFB SPECIAL MEETING IN PERSON; HOWEVER, WHETHER
OR NOT YOU PLAN TO ATTEND, WE URGE YOU TO COMPLETE, DATE AND SIGN THE
ACCOMPANYING PROXY CARD AND TO RETURN IT PROMPTLY IN THE ENCLOSED POSTAGE
PRE-PAID ENVELOPE. Signing and returning an appointment of proxy card will not
affect an AFB shareholder's right to attend the special meeting and vote in
person.
By Order of the Board of Directors
DEBORAH A. BRADY
SECRETARY
Greenville, South Carolina
June [ ], 1997
AFB'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT
ALL AFB SHAREHOLDERS VOTE TO APPROVE THE MERGER AGREEMENT
<PAGE>
PROSPECTUS
CCB FINANCIAL CORPORATION
SHARES
COMMON STOCK
PAR VALUE $5.00
EACH WITH AN ATTACHED PREFERRED STOCK PURCHASE RIGHT
JOINT PROXY STATEMENT
FOR THE SPECIAL MEETINGS OF SHAREHOLDERS OF CCB FINANCIAL CORPORATION
AND AMERICAN FEDERAL BANK, FSB TO BE HELD ON JUNE 26, 1997
This Prospectus relates to shares of the $5.00 par value common stock
("CCBF Stock"), each with an attached right to purchase .01 of a share of CCBF
Series A Junior Participating Preferred (a "CCBF Right"), of CCB Financial
Corporation ("CCBF") that will be issued in connection with the proposed merger
(the "Merger") of American Federal Interim Savings Bank, FSB, a to-be-formed
interim federal savings bank subsidiary of CCBF ("Interim FSB"), with and into
American Federal Bank, FSB ("AFB"). CCBF is a North Carolina corporation which
is registered with the Board of Governors of the Federal Reserve System (the
"Federal Reserve") as a bank holding company and which is the parent company of
Central Carolina Bank and Trust Company. Interim FSB will be formed as a
wholly-owned subsidiary of CCBF for the purpose of facilitating the combination
of CCBF and AFB. As described in the Agreement and Plan of Reorganization, dated
as of February 17, 1997, between CCBF and AFB, and the related Plan of Merger
and Combination (collectively the "Merger Agreement"), upon consummation of the
Merger, Interim FSB will be merged into AFB and each outstanding share of AFB's
$1.00 par value common stock ("AFB Stock") will be converted into and exchanged
for .445 of a share of CCBF Stock and .445 of a CCBF Right (the "Exchange
Ratio"), and AFB will become a wholly-owned subsidiary of CCBF. (See "THE
MERGER"). References in this Prospectus/Joint Proxy Statement to the CCBF Stock
shall be deemed to include the CCBF Rights attached to such CCBF Stock. For
additional information about the CCBF Rights, see "CAPITAL STOCK OF CCBF AND
AFB -- CCBF Rights Plan."
Based upon the number of shares of AFB Stock outstanding on May 31, 1997, a
total of 5,102,030 shares of CCBF Stock, having an aggregate market value of
$358.4 million based upon the $70.25 per share closing price of CCBF Stock on
the New York Stock Exchange ("NYSE") on May 31, 1997, will be issued to AFB's
shareholder upon the effectiveness of the Merger (approximately 24.4% of the
outstanding CCBF Stock as of such time).
This Prospectus also serves as CCBF's and AFB's Joint Proxy Statement in
connection with their respective Boards of Directors' solicitation of
appointments of proxy to be used at special meetings of their shareholders,
including any adjournments thereof (the "Special Meetings"), to be held for the
purposes described herein. (See "THE SPECIAL MEETINGS.")
At the AFB Special Meeting, the holders of record of AFB Stock as of the
close of business on June 10, 1997 will consider and vote upon a proposal to
approve the Merger Agreement. At the CCBF Special Meeting, the holders of record
of CCBF Stock as of the close of business on June 10, 1997, will consider and
vote upon a proposal to approve the Merger Agreement and to issue up to a
maximum of 5,102,030 shares of CCBF Stock to effect the combination of AFB and
CCBF through the Merger. (See "THE MERGER -- Terms of the Merger.")
Neither CCBF's shareholders nor AFB's shareholders are entitled to
dissenters' rights in connection with the Merger. (See "THE MERGER -- Absence of
Dissenters' Rights.")
The outstanding shares of CCBF Stock are listed for trading on the New York
Stock Exchange (the "NYSE") and the outstanding shares of AFB are included for
quotation on the National Market System of The Nasdaq Stock Market, Inc. (the
"Nasdaq National Market"). The shares of CCBF Stock issued in the Merger also
will be listed for trading on the NYSE.
This Prospectus/Joint Proxy Statement and the accompanying forms of
appointment of proxies are first being mailed to shareholders of AFB and CCBF on
or about June , 1997.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS/PROXY STATEMENT. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus/Proxy Statement is June , 1997.
<PAGE>
No person is authorized to give any information or make any representation
other than those contained in this Prospectus/Joint Proxy Statement, and, if
given or made, such information or representation should not be relied upon as
having been authorized by CCBF or AFB. This Prospectus/Joint Proxy Statement
does not constitute an offer to sell, or a solicitation of an offer to purchase
or exchange the securities offered by this Prospectus/Joint Proxy Statement, in
any jurisdiction in which such offer is not authorized or to or from any person
to whom it is unlawful to make such offer or solicitation. The information
contained in this Prospectus/Joint Proxy Statement regarding CCBF and its
affiliates has been furnished by CCBF, and the information herein regarding AFB
and its affiliates has been furnished by AFB. Neither the delivery of this
Prospectus/Joint Proxy Statement nor any distribution of the securities being
made hereunder shall, under any circumstances, create any implication that there
has been no change in the affairs of CCBF or AFB or their affiliates since the
date of this Prospectus/Joint Proxy Statement or that information contained
herein or in the documents incorporated herein by reference is correct as of any
time subsequent to the date hereof or the dates thereof.
THE SHARES OF CCBF STOCK BEING OFFERED TO AFB'S SHAREHOLDERS ARE NOT
DEPOSITS OF ANY BANK OR OTHER FINANCIAL INSTITUTION AND ARE NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY.
THIS PROSPECTUS/JOINT PROXY STATEMENT CONTAINS CERTAIN FORWARD-LOOKING
STATEMENTS WITH RESPECT TO THE FINANCIAL CONDITION, RESULTS OF OPERATIONS AND
BUSINESS OF CCBF FOLLOWING THE CONSUMMATION OF THE MERGER, INCLUDING STATEMENTS
RELATING TO THE COST SAVINGS AND REVENUE ENHANCEMENTS THAT ARE EXPECTED TO BE
REALIZED FROM THE MERGER AND THE EXPECTED IMPACT OF THE MERGER ON CCBF'S
FINANCIAL PERFORMANCE (SEE "THE MERGER -- BACKGROUND OF THE MERGER;
RECOMMENDATIONS AND REASONS"). THESE FORWARD-LOOKING STATEMENTS INVOLVE CERTAIN
RISKS AND UNCERTAINTIES. FACTORS THAT MAY CAUSE ACTUAL RESULTS TO DIFFER
MATERIALLY FROM THOSE CONTEMPLATED BY SUCH FORWARD-LOOKING STATEMENTS INCLUDE,
AMONG OTHER THINGS, THE FOLLOWING POSSIBILITIES: (I) EXPECTED COST SAVINGS FROM
THE MERGER CANNOT BE FULLY REALIZED; (II) DEPOSIT ATTRITION, CUSTOMER LOSS OR
REVENUE LOSS FOLLOWING THE MERGER IS GREATER THAN EXPECTED; (III) COMPETITIVE
PRESSURE IN THE BANKING INDUSTRY INCREASES SIGNIFICANTLY; (IV) COSTS OR
DIFFICULTIES RELATED TO THE INTEGRATION OF THE BUSINESSES OF CCBF AND AFB ARE
GREATER THAN EXPECTED; (V) CHANGES IN THE INTEREST RATE ENVIRONMENT REDUCE
MARGINS; (VI) GENERAL ECONOMIC CONDITIONS, EITHER NATIONALLY OR REGIONALLY, ARE
LESS FAVORABLE THAN EXPECTED, RESULTING IN, AMONG OTHER THINGS, A DETERIORATION
IN CREDIT QUALITY; (VII) CHANGES OCCUR IN THE REGULATORY ENVIRONMENT; (VIII)
CHANGES OCCUR IN BUSINESS CONDITIONS AND INFLATION; AND (IX) CHANGES OCCUR IN
THE SECURITIES MARKETS. THE FORWARD-LOOKING EARNINGS ESTIMATES INCLUDED IN THIS
PROSPECTUS/JOINT PROXY STATEMENT HAVE NOT BEEN EXAMINED OR COMPILED BY THE
INDEPENDENT PUBLIC ACCOUNTANTS OF CCBF AND AFB, NOR HAVE SUCH ACCOUNTANTS
APPLIED ANY PROCEDURES THERETO. ACCORDINGLY, SUCH ACCOUNTANTS DO NOT EXPRESS AN
OPINION OR ANY OTHER FORM OF ASSURANCE ON THEM. FURTHER INFORMATION ON OTHER
FACTORS THAT COULD AFFECT THE FINANCIAL RESULTS OF CCBF AFTER THE MERGER IS
INCLUDED IN THE SECURITIES AND EXCHANGE COMMISSION FILINGS INCORPORATED BY
REFERENCE HEREIN.
<PAGE>
TABLE OF CONTENTS
<TABLE>
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PAGE PAGE
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AVAILABLE INFORMATION................................ 1
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE...... 2
SUMMARY.............................................. 3
Parties............................................ 3
Special Meetings of Shareholders................... 3
The Merger......................................... 5
Selected Financial Information..................... 9
Selected Pro Forma Financial Information........... 13
Unaudited Comparative Per Share Data............... 15
THE SPECIAL MEETINGS................................. 17
General; Proposals to be Considered................ 17
Record Dates....................................... 17
Voting Securities; Votes Required for
Approval........................................ 17
Voting and Revocation of Proxies................... 18
Proxy Solicitation Expenses........................ 19
THE MERGER........................................... 19
General............................................ 19
Conversion of AFB Stock and AFB Options; Exchange
Ratio........................................... 19
Treatment of Fractional Shares..................... 20
Background of the Merger;
Recommendations and Reasons..................... 20
AFB Fairness Opinions.............................. 29
CCBF Fairness Opinion.............................. 35
Required Shareholder Approvals..................... 41
Required Regulatory Approvals...................... 41
Conduct of Business Pending Merger................. 42
Dividends.......................................... 43
The Stock Option Agreement......................... 43
Accounting Treatment............................... 44
Material Income Tax Consequences................... 44
Absence of Dissenters' Rights...................... 45
Conditions to Merger............................... 45
Amendment of the Merger Agreement;
Waiver.......................................... 46
Termination of the Merger Agreement................ 46
Effective Time and Closing Date.................... 46
Surrender and Exchange of Certificates............. 47
Interests of Certain Persons With Respect to the
Merger.......................................... 47
Effect on Employee Benefit Plans and AFB Options... 50
New York Stock Exchange Listing.................... 50
Dividend Reinvestment and Stock Purchase
Plan............................................ 51
Restrictions on Resale of CCBF Stock by
Affiliates...................................... 51
Expenses........................................... 51
PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION... 52
PRO FORMA CAPITALIZATION............................. 59
MARKET AND DIVIDEND INFORMATION REGARDING CCBF STOCK
AND AFB STOCK...................................... 60
CCB FINANCIAL CORPORATION............................ 61
General............................................ 61
Subsidiaries....................................... 61
Beneficial Ownership of CCBF Stock................. 61
Management and Additional Information.............. 63
AMERICAN FEDERAL BANK, FSB........................... 64
General............................................ 64
Beneficial Ownership of AFB Stock.................. 65
Management and Additional Information.............. 66
CERTAIN REGULATORY
CONSIDERATIONS..................................... 67
CAPITAL STOCK OF CCBF AND AFB........................ 73
Authorized Capital Stock........................... 73
CCBF Rights Plan................................... 73
Special Meetings of Shareholders................... 74
Directors.......................................... 74
Business Combinations and Changes
in Control...................................... 75
Amendment of Organizational Documents.............. 76
Anti-takeover Effect of Certain Provisions......... 77
INDEMNIFICATION...................................... 78
LEGAL MATTERS........................................ 79
EXPERTS.............................................. 79
OTHER MATTERS........................................ 79
PROPOSALS OF SHAREHOLDERS............................ 80
APPENDIX A -- Agreement and Plan of Reorganization
dated as of February 17, 1997 and the Plan of
Merger and Combination............................. A-1
APPENDIX B -- Opinion of Wheat, First Securities,
Inc................................................ B-1
APPENDIX C -- Opinion of Keefe, Bruyette & Woods,
Inc................................................ C-1
APPENDIX D -- Opinion of Merrill Lynch, Pierce,
Fenner & Smith Incorporated........................ D-1
</TABLE>
<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, proxy statements 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.
AFB is subject to the informational requirements of the 1934 Act and, in
connection therewith, files reports, proxy statements and other information with
the Office of Thrift Supervision (the "OTS"). Requests to review such reports,
proxy statements and other information may be made in writing to the
Dissemination Branch, Records Management and Information Policy Division, Office
of Thrift Supervision, 1700 G Street, N.W., Washington, D.C. 20552 or in person
at the OTS' Public Reference Room at the same address. Additionally, AFB's
Annual Report on Form 10-K for the fiscal year ended December 31, 1996 and its
Current Report on Form 8-K, dated February 17, 1997, have been filed with the
Commission as exhibits to CCBF's Current Reports on Form 10-K, both dated April
21, 1997. AFB's Quarterly Report on Form 10-Q for the quarter ended March 31,
1997 is contained as an exhibit to a CCBF Current Report on Form 8-K dated May
13, 1997.
CCBF has filed with the Commission a Registration Statement on Form S-4
under the Securities Act of 1933, as amended (the "1933 Act"), with respect to
the CCBF Stock offered hereby. As permitted by the rules and regulations of the
Commission, this Prospectus/Joint Proxy Statement does not contain all the
information set forth in the Registration Statement 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, THIS PROSPECTUS/JOINT PROXY STATEMENT
INCORPORATES BY REFERENCE DOCUMENTS RELATING TO CCBF AND AFB WHICH ARE NOT
PRESENTED HEREIN OR DELIVERED HEREWITH. STATEMENTS CONTAINED HEREIN OR IN ANY
DOCUMENT INCORPORATED HEREIN BY REFERENCE AS TO THE CONTENTS OF ANY CONTRACTS OR
OTHER DOCUMENT REFERRED TO HEREIN OR THEREIN 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 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, NORTH
CAROLINA 27702, TELEPHONE (919) 683-7631. REQUESTS FOR DOCUMENTS REGARDING AFB
SHOULD BE DIRECTED TO MARY MARGARET DRAGOUN, VICE PRESIDENT, AMERICAN FEDERAL
BANK, FSB, POST OFFICE BOX 1268, GREENVILLE, SOUTH CAROLINA 29602, TELEPHONE
(864) 255-7000. IN ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS BEFORE THE
SPECIAL MEETINGS, ANY SUCH REQUESTS SHOULD BE MADE BY JULY 17, 1997.
1
<PAGE>
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 this Prospectus/Joint Proxy
Statement: (i) CCBF's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996; (ii) CCBF's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1997; (iii) CCBF's Current Reports on Form 8-K dated January 31,
1997, February 17, 1997, March 19, 1997, April 21, 1997, April 21, 1997, and May
13, 1997; and (iv) the description of CCBF Stock contained in its current report
on Form 8-K dated July 1, 1983, as amended by its Form 8-K/A2 dated June 14,
1996, and its Form 8-A, dated July 29, 1996, as each is amended by CCBF's
subsequent reports filed under the 1934 Act.
The following documents previously filed by AFB with the OTS (OTS Docket
No. 1872), and attached as exhibits to CCBF's Current Reports on Form 8-K dated
April 21, 1997 and May 13, 1997, are incorporated by reference into this
Prospectus/Joint Proxy Statement: (i) AFB's Annual Report on Form 10-K for the
fiscal year ended December 31, 1996; (ii) AFB's Quarterly Report on Form 10-Q
for the quarter ended March 31, 1997; and (iii) AFB's Current Report on Form 8-K
dated February 17, 1997, as each is amended by AFB's subsequent reports filed
under the 1934 Act. AFB's periodic and other filings under the 1934 Act filed
with the OTS after the date of this Prospectus/Joint Proxy Statement will be
contained as exhibits to CCBF Current Reports on Form 8-K that will be filed
with the Commission on or about the times such filings are made by AFB with the
OTS. (See "AVAILABLE INFORMATION.")
In addition, all other documents filed by CCBF or AFB pursuant to Section
13(a), 14 or 15(d) of the 1934 Act prior to the date the Special Meetings have
been finally adjourned shall be deemed to be incorporated by reference herein
and will be deemed to be modified or superseded for purposes of this
Prospectus/Joint Proxy Statement to the extent that a statement contained herein
or in any other subsequently filed document which also is or is deemed to be
incorporated by reference 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 hereof.
2
<PAGE>
SUMMARY
THE FOLLOWING IS A SUMMARY OF INFORMATION ABOUT THE SPECIAL MEETINGS, THE
MERGER AGREEMENT AND THE TRANSACTIONS DESCRIBED THEREIN AND IS NOT INTENDED TO
BE A COMPLETE DESCRIPTION OF ALL MATERIAL FACTS REGARDING CCBF, AFB, THE MERGER
OR OTHER MATTERS TO BE CONSIDERED AT THE SPECIAL MEETINGS. THE SUMMARY IS
QUALIFIED IN ALL RESPECTS BY REFERENCE TO THE MORE DETAILED INFORMATION INCLUDED
IN THIS PROSPECTUS/JOINT PROXY STATEMENT, THE APPENDICES HERETO (INCLUDING THE
MERGER AGREEMENT, A COPY OF WHICH IS ATTACHED AS APPENDIX A) AND THE DOCUMENTS
INCORPORATED HEREIN BY REFERENCE.
PARTIES
CCBF is a North Carolina business corporation which is registered with the
Federal Reserve as a bank holding company under the Bank Holding Company Act of
1956, as amended (the "BHCA"). CCBF's principal subsidiaries are (i) Central
Carolina Bank and Trust Company ("CCB Bank"), a North Carolina commercial bank
headquartered in Durham, North Carolina and operating 161 offices located
primarily in the urban corridor of North Carolina along Interstate 85 and
Interstate 40 from Raleigh to Charlotte, North Carolina, and (ii) Central
Carolina Bank-Georgia ("CCB-Georgia"), a Georgia special purpose credit card
bank headquartered in Columbus, Georgia. At March 31, 1997, CCBF had total
consolidated assets of approximately $5.6 billion, total consolidated deposits
of approximately $4.8 billion, and total consolidated shareholders' equity of
approximately $502.7 million. CCBF's principal offices are located at 111
Corcoran Street (Post Office Box 931), Durham, North Carolina 27702-0931, and
its telephone number at that address is (919) 683-7777. (See "CCB FINANCIAL
CORPORATION.") Interim FSB will be formed as an interim federal savings bank and
as a wholly-owned subsidiary of CCBF for the sole purpose of facilitating the
combination of CCBF and AFB through the Merger and will not conduct any business
operations. Interim FSB will adopt the Plan of Merger and Combination upon its
formation.
AFB is a federally-chartered stock savings bank headquartered in
Greenville, South Carolina and operates 40 branch offices in the northwestern
and central regions of South Carolina. Through its branch operations, AFB
provides a wide variety of retail and commercial loan and deposit products. At
March 31, 1997, AFB had total consolidated assets of approximately $1.3 billion,
total consolidated deposits of approximately $1.0 billion, and total
consolidated shareholders' equity of approximately $117.5 million. AFB's
principal offices are located at 300 East McBee Avenue, Greenville, South
Carolina 29601, and its telephone number at that address is (864) 255-7000. (See
"AMERICAN FEDERAL BANK.")
SPECIAL MEETINGS OF SHAREHOLDERS
GENERAL. This Prospectus/Joint Proxy Statement is being furnished in
connection with the solicitations by the Boards of Directors of CCBF and AFB of
appointments of proxy for use at the Special Meetings of their respective
shareholders to be held as provided and for the purposes described below.
PURPOSES OF SPECIAL MEETINGS. The purposes of the CCBF Special Meeting are
(i) to consider and vote on a proposal to approve the Merger Agreement (attached
hereto as Appendix A and incorporated herein by reference) and the transactions
described therein, including without limitation the issuance of up to a maximum
of 5,102,163 shares of CCBF Stock to effect the combination of CCBF and AFB
through the Merger, and (ii) to transact such other business as properly may be
presented for action at the CCBF Special Meeting.
The purposes of the AFB Special Meeting are (i) to consider and vote on a
proposal to approve the Merger Agreement and the transactions described therein,
including without limitation the Merger and the conversion of the outstanding
shares of AFB Stock into shares of CCBF Stock, and (ii) to transact such other
business as properly may be presented for action at the AFB Special Meeting.
DATE, PLACE AND TIME. The CCBF Special Meeting will be held at the Durham
Omni Hotel, 201 Foster Street, Durham, North Carolina on July 31, 1997 at 11:00
o'clock, a.m., E.D.S.T. time.
The AFB Special Meeting will be held in the Board Room of the Greater
Greenville Chamber of Commerce Building, located at 24 Cleveland Street,
Greenville, South Carolina on July 31, 1997 at 11:00 o'clock, a.m., E.D.S.T.
time.
RECORD DATES. The close of business on June 10, 1997 has been fixed as the
record date (the "Record Date") for the determination of shareholders entitled
to notice of and to vote at both the CCBF Special Meeting and the AFB Special
Meeting. Only those CCBF and AFB shareholders of record on the Record Date will
be eligible to vote at their respective Special Meetings on the matters
described herein (See "THE SPECIAL MEETINGS -- Record Dates.")
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VOTING SECURITIES. The voting securities of CCBF are the shares of CCBF
Stock, of which shares were issued and outstanding on the Record Date.
(See "THE SPECIAL MEETINGS -- Voting Securities; Votes Required for Approval.")
The voting securities of AFB are the shares of AFB Stock, of which
shares were issued and outstanding on the Record Date. (See "THE SPECIAL
MEETINGS -- Voting Securities; Votes Required for Approval.")
VOTES REQUIRED FOR APPROVAL. At the CCBF Special Meeting, each CCBF
shareholder will be entitled to cast one vote for each share of CCBF Stock held
of record on the Record Date on each matter submitted for voting. The
affirmative vote of the holders of a majority of the shares of CCBF Stock
represented, in person or by proxy, and entitled to be voted at the CCBF Special
Meeting is required to approve the Merger Agreement. Provided that a majority of
the CCBF Stock is represented, in person or by proxy, and is voted upon the
proposal to approve the Merger Agreement, abstentions, broker non-votes and
shares otherwise not voted will have no effect in the voting at the CCBF Special
Meeting. (See "THE SPECIAL MEETINGS -- Voting Securities; Votes Required for
Approval" and "THE MERGER -- Required Shareholder Approvals.")
At the AFB Special Meeting, each AFB shareholder will be entitled to cast
one vote for each share of AFB Stock held of record on the Record Date on each
matter submitted for voting. The affirmative vote of the holders of two-thirds
( 2/3) of the shares of AFB Stock entitled to be voted at the AFB Special
Meeting is required to approve the Merger Agreement under the Home Owners' Loan
Act and the regulations of the OTS (the "OTS Merger Law"). BECAUSE THE
AFFIRMATIVE VOTE OF TWO-THIRDS ( 2/3) OF ALL OUTSTANDING AFB STOCK IS REQUIRED
FOR APPROVAL OF THE MERGER AGREEMENT, ABSTENTIONS, BROKER NON-VOTES AND SHARES
OTHERWISE NOT VOTED IN THE AFFIRMATIVE WILL HAVE THE SAME EFFECT AS VOTES
AGAINST THE MERGER AGREEMENT. (See "THE SPECIAL MEETINGS -- Voting Securities;
Votes Required for Approval" and "THE MERGER -- Required Shareholder
Approvals.")
VOTING OF PROXIES. The persons named to represent CCBF's shareholders as
proxies at the CCBF Special Meeting are W. Harold Parker, Jr., Leo P. Pylypec
and Manuel L. Rojas (the "CCBF Proxies"). Shares of CCBF Stock represented by
each appointment of proxy which is properly executed and returned by a CCBF
shareholder, and not revoked, will be voted by the CCBF Proxies in accordance
with the directions contained therein. If no directions are given, such shares
will be voted by the CCBF Proxies "FOR" approval of the Merger Agreement and the
transactions contemplated therein. On such other matters that may properly come
before the CCBF Special Meeting, the CCBF Proxies will be authorized to vote in
accordance with their best judgment on such matters. If necessary, the CCBF
Proxies may vote in favor of a proposal to adjourn the CCBF Special Meeting in
order to permit further solicitation of proxies in the event that there should
not be sufficient votes to approve a proposal at the CCBF Special Meeting.
However, in such event, voting authority will be exercised only to the extent
permissible under the applicable federal securities laws and no CCBF Proxy will
vote any proxies voted "Against" approval of a particular matter at the CCBF
Special Meeting "For" a proposal to adjourn the CCBF Special Meeting to solicit
additional proxies for that particular matter. (See "THE SPECIAL
MEETINGS -- Voting and Revocation of Proxies.")
The persons named to represent AFB's shareholders as proxies at the AFB
Special Meeting are Deborah A. Brady and Kent S. Dill (the "AFB Proxies").
Shares of AFB Stock represented by each appointment of proxy which is properly
executed and returned by an AFB shareholder, and not revoked, will be voted by
the AFB Proxies in accordance with the directions contained therein. If no
directions are given, such shares will be voted by the AFB Proxies "FOR"
approval of the Merger Agreement and the transactions contemplated therein. On
such other matters that may properly come before the AFB Special Meeting, the
AFB Proxies will be authorized to vote in accordance with their best judgment on
such matters. If necessary, the AFB Proxies may vote in favor of a proposal to
adjourn the AFB Special Meeting in order to permit further solicitation of
proxies in the event that there should not be sufficient votes to approve a
proposal at the AFB Special Meeting. However, in such event, voting authority
will be exercised only to the extent permissible under the applicable federal
securities laws and no AFB Proxy will vote any proxies voted "Against" approval
of a particular matter at the AFB Special Meeting "For" a proposal to adjourn
the AFB Special Meeting to solicit additional proxies for that particular
matter. (See "THE SPECIAL MEETINGS -- Voting and Revocation of Proxies.")
REVOCATION OF APPOINTMENTS OF PROXY. Any CCBF 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 CCBF either an instrument revoking it
or a duly executed appointment of proxy bearing a later date, or by attending
the CCBF Special Meeting and announcing his or her intention to vote in person.
(See"THE SPECIAL MEETINGS -- Voting and Revocation of Proxies.")
Any AFB 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 AFB
either an instrument revoking it or a duly executed appointment of proxy bearing
a later date, or by attending the AFB Special Meeting and announcing his or her
intention to vote in person. (See "THE SPECIAL MEETINGS -- Voting and Revocation
of Proxies.")
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PROXY SOLICITATION EXPENSES. CCBF and AFB each will pay the expenses
associated with its own Special Meeting, except that CCBF has paid the filing
fees associated with the filing of the Registration Statement and will bear the
costs of printing this Prospectus/Joint Proxy Statement. In addition to the use
of the mail, appointments of proxy may be solicited personally or by telephone
by CCBF's and AFB's respective officers, directors and employees, none of whom
will be compensated separately for any such solicitation activities. CCBF has
engaged Corporate Investor Communications, Inc. and AFB has engaged Corporate
Communications, Inc. to assist in their solicitations of appointments of proxy
for use at their respective Special Meetings. The fees for such services will be
approximately $4,500 and $2,500, respectively, plus reimbursement of reasonable
out-of-pocket expenses. CCBF and AFB will reimburse brokerage houses, nominees
and other similar persons for expenses incurred in forwarding this
Prospectus/Joint Proxy Statement to beneficial owners of their respective voting
securities. (See "THE SPECIAL MEETINGS -- Proxy Solicitation Expenses" and "THE
MERGER -- Expenses.")
THE MERGER
CCBF and AFB have entered into the Merger Agreement which provides for the
Merger and certain other transactions as described therein.
EFFECT OF MERGER. At the time the Merger becomes effective (the "Effective
Time"), Interim FSB will be merged with and into AFB and AFB will become a
wholly-owned subsidiary of CCBF. AFB will continue to conduct its business as a
federal savings bank. (See "THE MERGER -- General" and " -- Effective Time and
Closing Date.")
CONVERSION OF AFB STOCK AND EXCHANGE RATIO. At the Effective Time, each
outstanding share of AFB Stock (excluding shares held by CCBF, AFB or their
subsidiaries other than in a fiduciary capacity or as a result of debts
previously contracted) will be converted into, and thereafter may be exchanged
for, .445 of a share of CCBF Stock. (See "THE MERGER -- Conversion of AFB Stock
and Stock Options; Exchange Ratio," " -- Surrender and Exchange of
Certificates," and " -- Termination of the Merger Agreement;" and "CAPITAL STOCK
OF CCBF AND AFB.") Based upon the number of shares of AFB Stock outstanding on
May 31, 1997, a total of 5,102,030 shares of CCBF will be issued to AFB's
shareholders at the Effective Time, approximately 24.4% of the shares of CCBF
Stock that will be outstanding immediately after the Effective Time. Assuming
that the per share closing price of CCBF Stock on the NYSE on the date of the
Effective Time is $70.25, the closing price on May 31, 1997, the aggregate
market value of the CCBF Stock issued to AFB's shareholders would be $358.4
million. (See "MARKET AND DIVIDEND INFORMATION REGARDING CCBF STOCK AND AFB
STOCK.")
RECOMMENDATIONS AND REASONS. AFB'S BOARD OF DIRECTORS UNANIMOUSLY
RECOMMENDS THAT AFB'S SHAREHOLDERS VOTE TO APPROVE THE MERGER AGREEMENT. AFB's
Board of Directors has adopted the Merger Agreement, believes the Merger and the
actions to be taken in connection therewith are in the best interest of AFB and
its shareholders, and unanimously recommends that AFB's shareholders vote FOR
approval of the Merger Agreement. (See "THE MERGER -- Recommendations and
Reasons" and " -- AFB Fairness Opinions.")
CCBF'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT CCBF'S SHAREHOLDERS
VOTE TO APPROVE THE MERGER AGREEMENT. CCBF's Board of Directors has adopted the
Merger Agreement, believes the Merger is in the best interest of CCBF and its
shareholders, and unanimously recommends that CCBF's shareholders vote FOR
approval of the Merger Agreement and the issuance of CCBF Stock thereunder. (See
"THE MERGER -- Recommendation and Reasons" and " -- CCBF Fairness Opinion.")
FAIRNESS OPINIONS. AFB's Board of Directors retained Wheat, First
Securities, Inc. ("Wheat") and Keefe, Bruyette & Woods, Inc. ("Keefe") as its
financial advisors in connection with the Merger. Wheat and Keefe have delivered
their written opinions to the AFB Board that, based upon and subject to various
considerations set forth in such opinions and as of the date of such opinions,
the Exchange Ratio is fair, from a financial point of view, to the holders of
AFB Stock (the "AFB Fairness Opinions"). The full text of the AFB Fairness
Opinions of Wheat and Keefe, each dated as of the date of this Prospectus/Joint
Proxy Statement, are set forth in Appendices B and C, respectively, to this
Prospectus/Joint Proxy Statement and each should be read in its entirety with
respect to the procedures followed, assumptions made, limitations on the reviews
undertaken, and other matters considered in connection with rendering such
opinions. As of May 31, 1997, Keefe held for its own account 587,914 (5.31%) of
the outstanding shares of AFB Stock. (See "THE MERGER -- AFB Fairness
Opinions.")
CCBF's Board of Directors retained Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("Merrill Lynch") as CCBF's financial advisor to provide, among
other services, financial analyses of the proposed Merger and an opinion to
CCBF's Board of Directors as to the fairness, from a financial point of view, of
the Exchange Ratio to CCBF. Merrill Lynch has
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delivered to CCBF's Board a written opinion, dated as of the date of this
Prospectus/Joint Proxy Statement (the "CCBF Fairness Opinion"), a copy of which
is attached as Appendix D to this Prospectus/Joint Proxy Statement, to the
effect that, as of the date of such opinion and based upon and subject to the
considerations set forth therein, the Exchange Ratio is fair, from a financial
point of view, to CCBF. The CCBF Fairness Opinion should be read in its entirety
with respect to the procedures followed, assumptions made, limitations on the
scope of review undertaken, and other matters considered in connection with
rendering such opinion. (See "THE MERGER -- CCBF Fairness Opinion.")
REQUIRED REGULATORY APPROVALS. The Merger is subject to the prior approval
of the Federal Reserve and the OTS. All such approvals have been received. (See
"THE MERGER -- Required Regulatory Approvals.")
CONDUCT OF BUSINESS PENDING MERGER. The Merger Agreement generally provides
that, prior to the Effective Time, CCBF and AFB each will conduct its business
in the usual, regular and ordinary course, use its best efforts to maintain and
preserve intact its business organization, employees and advantageous business
relationships and retain the services of its officers and key employees, and
take no action which would adversely affect the ability of either CCBF or AFB to
obtain any regulatory approvals required for the Merger or the other
transactions contemplated by the Merger Agreement or to perform its covenants
and agreements under the Merger Agreement. Further, except as permitted by the
Merger Agreement, CCBF and AFB each will refrain from taking certain actions
relating to the operation of its business without the prior approval of the
other party. (See "THE MERGER -- Conduct of Business Pending Merger" and
" -- Dividends.")
The Merger Agreement generally provides that none of AFB, its affiliates or
representatives shall directly or indirectly solicit any third party to effect
or propose any tender offer or exchange offer for AFB Stock, the acquisition of
all of the stock or assets of AFB or other business combination involving the
acquisition of AFB or any of it subsidiaries, or the acquisition of a
substantial equity interest or portion of the assets of AFB or any of its
subsidiaries other than as provided by the Merger Agreement (each an
"Acquisition Proposal"). Further, subject to the fiduciary obligations of its
Board of Directors, AFB shall not provide any non-public information or
assistance to, negotiate with, or enter into any contact with any person in
furtherance of any inquiry pertaining to an Acquisition Proposal. AFB may,
however, communicate information about any Acquisition Proposal to its
shareholders if and to the extent it is legally required to do so as advised by
outside counsel. AFB must notify CCBF immediately upon AFB's receipt of any
Acquisition Proposal.
STOCK OPTION AGREEMENT. In connection with, and as an inducement to CCBF's
willingness to enter into, the Merger Agreement, CCBF and AFB entered into a
Stock Option Agreement (the "Stock Option Agreement") pursuant to which AFB
granted CCBF an option (the "CCBF Option") to acquire up to 2,188,180 shares
("Option Shares") of AFB's authorized, but unissued, Common Stock at the
exercise price of $25.00 per share, upon certain terms and in accordance with
certain conditions. Under the Stock Option Agreement, CCBF may exercise the CCBF
Option, in whole or in part, at any time following the occurrence of certain
events that would or are likely to adversely affect the parties' ability to
consummate the Merger. (See "THE MERGER -- The Stock Option Agreement" and
" -- Termination of the Merger Agreement.")
ACCOUNTING TREATMENT. The Merger Agreement requires that the Merger qualify
to be treated as a pooling-of-interests for accounting. The obligations of CCBF
and AFB to consummate the Merger are subject to receipt of an opinion by KPMG
Peat Marwick LLP, the independent auditors of CCBF and AFB, to the effect that
the Merger will qualify as a pooling-of-interests for accounting purposes (the
"Pooling Opinion"). (See "THE MERGER -- Accounting Treatment," and
" -- Termination of Merger Agreement.")
MATERIAL INCOME TAX CONSEQUENCES. CCBF and AFB have received an opinion
(the "Tax Opinion") from KPMG Peat Marwick LLP, tax advisors to CCBF and AFB, to
the effect that the Merger will constitute a tax-free reorganization under
Section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code"),
and that the shareholders of AFB will not recognize gain or loss for federal
income tax purposes to the extent such shareholders exchange shares of AFB Stock
for shares of CCBF Stock. (See "THE MERGER -- Material Income Tax
Consequences.")
Because of the complexity of federal income tax laws and because tax
consequences may vary depending upon a shareholder's individual circumstances or
tax status, it is recommended that each AFB shareholder consult his or her own
tax advisor concerning the federal (and applicable state, local or other) tax
consequences of the Merger.
CONDITIONS TO THE MERGER. In addition to the receipt of required regulatory
and shareholder approvals, consummation of the Merger is conditioned upon the
fulfillment of certain other conditions set forth in the Merger Agreement,
including without limitation (i) the receipt of the Pooling Opinion, (ii) the
receipt of the Tax Opinion, (iii) the receipt by CCBF and AFB of Fairness
Opinions from their respective financial advisors, (iv) the absence of any
order, decree, injunction, law or regulation enjoining or prohibiting the
consummation of the Merger, (v) the listing on the NYSE of the CCBF Stock to be
issued in the Merger or upon exercise of outstanding options to acquire shares
of AFB's Common Stock ("AFB Options"),
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and (vi) certain other conditions customary in transactions of this nature. (See
"THE MERGER -- Conditions to the Merger," " -- Required Shareholder Approvals,"
" -- Required Regulatory Approvals," " -- Accounting Treatment," and
" -- Material Income Tax Consequences.")
WAIVER AND AMENDMENT. Prior to the Effective Time, any provision of the
Merger Agreement may be waived by the party entitled to the benefits of such
provision, except that no condition may be waived which, if not satisfied, would
result in the violation of any law or applicable governmental regulation. In
addition, to the extent permitted by law, the Merger Agreement may be amended at
any time upon the written agreement of CCBF and AFB without the approval of
their respective shareholders, except that no amendment may be made after the
Special Meetings that reduces or modifies in any material respect the
consideration to be received by AFB shareholders in the Merger without the
approval of AFB's shareholders, and no amendment may be made after the Special
Meetings, in any manner adverse to CCBF's shareholders, to the provisions
relating to the manner or basis in which shares of AFB Stock will be exchanged
for CCBF Stock without approval of CCBF's shareholders. (See "THE
MERGER -- Amendment of the Merger Agreement; Waiver.")
TERMINATION OF THE MERGER AGREEMENT. The Merger Agreement generally 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 CCBF and AFB; (ii) by either CCBF or AFB, provided the terminating
party is not then in material breach of any of its representations, warranties
or covenants contained in the Merger Agreement, (A) in the event of any
inaccuracy in the representations or warranties of the other party which cannot
be or has not been cured within 30 days after giving notice to the breaching
party of such inaccuracy and would give the terminating party the right to
terminate the Merger Agreement, (B) in the event of a material breach by the
other party of a covenant contained in the Merger Agreement which cannot be or
has not been cured within 30 days of giving notice to the breaching party of
such breach, (C) upon the failure to receive a required regulatory approval or
shareholder approval of the Merger, (D) upon failure to consummate the Merger by
December 31, 1997 (unless such failure was caused by any breach of the Merger
Agreement by the terminating party), and (E) upon material breach of any
covenant or other agreement by the other party which renders a condition
precedent to the terminating party's obligation to consummate the Merger unable
to be satisfied by December 31, 1997; and (iii) by AFB, if CCBF exercises the
CCBF Option or its Repurchase Rights (as defined herein). (See "THE
MERGER -- Conversion of AFB Stock and Stock Options; Exchange Ratio" and
" -- Termination of the Merger Agreement.")
EFFECTIVE TIME. Assuming the receipt of all required regulatory and
shareholder approvals, it currently is expected that the Merger will become
effective in August of 1997. (See "THE MERGER -- Effective Time and Closing
Date.")
INTERESTS OF CERTAIN PERSONS. Certain members of AFB's management and the
AFB Board have interests in the Merger in addition to their interests as
shareholders of AFB generally. These interests relate to: (i) the election of
four members of the AFB Board, William L. Abercrombie, Jr., Chairman, President
and Chief Executive Officer of AFB, Blake P. Garrett, Jr., C. Dan Joyner and Dr.
David E. Shi, to the CCBF Board, and the continued service of the members of the
AFB Board on the Board of Directors of AFB; (ii) the appointment of Mr.
Abercrombie as a Vice Chairman and member of the Executive Committee of CCBF's
Board of Directors; (iii) the entering into employment agreements with Mr.
Abercrombie and Michael A. Trimble, Chief Operating and Chief Financial Officer
of AFB, in exchange for terminating their existing employment agreements with
AFB (which provide, in the case of Mr. Abercrombie, an annual base salary of
$300,000, together with other benefits applicable generally to senior officers
of CCBF, a closing bonus in the amount of $275,000, and a monthly bonus in
addition to any other bonuses to which he may be entitled of $24,300 for each of
the 24 months following the Effective Time, and, in the case of Mr. Trimble, an
annual base salary of $193,000, together with other benefits applicable
generally to senior officers of CCBF, a closing bonus in the amount of $180,000,
and a monthly bonus in addition to any other bonuses to which he may be entitled
of $15,800 for each of the 24 months following the Effective Time); (iv) the
assumption by CCBF of the AFB Options on a basis that reflects the Exchange
Ratio, including AFB Options held by the Executive Officer Group (as defined
herein) and the Director Group (as defined herein) entitling them to purchase in
the aggregate 259,850 shares of AFB Stock and that have an aggregate value of
approximately $5.2 million (based upon the $30.75 closing price of AFB Stock on
the Nasdaq National Market on May 30, 1997); (v) the eligibility of the former
employees of AFB who become employees of CCBF for certain employee benefits; and
(vi) the continued indemnification by CCBF of the former directors, officers,
employees and agents of AFB and its subsidiaries following consummation of the
Merger. (See "THE MERGER -- Interests of Certain Persons With Respect to the
Merger.")
DIFFERENCES IN CAPITAL STOCK OF CCBF AND AFB. In connection with the
Merger, AFB's shareholders will become CCBF shareholders. There are certain
differences between the rights of the respective shareholders of CCBF and AFB.
AFB shareholders should consider carefully the differences in CCBF Stock and AFB
Stock under the governing instruments of those corporations and applicable law.
(See "CAPITAL STOCK OF CCBF AND AFB.") One such difference results from CCBF's
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adoption of a Rights Agreement in 1990. Under the Rights Agreement, a right to
purchase, in certain circumstances, .01 of a share of CCBF Series A Preferred
Stock is attached to each outstanding share of CCBF Stock (herein, a "CCBF
Right"). The CCBF Rights are intended to discourage an uninvited or unfriendly
attempt to acquire control of CCBF. The CCBF Rights expire on February 26, 2000
and may be redeemed by CCBF for $.01 per CCBF Right at any time prior to the
acquisition by a person or group of 15% or more of the outstanding CCBF Stock.
(See "CAPITAL STOCK OF CCBF AND AFB -- CCBF Rights Plan.")
RESALES OF CCBF STOCK RECEIVED IN MERGER. The shares of CCBF Stock into
which AFB Stock will be converted in the Merger will be freely transferable by
the holders thereof except in the case of shares held by persons who may be
deemed to be "Affiliates" of CCBF or AFB under applicable federal securities
laws. Generally, the Affiliates of each of CCBF and AFB include its directors,
executive officers, principal shareholders and other persons who may be deemed
to "control" it. (See "THE MERGER -- Restrictions on Resale of CCBF Stock by
Affiliates.") The CCBF Rights attached to the shares of CCBF Stock received by
AFB's shareholders will not be transferable separately from the shares of CCBF
Stock to which they relate. (See "CAPITAL STOCK OF CCBF AND AFB.")
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SELECTED FINANCIAL INFORMATION
The following tables set forth selected consolidated financial information
for CCBF and AFB on a historical basis. This financial information has been
based on, and should be read in conjunction with, CCBF's and AFB's audited
financial statements and interim unaudited financial statements, including the
related notes thereto, which are incorporated by reference in this
Prospectus/Joint Proxy Statement. The results of operations are not necessarily
indicative of operations that may be expected in the future. In the opinion of
CCBF and AFB, all adjustments necessary for a fair presentation of the results
of interim periods of CCBF and AFB (none of which were other than normal
accruals) have been included. (See "INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE.")
On January 31, 1997, CCBF consummated a merger with Salem Trust Bank
("Salem Trust"), a $165 million commercial bank headquartered in Winston-Salem,
North Carolina. Under the terms of the merger agreement, CCBF issued .36 of a
share of CCBF Stock for each share of Salem Trust outstanding or approximately
680,000 shares of CCBF Stock. This merger of Salem Trust into CCB Bank was
accounted for as a pooling-of-interests combination. Due to the immateriality of
the Salem Trust transaction to the consolidated financial statements of CCBF
taken as a whole, the impact of the merger with Salem Trust is not reflected in
the consolidated financial data incorporated herein by reference or included in
this Prospectus/Joint Proxy Statement, other than the consolidated financial
information as of and for the three-month periods ended March 31, 1997 and 1996
summarized below and in the Selected Pro Forma Financial Information.
CCB FINANCIAL CORPORATION
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31
(UNAUDITED) YEARS ENDED DECEMBER 31
1997 1996 1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS EXCEPT PER SHARE DATA)
SUMMARY OF OPERATIONS
Interest income........................ $ 107,454 99,752 397,764 383,514 309,899 254,912 241,589
Interest expense....................... 49,393 45,944 181,348 179,404 126,366 101,956 105,766
Net interest income.................... 58,061 53,808 216,416 204,110 183,533 152,956 135,823
Provision for loan and lease losses.... 1,775 2,133 12,800 8,183 9,279 7,106 7,831
Net interest income after provision.... 56,286 51,675 203,616 195,927 174,254 145,850 127,992
Other income........................... 17,371 14,738 62,084 53,267 48,630 46,617 39,570
Net investment securities gains
(losses)............................. 56 (15) 505 (978) 357 2,962 2,073
Other expenses (1)..................... 41,991 38,684 161,438 160,223 147,287 129,452 116,114
Income before income taxes............. 31,722 27,714 104,767 87,993 75,954 65,977 53,521
Income taxes (2)....................... 11,603 9,558 34,452 30,133 30,843 21,913 18,238
Income before cumulative effect of
changes in accounting principles..... 20,119 18,156 70,315 57,860 45,111 44,064 35,283
Cumulative effect of changes in
accounting principles (3)............ -- -- -- -- -- (1,371) --
Net income............................. $ 20,119 18,156 70,315 57,860 45,111 42,693 35,283
PER SHARE
Income before cumulative effect of
changes in accounting principles:
Primary.............................. $ 1.28 1.16 4.67 3.87 2.94 3.10 2.60
Fully diluted(4)..................... 1.28 1.16 4.67 3.87 2.94 3.05 2.52
Net income:
Primary.............................. 1.28 1.16 4.67 3.87 2.94 3.00 2.60
Fully diluted (4).................... 1.28 1.16 4.67 3.87 2.94 2.95 2.52
Cash dividends......................... .42 .38 1.60 1.44 1.32 1.24 1.14
Book value............................. 31.85 29.05 31.71 28.98 24.75 24.43 22.42
Average shares outstanding:
Primary............................. 15,764 15,585 15,048 14,949 15,354 14,230 13,580
Fully diluted (4).................... 15,764 15,585 15,048 14,949 15,354 14,612 14,494
AVERAGE BALANCES
Assets................................. $5,522,844 5,094,067 5,065,598 4,811,108 4,297,775 3,613,333 3,095,352
Loans and lease financing.............. 3,905,349 3,477,305 3,519,615 3,251,613 2,823,525 2,299,599 2,018,812
Earning assets......................... 5,246,245 4,795,453 4,780,292 4,521,780 4,021,814 3,365,274 2,875,280
Deposits............................... 4,708,346 4,384,100 4,324,462 4,148,526 3,676,139 3,137,037 2,687,980
Interest-bearing liabilities........... 4,358,933 4,032,638 3,991,943 3,824,793 3,376,509 2,820,219 2,412,176
Shareholders' equity................... 497,857 449,701 448,654 397,504 382,884 330,679 289,291
</TABLE>
9
<PAGE>
CCB FINANCIAL CORPORATION (CONTINUED)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31
(UNAUDITED) YEARS ENDED DECEMBER 31
1997 1996 1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS EXCEPT PER SHARE DATA)
SELECTED PERIOD END BALANCES
Assets.......................... $5,568,082 5,203,102 5,384,110 5,089,786 4,720,688 4,186,578 3,225,929
Loans and lease financing....... 3,855,249 3,509,008 3,771,423 3,345,345 3,158,863 2,651,100 2,033,829
Reserve for loan and lease
losses........................ 50,135 45,653 49,023 43,578 41,046 34,190 25,936
Deposits........................ 4,788,323 4,445,985 4,589,535 4,297,411 4,057,680 3,601,227 2,802,141
Shareholders' equity............ 502,735 454,448 478,231 433,517 371,151 375,224 306,773
RATIOS (ANNUALIZED)
Income before cumulative effect
of changes in accounting
principles to:
Average assets................ 1.48% 1.43 1.39 1.20 1.05 1.22 1.14
Average shareholders'
equity..................... 16.39 16.24 15.67 14.56 11.78 13.33 12.20
Net income to:
Average assets................ 1.48 1.43 1.39 1.20 1.05 1.18 1.14
Average shareholders'
equity..................... 16.39 16.24 15.67 14.56 11.78 12.91 12.20
Net interest margin, taxable
equivalent (5)................ 4.61 4.67 4.70 4.70 4.75 4.76 4.88
Net loan and lease losses to
average loans and lease
financing..................... .23 .16 .21 .17 .17 .20 .25
Dividend payout ratio........... 32.81 32.76 34.26 37.21 44.90 41.33 43.85
Equity to assets ratio.......... 9.01 8.83 8.86 8.26 8.91 9.15 9.35
</TABLE>
(1) Other expenses include the levying in 1996 of a $7.4 million special
assessment by the Federal Deposit Insurance Corporation ("FDIC") to
recapitalize the Savings Association Insurance Fund ("SAIF"). Other expenses
also include merger-related expense of $1.0 million in 1997 related to
CCBF's merger with Salem Trust and $10.3 million incurred 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. The
after-tax effect of the aforementioned non-recurring expense items was to
decrease net income per share by $.05 per share in 1997, $.29 per share in
1996, $.49 per share in 1995 and $.04 per share in 1994.
(2) During 1996, a tax benefit of $1.5 million ($.10 per share) was recorded for
forgiveness of the recapture of tax bad debt reserves of a former savings
bank subsidiary. During 1994, SCBC recognized a one-time charge of
approximately $5.6 million ($.37 per share) of deferred tax liabilities
recorded in anticipation of the merger of SCBC's three savings bank
subsidiaries into its commercial bank subsidiary.
(3) The cumulative changes in accounting principles reflect CCBF's 1993
adoptions of Statement of Financial Accounting Standards ("SFAS") No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions,"
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 SFAS No. 109, "Accounting for Income Taxes," which resulted
in a one-time benefit of $900,000.
(4) Assumes full conversion of convertible subordinated debentures issued by
CCBF in 1985 which were outstanding until 1993 when substantially all were
converted into CCBF Stock.
(5) Net interest margin is computed by dividing taxable equivalent net interest
income by average earning assets.
10
<PAGE>
AMERICAN FEDERAL BANK, FSB
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31
(UNAUDITED) YEARS ENDED DECEMBER 31
1997 1996 1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS EXCEPT PER SHARE DATA)
SUMMARY OF OPERATIONS
Interest income....................................... $25,701 25,663 103,992 99,558 86,369 79,768 87,206
Interest expense...................................... 11,560 12,717 50,009 50,905 39,720 34,774 45,105
Net interest income................................... 14,141 12,946 53,983 48,653 46,649 44,994 42,101
Provision for loan losses............................. 888 722 4,338 2,279 1,432 1,233 3,451
Net interest income after provision................... 13,253 12,224 49,645 46,374 45,217 43,761 38,650
Other income.......................................... 4,052 3,523 18,328 12,806 8,852 7,601 9,173
Net investment securities gains (losses).............. 5 -- (2,667) 162 -- -- 157
Other expenses(1)..................................... 9,677 9,047 43,014 34,600 31,466 31,002 29,433
Income before income taxes............................ 7,633 6,700 22,292 24,742 22,603 20,360 18,547
Income taxes.......................................... 2,863 2,345 7,800 6,502 7,072 7,907 7,046
Income before extraordinary item and cumulative effect
of changes in accounting principles................. 4,770 4,355 14,492 18,240 15,531 12,453 11,501
Extraordinary item(2)................................. -- -- -- (1,709) -- -- --
Cumulative effect of changes in accounting
principles(3)....................................... -- -- -- -- -- (35,178) --
Net income (loss)..................................... $ 4,770 4,355 14,492 16,531 15,531 (22,725) 11,501
PER SHARE
Income before extraordinary item and cumulative effect
of changes in accounting principles:
Primary............................................. $ .42 .38 1.28 1.60 1.37 1.25 1.87
Fully diluted....................................... .42 .38 1.28 1.60 1.37 1.19 1.48
Net income (loss):
Primary............................................. .42 .38 1.28 1.45 1.37 (2.28) 1.87
Fully diluted....................................... .42 .38 1.28 1.45 1.37 (2.17) 1.48
Cash dividends........................................ .12 .07 .37 .28 .22 .10 --
Book value............................................ 10.65 10.07 10.53 10.07 8.60 7.55 n/a
Average shares outstanding:
Primary............................................. 11,241 11,448 11,287 11,425 11,308 9,967 6,577
Fully diluted....................................... 11,256 11,448 11,316 11,438 11,308 10,485 8,324
</TABLE>
11
<PAGE>
AMERICAN FEDERAL BANK, FSB (CONTINUED)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31
(UNAUDITED) YEARS ENDED DECEMBER 31
1997 1996 1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS EXCEPT PER SHARE DATA)
AVERAGE BALANCES
Assets............................ $1,326,502 1,346,703 1,349,467 1,293,301 1,193,801 1,021,102 1,074,653
Loans............................. 857,717 814,052 828,030 774,180 684,429 668,630 723,076
Earning assets.................... 1,261,307 1,269,803 1,280,243 1,221,450 1,131,130 955,043 962,254
Deposits.......................... 979,651 969,050 977,079 907,012 833,417 820,355 823,972
Interest-bearing liabilities...... 1,148,069 1,171,395 1,178,578 1,129,675 1,050,707 897,766 947,737
Stockholders' equity.............. 117,531 111,120 110,584 102,399 88,204 70,338 70,118
SELECTED PERIOD END BALANCES
Assets............................ $1,306,915 1,339,147 1,318,400 1,345,884 1,254,418 1,112,009 1,039,518
Loans............................. 866,079 808,337 848,565 815,599 726,331 672,744 688,209
Allowance for loan losses......... 11,228 10,248 10,710 10,234 9,099 8,453 8,280
Deposits.......................... 999,516 995,655 986,780 977,957 835,365 826,820 821,158
Stockholders' equity.............. 117,473 109,941 115,592 109,792 93,358 81,735 76,065
RATIOS (ANNUALIZED)
Income before extraordinary item
and cumulative effect of changes
in accounting principles to:
Average assets.................. 1.46% 1.30 1.07 1.28 1.30 1.22 1.07
Average stockholders' equity.... 16.46 15.76 13.10 16.14 17.61 17.70 16.40
Net income (loss) to:
Average assets.................. 1.46 1.30 1.07 1.28 1.30 (2.23) 1.07
Average stockholders' equity.... 16.46 15.76 13.10 16.14 17.61 (32.30) 16.40
Net interest margin(4)............ 4.55 4.10 4.22 3.98 4.12 4.71 4.38
Net loan losses to average loans.. .17 .35 .47 .15 .11 .16 .44
Dividend payout ratio............. 28.57 18.42 28.91 19.31 16.06 -- --
Equity to assets ratio............ 8.86 8.25 8.19 7.92 7.39 6.89 6.52
</TABLE>
(1) Other expenses include the levying in 1996 of a $5.6 million special
assessment by the FDIC to recapitalize the SAIF. The after-tax effect of the
special assessment was to decrease net income per share by $.30 in 1996.
(2) An extraordinary charge of $1.7 million, net of tax, was recorded in 1995
due to prepayment penalties on the early extinguishment of $35.5 million of
long-term debt.
(3) The cumulative effect of changes in accounting principles reflects AFB's
adoption of SFAS No. 72, "Accounting for Goodwill," which resulted in a
one-time charge of $36.2 million, and adoption of SFAS No. 109 which
resulted in a one-time benefit of $1.0 million.
(4) Net interest margin is computed by dividing net interest income by average
earning assets.
12
<PAGE>
SELECTED PRO FORMA FINANCIAL INFORMATION
The following selected unaudited pro forma combined financial information
has been prepared using historical financial information for CCBF and AFB, and
assumes that the Merger was consummated 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 financial
information presented is not necessarily indicative of the 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 restructuring expenses which may be recognized, transaction expenses which
will be incurred, cost savings from operating efficiencies which may be
achieved, or revenue enhancements from the availability of additional services
to AFB's customers which may be realized in connection with the Merger. Current
estimates of restructuring expenses for 1997 are $8.9 million. Transaction
expenses are estimated to be $3.7 million. The cost savings associated with
possible operating efficiencies and synergies are forecast to be approximately
$8.5 million. Possible revenue enhancements are forecast to total approximately
$1.9 million and would be realized, if at all, in 1998 and following years. All
of such forecasts are based on numerous variables and assumptions which are
inherently uncertain and which may not be within the control of CCBF including,
without limitation, general economic, competitive and regulatory conditions.
Some or a substantial part of the projected estimates of cost savings and
revenue enhancements may not be achievable, if at all, unless and until AFB is
merged into CCB Bank. CCBF currently anticipates that such a merger will not
occur until approximately two years after the Effective Time. For all the
foregoing reasons, the amounts and times of realization of possible costs
savings and revenue enhancements may vary materially from those estimated above.
CCB FINANCIAL CORPORATION PRO FORMA COMBINED
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31 YEARS ENDED DECEMBER 31
1997 1996 1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS EXCEPT PER SHARE DATA)
SUMMARY OF OPERATIONS
Interest income............................... $133,155 125,415 501,756 483,072 396,268 334,680 328,795
Interest expense.............................. 60,953 58,661 231,357 230,309 166,086 136,730 150,871
Net interest income........................... 72,202 66,754 270,399 252,763 230,182 197,950 177,924
Provisions for loan and lease losses.......... 2,663 2,855 17,138 10,462 10,711 8,339 11,282
Net interest income after provision........... 69,539 63,899 253,261 242,301 219,471 189,611 166,642
Other income.................................. 21,423 18,261 80,412 66,073 57,482 54,218 48,743
Net investment securities gains (losses)...... 61 (15) (2,162) (816) 357 2,962 2,230
Other expenses (1)............................ 51,668 47,731 204,452 194,823 178,753 160,454 145,547
Income before income taxes.................... 39,355 34,414 127,059 112,735 98,557 86,337 72,068
Income taxes (2).............................. 14,466 11,903 42,252 36,635 37,915 29,820 25,284
Income before extraordinary item and effect of
cumulative changes in accounting
principles.................................. 24,889 22,511 84,807 76,100 60,642 56,517 46,784
Extraordinary item (3)........................ -- -- -- (1,709) -- -- --
Cumulative effect of changes in accounting
principles.................................. -- -- -- -- -- (36,549) --
Net income (4)................................ $ 24,889 22,511 84,807 74,391 60,642 19,968 46,784
PER SHARE
Income before extraordinary item and effect of
cumulative changes in accounting principles:
Primary..................................... $ 1.20 1.09 4.23 3.80 2.97 3.03 2.83
Fully diluted (5)........................... 1.20 1.09 4.22 3.80 2.97 2.95 2.66
Net income:
Primary..................................... 1.20 1.09 4.23 3.71 2.97 1.07 2.83
Fully diluted (5)........................... 1.20 1.09 4.22 3.71 2.97 1.05 2.66
Cash dividends (6)............................ .42 .38 1.60 1.44 1.32 1.24 1.14
Book value.................................... 29.97 27.53 29.74 27.42 23.43 22.65 26.27
Average shares outstanding:
Primary..................................... 20,766 20,679 20,071 20,033 20,386 18,665 16,507
Fully diluted (5)........................... 20,773 20,679 20,084 20,039 20,386 19,278 18,198
</TABLE>
13
<PAGE>
CCB FINANCIAL CORPORATION PRO FORMA COMBINED (CONTINUED)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31 YEARS ENDED DECEMBER 31
1997 1996 1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS EXCEPT PER SHARE DATA)
AVERAGE BALANCES
Assets........................... $6,849,346 6,440,770 6,415,065 6,104,409 5,491,576 4,634,435 4,170,005
Loans and lease financing........ 4,763,066 4,291,357 4,347,645 4,025,793 3,507,954 2,968,229 2,741,888
Earning assets................... 6,507,552 6,065,256 6,060,535 5,743,230 5,152,944 4,320,317 3,837,534
Deposits......................... 5,687,997 5,353,150 5,301,541 5,055,538 4,509,556 3,957,392 3,511,952
Interest-bearing liabilities..... 5,507,002 5,204,033 5,170,521 4,954,468 4,427,216 3,717,985 3,359,913
Shareholders' equity............. 615,388 560,821 559,238 499,903 471,088 401,017 359,409
SELECTED PERIOD END BALANCES
Assets........................... $6,874,997 6,542,249 6,702,510 6,435,670 5,975,106 5,298,587 4,265,447
Loans and lease financing........ 4,721,328 4,317,345 4,619,988 4,160,944 3,885,194 3,323,844 2,722,038
Reserve for loan and lease
losses......................... 61,363 55,901 59,733 53,812 50,145 42,643 34,216
Deposits......................... 5,787,839 5,441,640 5,576,315 5,275,368 4,893,044 4,428,047 3,623,299
Shareholders' equity............. 620,208 564,389 593,823 543,309 464,509 456,959 382,838
RATIOS (ANNUALIZED)
Income before extraordinary item
and cumulative effect of
changes in accounting
principles to:
Average assets................. 1.47% 1.41 1.32 1.25 1.10 1.22 1.12
Average shareholders' equity... 16.40 16.14 15.16 15.22 12.87 14.09 13.02
Net income to:
Average assets................. 1.47 1.41 1.32 1.22 1.10 .43 1.12
Average shareholders' equity... 16.40 16.14 15.16 14.88 12.87 4.98 13.02
Net interest margin, taxable
equivalent (7)................. 4.62 4.55 4.59 4.55 4.61 4.75 4.75
Net loan and lease losses to
average loans and lease
financing...................... .22 .19 .26 .17 .16 .19 .30
Dividend payout ratio (6)........ 35.00 34.86 37.83 38.81 44.44 115.89 40.28
Equity to assets ratio........... 8.98 8.71 8.72 8.19 8.58 8.65 8.62
</TABLE>
(1) Other expenses include the levying in 1996 of a $13.0 million special
assessment by the FDIC to recapitalize the SAIF. Other expenses also include
merger-related expenses of $1.0 million in 1997 related to CCBF's merger
with Salem Trust and $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 aforementioned non-recurring
expense items was to decrease net income per share by $.04 per share in
1997, $.39 per share in 1996, $.36 per share in 1995 and $.03 per share in
1994.
(2) During 1996, a tax benefit of $1.5 million ($.07 per share) was recorded for
forgiveness of the recapture of tax bad debt reserves of a former savings
bank subsidiary of CCBF. During 1994, SCBC recognized a one-time charge of
approximately $5.6 million ($.27 per share) of deferred tax liabilities
recorded in anticipation of the merger of SCBC's three savings bank
subsidiaries into its commercial bank subsidiary.
(3) The extraordinary item resulted from a prepayment penalty on the early
extinguishment of debt by AFB.
(4) The after-tax cumulative effect of changes in accounting principles reflect
adoption of SFAS No. 72 which resulted in a one-time charge of $36.2
million, SFAS No. 106 which resulted in a one-time net charge of $2.3
million, and SFAS No. 109 which resulted in a one-time benefit of $1.9
million.
(5) Assumes full conversion of convertible subordinated debentures issued by
CCBF in 1985. The convertible subordinated debenture were called for
redemption during 1993 and substantially all were converted into CCBF Stock.
(6) CCBF pro forma combined dividends per share represent historical dividends
per share paid by CCBF.
(7) Net interest margin is computed by dividing taxable equivalent net interest
income by average earning assets.
14
<PAGE>
UNAUDITED 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 AFB 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
AFB Stock basis (each assuming that 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, and the related notes thereto, of CCBF and AFB, respectively,
incorporated herein by reference, and in conjunction with the unaudited pro
forma combined condensed financial information, including the related notes
thereto, included elsewhere in this Prospectus/Joint Proxy Statement. (See "PRO
FORMA COMBINED FINANCIAL INFORMATION.")
<TABLE>
<CAPTION>
AT
MARCH 31,
1997
<S> <C>
BOOK VALUE PER COMMON SHARE:
CCBF (1)....................................................................... $ 31.85
AFB (1)........................................................................ 10.65
Pro Forma Combined (2)......................................................... 29.97
Equivalent per share of AFB Stock (3).......................................... 13.34
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31 YEARS ENDED DECEMBER 31
1997 1996 1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C> <C> <C>
CASH DIVIDENDS PER COMMON SHARE:
CCBF................................................................. $ .42 .38 1.60 1.44 1.32 1.24 1.14
AFB.................................................................. .12 .07 .37 .28 .22 .10 --
Pro Forma Combined (4)............................................... .42 .38 1.60 1.44 1.32 1.24 1.14
Equivalent per share of AFB Stock (3)................................ .19 .17 .71 .64 .59 .55 .51
INCOME BEFORE EXTRAORDINARY ITEM AND CUMULATIVE EFFECT OF CHANGES IN
ACCOUNTING PRINCIPLES PER PRIMARY COMMON SHARE:
CCBF................................................................. 1.28 1.16 4.67 3.87 2.94 3.10 2.60
AFB.................................................................. .42 .38 1.28 1.60 1.37 1.25 1.87
Pro Forma Combined (5)............................................... 1.20 1.09 4.23 3.80 2.97 3.03 2.83
Equivalent per share of AFB Stock (3)................................ .54 .49 1.88 1.69 1.32 1.35 1.26
INCOME BEFORE EXTRAORDINARY ITEM AND CUMULATIVE EFFECT OF CHANGES IN
ACCOUNTING PRINCIPLES PER FULLY DILUTED COMMON SHARE (6):
CCBF................................................................. 1.28 1.16 4.67 3.87 2.94 3.05 2.52
AFB.................................................................. .42 .38 1.28 1.60 1.37 1.19 1.48
Pro Forma Combined (7)............................................... 1.20 1.09 4.22 3.80 2.97 2.95 2.66
Equivalent per share of AFB Stock (3)................................ .54 .49 1.88 1.69 1.32 1.31 1.18
</TABLE>
(1) CCBF and AFB 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 AFB divided by
total pro forma shares of CCBF Stock, assuming conversion of the AFB Stock
at the Exchange Ratio.
(3) AFB pro forma equivalent per share amounts are computed by multiplying the
CCBF pro forma combined amounts by the Exchange Ratio.
(4) CCBF pro forma combined dividends per share represent historical dividends
per share paid by CCBF.
(5) The pro forma combined income per primary common share before extraordinary
item and cumulative effect of changes in accounting principles is based on
the combined historical income before extraordinary item and cumulative
effect of
15
<PAGE>
changes in accounting principles of CCBF and AFB divided by the pro forma
combined weighted average primary common shares of CCBF.
(6) Assumes full conversion of convertible subordinated debentures issued by
CCBF in 1985 which were outstanding until 1993 when substantially all were
converted into CCBF Stock.
(7) The pro forma combined income before extraordinary item and cumulative
effect of changes in accounting principles per fully diluted share is based
on the combined historical income before extraordinary item and cumulative
effect of changes in accounting principles of CCBF and AFB divided by the
weighted average pro forma combined fully diluted common shares of CCBF.
The following table sets forth (i) on an historical basis, the closing
price per share of CCBF Stock on the NYSE and of AFB Stock on the Nasdaq
National Market on February 14, 1997 (the last trading day prior to the public
announcement of the Merger), and (ii) the equivalent pro forma market value of
AFB Stock on that date (assuming that the Merger became effective on that date
and was accounted for as a pooling-of-interests).
<TABLE>
<CAPTION>
AT
FEBRUARY 14,
1997
<S> <C>
MARKET VALUE PER SHARE:
CCBF Stock.................................................................. $68.00
AFB Stock................................................................... 21.50
Equivalent pro forma per share of AFB Stock (1)............................. 30.26
</TABLE>
(1) Equivalent pro forma amount is calculated by multiplying the CCBF Stock
market value by the Exchange Ratio of .445.
16
<PAGE>
THE SPECIAL MEETINGS
GENERAL; PROPOSALS TO BE CONSIDERED
This Prospectus/Joint Proxy Statement is being furnished to holders of CCBF
Stock in connection with the solicitation of proxies by CCBF's Board of
Directors for use at the CCBF Special Meeting which has been called to consider
and vote upon (i) a proposal to approve the Merger Agreement and the issuance of
up to a maximum of 5,102,030 shares of CCBF Stock in connection therewith, and
(ii) to transact such other business as may properly come before the CCBF
Special Meeting.
This Prospectus/Joint Proxy Statement is also being furnished to holders of
AFB Stock in connection with the solicitation of proxies by AFB's Board of
Directors for use at the AFB Special Meeting which has been called to consider
and vote upon (i) a proposal to approve the Merger Agreement, and (ii) to
transact such other business as may properly come before the AFB Special
Meeting.
Each copy of this Prospectus/Joint Proxy Statement mailed to holders of
CCBF Stock is accompanied by an appointment of proxy for use at the CCBF Special
Meeting, and each copy of this Prospectus/Joint Proxy Statement mailed to
holders of AFB Stock is accompanied by an appointment of proxy for use at the
AFB Special Meeting.
HOLDERS OF CCBF STOCK AND AFB STOCK ARE URGED TO COMPLETE, DATE AND SIGN
THE APPOINTMENT OF PROXY WHICH ACCOMPANIES THEIR COPY OF THIS PROSPECTUS/JOINT
PROXY STATEMENT AND TO RETURN IT IMMEDIATELY TO CCBF OR AFB, AS APPLICABLE.
DATE, PLACE AND TIME
CCBF. The CCBF Special Meeting will be held at the Durham Omni Hotel, 201
Foster Street, Durham, North Carolina on Thursday, July 31, 1997 at 11:00
o'clock, a.m., E.D.S.T.
AFB. The AFB Special Meeting will be held in the Board Room of the Greater
Greenville Chamber of Commerce Building located at 24 Cleveland Street,
Greenville, South Carolina on Thursday, July 31, 1997 at 11:00 o'clock, a.m.,
E.D.S.T.
RECORD DATES
CCBF. CCBF's Board of Directors has fixed the close of business on June 10,
1997, as the record date (the "CCBF Record Date") for the determination of the
holders of CCBF Stock entitled to receive notice of and to vote at the CCBF
Special Meeting.
AFB. AFB's Board of Directors also has fixed the close of business on June
10, 1997 as the record date (the "AFB Record Date") for the determination of the
holders of AFB Stock entitled to receive notice of and to vote at the AFB
Special Meeting.
VOTING SECURITIES; VOTES REQUIRED FOR APPROVAL
CCBF. As of the CCBF Record Date, there were outstanding shares of CCBF
Stock. At the CCBF Special Meeting, each CCBF shareholder will be entitled to
cast one vote for each share of CCBF Stock held of record on the CCBF Record
Date on each matter submitted for voting. The affirmative vote of the holders of
a majority of the shares of CCBF Stock represented, in person or by proxy, and
entitled to be voted at the CCBF Special Meeting is required to approve the
Merger Agreement; provided, however, that in order to comply with the rules of
the NYSE applicable to shareholder approval of the issuance of CCBF Stock
pursuant to the Merger, a majority of all outstanding CCBF Stock must be
represented, in person or by proxy, and voted on the proposal. If a majority of
all outstanding CCBF Stock is present at the Special Meeting and voted on the
Merger proposal, abstentions, broker non-votes and shares otherwise not voted
will have no effect in the voting at the CCBF Special Meeting.
As of May 31, 1997, CCBF's directors and executive officers and their
affiliates owned or had voting power with respect to 526,924 shares, or
approximately 3.33%, of the then outstanding shares of CCBF Stock. All such
persons have indicated their intention to vote their shares of CCBF Stock in
favor of the Merger Agreement. In addition, as of May 31, 1997, CCB Bank held of
record or in the name of nominees 1,150,867 shares (or approximately 7.29% of
the outstanding shares of CCBF Stock) as fiduciary for the beneficiaries of
certain trusts and estates and as agent and had voting power over all of such
shares.
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As of May 31, 1997, none of AFB's directors and executive officers or their
affiliates owned or had voting power with respect to shares of CCBF Stock.
AFB. As of the AFB Record Date, there were outstanding shares of AFB
Stock. At the AFB Special Meeting, each AFB shareholder will be entitled to cast
one vote for each share of AFB Stock held of record on the AFB Record Date on
each matter submitted for voting. The affirmative vote of the holders of at
least two-thirds of the shares of AFB Stock entitled to vote at the AFB Special
Meeting is required to approve the Merger Agreement. Because the affirmative
vote of at least two-thirds of all outstanding AFB Stock is required,
abstentions, broker non-votes and shares otherwise not voted in the affirmative
will have the same effect as votes against the Merger Agreement.
As of May 31, 1997, AFB's directors and executive officers and their
affiliates owned or had voting power with respect to an aggregate of 441,727
shares, or approximately 3.99%, of the then outstanding shares of AFB Stock. All
such persons have indicated their intention to vote their shares of AFB Stock in
favor of the Merger Agreement. In addition, as of May 31, 1997, 20,000 shares
(or approximately .18% of the outstanding shares of AFB Stock) were held in
AFB's pension plan and with respect to which voting power is held by the
individual trustees of AFB's pension plan, each of whom is an employee of AFB.
An additional 530,638 shares of AFB Stock (or approximately 4.80% of the
outstanding shares of AFB Stock) are held in AFB's 401(k) Plan and with respect
to which voting power is exercised by the individual participants in such plan.
As of May 31, 1997, none of CCBF's directors, executive officers, or their
affiliates owned or had voting power with respect to shares of AFB Stock.
VOTING AND REVOCATION OF PROXIES
Shares of CCBF Stock and AFB Stock represented by an appointment of proxy
properly signed and received at or prior to the appropriate Special Meeting,
unless subsequently revoked, will be voted in accordance with the instructions
thereon. An appointment of proxy will not be revoked by death or incapacity of
the shareholder executing it unless, before the shares are voted, notice of such
death or incapacity is filed with the Secretary of CCBF or AFB, as applicable,
or with any other person authorized to tabulate votes on behalf of CCBF or AFB,
as applicable. If an appointment of proxy is signed and returned without
indicating any voting instructions, shares of CCBF Stock represented thereby
will be voted at the CCBF Special Meeting FOR the Merger Agreement and the
issuance of up to a maximum of 5,102,030 shares of CCBF Stock pursuant thereto,
and shares of AFB Stock represented thereby will be voted at the AFB Special
Meeting FOR the Merger Agreement. If necessary, the CCBF Proxies and the AFB
Proxies may vote in favor of a proposal to adjourn their respective Special
Meetings in order to permit further solicitation of proxies in the event that
there should not be sufficient votes to approve a proposal at the Special
Meetings. However, in such event, voting authority will be exercised only to the
extent permissible under the applicable federal securities laws and no CCBF
Proxy or AFB Proxy will vote any proxies voted "Against" approval of a
particular matter at the Special Meetings "For" a proposal to adjourn the
Special Meeting to solicit additional proxies for that particular matter.
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 CCBF or AFB, as applicable, prior to or at the applicable 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 applicable Special Meeting. All
written notices of revocation and other communications with respect to
revocation of AFB proxies should be addressed as follows: American Federal Bank,
FSB, 300 East McBee Avenue, Greenville, South Carolina 29601, Attn: Deborah A.
Brady, Corporate Secretary. All written notices of revocation and other
communications with respect to revocation of CCBF proxies should be addressed as
follows: CCB Financial Corporation, Post Office Box 931, Durham, North Carolina
27702, Attn: Leo P. Pylypec, Corporate Secretary. Attendance at a Special
Meeting will not in and of itself constitute revocation of an appointment of
proxy.
The Boards of Directors of CCBF and AFB are not aware of any business to be
acted upon at their respective Special Meeting other than as described herein.
If, however, other matters are properly brought before either Special Meeting,
the Proxies appointed for that Special Meeting will have discretionary authority
to vote on such matters in accordance with their best judgment; provided,
however, that such discretionary authority (i) will only be exercised to the
extent permissible under the applicable federal securities law and (ii) will not
extend to any motion to adjourn the CCBF Special Meeting made by CCBF or the AFB
Special Meeting made by AFB, in either case for the purpose of soliciting
additional proxies.
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PROXY SOLICITATION EXPENSES
Proxy solicitation costs in connection with the CCBF Special Meeting will
be borne by CCBF and such costs in connection with the AFB Special Meeting will
be borne by AFB (except that CCBF shall bear the costs of printing this
Prospectus/Joint Proxy Statement). In addition to solicitation by mail,
directors, officers and employees of CCBF and AFB who will not be specifically
compensated for such services, may solicit appointments of proxy from their
respective shareholders personally or by telephone or telegram or other forms of
communication. CCBF has engaged Corporate Investor Communications, Inc. and AFB
has engaged Corporate Communications, Inc. to assist in the solicitation of
appointments of proxy for use at their respective Special Meetings. The fee for
such services will be approximately $4,500 and $2,500, respectively, plus
reimbursement of reasonable out-of-pocket expenses. Brokerage houses, nominees,
fiduciaries and other custodians will be requested to forward soliciting
materials to beneficial owners of CCBF Stock and AFB Stock and will be
reimbursed for their reasonable expenses incurred in doing so by CCBF or AFB, as
applicable. (See "THE MERGER -- Termination of Merger Agreement" and
" -- Expenses.")
THE MERGER
THE FOLLOWING IS A SUMMARY OF INFORMATION ABOUT THE MERGER AND CERTAIN OF
THE IMPORTANT TERMS AND CONDITIONS OF THE MERGER AGREEMENT AND THE OTHER
TRANSACTIONS DESCRIBED THEREIN, AND IS NOT INTENDED TO BE A COMPLETE DESCRIPTION
OF ALL MATERIAL FACTS REGARDING THE MERGER. THE SUMMARY IS QUALIFIED IN ALL
RESPECTS BY REFERENCE TO THE FULL MERGER AGREEMENT ATTACHED HERETO AS APPENDIX A
AND THE OTHER APPENDICES TO THIS PROSPECTUS/JOINT PROXY STATEMENT. ALL CCBF AND
AFB SHAREHOLDERS ARE URGED TO READ THE MERGER AGREEMENT AND THE OTHER APPENDICES
IN THEIR ENTIRETY.
GENERAL
The Merger Agreement provides for the merger of Interim FSB, a to-be-formed
interim federal savings bank subsidiary of CCBF, into AFB and the conversion and
exchange of each outstanding share of AFB Stock into and for newly issued shares
of CCBF Stock. At the Effective Time, (i) Interim FSB will be merged into and
its existence will be combined with that of AFB as the surviving corporation and
Interim FSB will cease to exist as a separate entity, (ii) AFB's shareholders
will become shareholders of CCBF, and (iii) AFB will become a wholly-owned
subsidiary of CCBF. CCBF will continue to conduct its and AFB's business under
the supervision and regulation of the Federal Reserve, the FDIC and applicable
state banking regulators and, with respect to AFB, the OTS. It is currently
anticipated that the Effective Time will occur at 12:00:01 o'clock, a.m., on
August 1, 1997.
CONVERSION OF AFB STOCK AND AFB OPTIONS; EXCHANGE RATIO
At the Effective Time, and without any action on the part of CCBF, AFB or
their respective shareholders, each outstanding share of AFB Stock (excluding
shares held by CCBF, AFB or their subsidiaries, in each case other than in a
fiduciary capacity or as a result of debts previously contracted) automatically
will be converted into and become, and thereafter may be exchanged for .445 of a
share of newly issued CCBF Stock. If there is a change in the number of
outstanding shares of CCBF Stock as a consequence of a stock split, stock
dividend or similar recapitalization or in the number of outstanding shares of
AFB Stock prior to the Effective Time (other than pursuant to the exercise of
AFB Options outstanding as of February 17, 1997 or granted pursuant to AFB's
1995 Directors' Performance after February 17, 1997), then appropriate and
proportionate adjustments will be made in the Exchange Ratio.
AFB shareholders should be aware that the actual value of a share of CCBF
Stock at the Effective Time and at the time certificates for those shares are
delivered following surrender and exchange of certificates for shares of AFB
Stock may be more or less than the per share closing price of CCBF Stock on the
NYSE on either May 31, 1997 or the date of the AFB Special Meeting. AFB
shareholders are urged to obtain information on the trading value of CCBF Stock
that is more recent than that provided in this Prospectus/Joint Proxy Statement.
At the Effective Time, all AFB Options granted under the AFB Option Plans
(as defined herein), whether or not then exercisable, will be converted into (at
the Exchange Ratio) and will become options to acquire CCBF Stock, and CCBF will
assume AFB's obligations with respect to each such AFB Option under the terms of
the applicable AFB Option Plan under which such AFB Option was granted and the
related option agreement.
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TREATMENT OF FRACTIONAL SHARES
No fraction of a share of CCBF Stock (or any fraction of a CCBF Right), or
any script or certificate representing any such fractional share, will be issued
in connection with the Merger. Each AFB shareholder (and each holder of an AFB
Option) who otherwise would be entitled to receive a fraction of a share of CCBF
Stock upon the conversion of that shareholder's share of AFB Stock at the
Effective Time (or upon the exercise of the AFB Option) shall receive, in lieu
thereof, cash (without interest) in an amount equal to that fraction multiplied
by the "market value" of one whole share of CCBF Stock at the Effective Time (or
in the case of an AFB Option, on the date of exercise). As used above, "market
value" shall be equal to the closing price of CCBF Stock on the NYSE (as
reported by THE WALL STREET JOURNAL or, if not so reported, by any other
authoritative source selected by CCBF) on the last trading day preceding the
Effective Time (or, in the case of an AFB Option, the date of exercise). No AFB
shareholders will be entitled to any dividend or other distribution or any
voting or other rights as a shareholder with respect to any fractional share of
CCBF Stock.
BACKGROUND OF THE MERGER; RECOMMENDATIONS AND REASONS
CCBF'S AND AFB'S RESPECTIVE BOARDS OF DIRECTORS HAVE UNANIMOUSLY ADOPTED
THE MERGER AGREEMENT AND EACH RECOMMENDS THAT THEIR RESPECTIVE SHAREHOLDERS VOTE
"FOR" APPROVAL OF THE MERGER AGREEMENT AND THE MERGER.
BACKGROUND OF THE MERGER. In the early 1980s, AFB significantly expanded
its branch system in the northwestern and central regions of South Carolina by
acquiring five other thrift institutions and two branch offices of a sixth
institution. As a result of these acquisitions, approximately $61.2 million of
supervisory goodwill was recorded on the books of AFB. For additional
information concerning these transactions, see " -- Goodwill Litigation."
On January 26, 1989, AFB converted from the mutual to the stock form of
ownership (the "Conversion") and issued 2,000,000 shares of AFB Stock at a price
of $5.00 per share. As part of the Conversion, AFB sold to various investors (i)
$100,000 aggregate principal amount of Series A convertible subordinated
debentures due 2004 with non-detachable related mandatory purchase contracts for
$12.5 million (the "Series A Debentures"), and (ii) $15.0 million aggregate
principal amount $11.25 Series B subordinated debentures due 1999 (which were
subsequently exchanged in 1990 for Series I Preferred Stock) with detachable
warrants exercisable for 600,000 shares of AFB Stock at a price of $5.00 per
share. The capital infusion resulting from the Conversion enabled AFB to exceed
its then-applicable minimum capital requirements by approximately $27 million.
However, the enactment, in August 1989, of the Financial Institutions Reform,
Recovery, and Enforcement Act of 1989 ("FIRREA") had a significant adverse
impact on AFB's regulatory capital by requiring that the goodwill incurred in
the various acquisitions of insolvent thrifts in the early 1980s be deducted in
calculating regulatory capital.
Under the OTS capital regulations promulgated under FIRREA which became
effective in December of 1989, AFB was required to deduct all of its then $48.7
million in unamortized goodwill in calculating its compliance with the tangible
capital requirement. AFB was also required to deduct approximately $32.7 million
in unamortized goodwill in calculating its compliance with the core and
risk-based capital requirements. This exclusion of goodwill from capital
mandated by FIRREA caused AFB to report, as of year-end 1989, negative tangible
capital of $12.8 million and to initially fall short of its new core and
tangible capital requirements by $28.8 million and its new risk-based capital
requirements by $43.5 million.
As a result, AFB's principal strategic objective during the several years
following the enactment of FIRREA was to improve its regulatory capital
position, enhance earnings, and achieve cost savings. AFB's earnings and higher
capital levels enabled it to satisfy its minimum core and tangible capital
requirements by year-end 1991 and to meet all FIRREA capital requirements for
the first time on September 30, 1992. In order to satisfy its fully phased-in
capital requirements under FIRREA, AFB effected in March of 1993 a capital
instruments exchange of its Series A Debentures and Series I Preferred Stock and
a public offering of AFB Stock. Upon completing the capital instruments exchange
and public offering AFB satisfied all fully phased-in capital requirements
imposed by the OTS and had the requisite capital levels to qualify as a
"well-capitalized" institution under the applicable provisions of the Federal
Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA").
With the achievement of fully phased-in capital compliance and in light of
the significant consolidation in the financial services industry fueled largely
by technological changes, deregulation and heightened competition, AFB began to
review its strategic alternatives for continuing to enhance long-term
shareholder value. It was the belief of management and the AFB Board that any of
the following corporate strategies could be pursued by AFB: (i) continued growth
in earnings on an independent basis, including acquisitions of smaller
institutions from time-to-time; (ii) a merger of equals (in which the
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transaction is structured to take into account the relative contribution of the
respective parties to a variety of measures, but which generally involves no
acquisition premium based on the trading prices of the common stock of the
respective parties); or (iii) a merger with or a sale to a larger financial
institution (which would involve an acquisition premium based on the trading
price of AFB Stock).
In considering these alternatives, the Board of AFB determined that
shareholder value would be furthered the most by reinvesting in, and improving
further the franchise value of, AFB as an independent institution. As part of
improving the franchise value, AFB believed that achieving a larger asset base
would be helpful in permitting AFB to compete more effectively against the
super-regional and non-bank financial services competitors operating in the
South Carolina market areas served by AFB. It was further believed that
expansion of the franchise through a significant acquisition or even a series of
small acquisitions would likely result in significant dilution in earnings per
share and therefore be unacceptable.
Consistent with the Board's view that achievement of a larger asset base
for AFB on a basis that did not dilute earnings per share would contribute to
the long-term shareholder value of AFB, on April 11, 1994, AFB entered into an
agreement to effect a merger of equals with United Financial Corporation of
South Carolina, Inc. ("United"), a $691 million asset financial institution
based in Greenwood, South Carolina. United shared a similar approach to banking
fundamentals with AFB and the institutions combined would have created the
largest independent financial institution headquartered in South Carolina,
operating 50 banking offices. Due, however, to the objections of an investor
group that purchased a 9.9% interest in United subsequent to the announcement of
the merger with AFB, AFB and United mutually terminated the definitive merger
agreement between the parties on September 28, 1994.
Since the abandonment of the proposed merger with United, AFB has generated
record earnings in each of 1994, 1995 and 1996, achieving a return on assets in
each of such years (excluding a one-time SAIF recapitalization charge in 1996)
of 1.30%, 1.28%, and 1.34%, respectively. During this period, AFB developed a
number of new loan and deposit products, purchased six branch offices with
aggregate deposits of approximately $110 million from unaffiliated institutions,
and increased the percentage of households in the Greenville-Spartanburg
Metropolitan Statistical Area with which it had a customer relationship to
35.4%.
While the AFB Board believed that a course of corporate independence should
continue to be pursued so long as AFB's shareholders and other constituencies
remained well-served, the Board recognized that continued independence of
financial institutions the size of AFB was subject to uncertainty in view of the
ongoing industry consolidation, and that at some point, any of several larger
institutions could propose on an unsolicited basis a combination that would
warrant serious consideration by AFB and potentially result in the acquisition
of AFB by such institution. During 1995 and 1996, AFB's management had informal
contacts and discussions from time to time with the executive management of
other financial institutions, including CCBF, to assess such institutions'
operating philosophy and strategic goals and objectives with respect to
acquisitions and mergers in AFB's market area. These informal contacts and
discussions were designed only to acquaint AFB's management with the management
philosophy and strategic goals and objectives of the other institutions, and
were not designed or intended by AFB to solicit definitive merger proposals or
lead to formal merger or acquisition negotiations with any such institutions.
Such contacts and discussions were pursued for the purpose of furthering AFB's
knowledge of other institutions located in the Southeast that reasonably could
be expected to be interested in furthering or developing their franchise in
AFB's market area.
On November 6, 1996, Ernest C. Roessler, Vice Chairman, President and Chief
Executive Officer of CCBF, on an unsolicited basis telephoned Mr. Abercrombie,
Chairman and Chief Executive Officer of AFB, to inquire as to whether AFB would
be interested in pursuing merger discussions with CCBF. CCBF had previously
identified AFB as an attractive potential acquisition due to AFB's location
along the strategic Interstate 85/Interstate 40 urban corridor of North Carolina
and South Carolina, its market share in the growing Greenville-Spartanburg
market area, its history of profitability and its commercial bank orientation.
As a result of that November 6, 1996 telephone conversation, on December
13, 1996, the Executive Committee of the AFB Board authorized Mr. Abercrombie to
contact CCBF to obtain an understanding of CCBF's interest in AFB. Following
such authorization, Mr. Abercrombie telephoned Mr. Roessler on December 20,
1996, and Messrs. Abercrombie and Roessler agreed to meet on January 8, 1997, to
explore a possible merger of the two institutions. During this meeting, Messrs.
Abercrombie and Roessler discussed a variety of issues relating to a proposed
combination of AFB and CCBF, including various non-financial issues relating to
consolidating the operations of the parties. A subsequent meeting on January 22,
1997 occurred among Mr. Roessler, Mr. Abercrombie and C. Dan Joyner, a member of
the Compensation Committee and the Executive Committee of the AFB Board. This
meeting involved further discussion of the various issues posed by a possible
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combination of the two institutions, including certain non-financial issues
involving the retention of AFB's management. In neither of the meetings on
January 8th and January 22nd were specific pricing ranges discussed between the
participants.
On January 27, 1997, Mr. Trimble, Chief Financial Officer and Chief
Operating Officer of AFB, met with Robert L. Savage, Jr., Senior Vice President
of CCBF, to discuss various financial issues, including estimates for potential
cost savings, relative market valuations, and respective accounting issues. On
January 29, 1997, representatives of Wheat and Mr. Savage met to discuss the
financial implications of a possible merger. No agreement on an exchange ratio
or related matters were reached at this meeting. However, based on these
discussions, the parties determined that further discussions would be
beneficial. Various representatives of CCBF, including Mr. Roessler, and W. L.
Burns, Jr., Chairman of the Board of CCBF, met with the Executive Committee of
the AFB Board on February 3, 1997. Following this meeting, the parties began to
negotiate the terms of a proposed merger, including proposed exchange ratios of
.42 to .46, appropriate price protection mechanisms, and a definitive merger
agreement. In these further discussions, each party expressed differing views on
the value of the Goodwill Litigation to AFB and its shareholders, considered
various possible mechanisms for directing any recovery in the Goodwill
Litigation to AFB's shareholders and the impact of any such mechanism upon
treatment of the Merger as a pooling-of-interests, and further negotiated an
exchange ratio each party could accept despite their differing analysis of the
foregoing matters and the value of AFB in light of comparable transactions. The
parties temporarily suspended discussions during the second weekend of February
as a result of these pricing discussions. After further review of relevant
information and receipt of advice from their financial, legal and other
advisors, during the following week the parties renewed discussions and reached
agreement upon the Exchange Ratio of .445 and the various pricing protections
contained in the Merger Agreement.
On February 17, 1997, the AFB Board met to review the terms of the Merger
Agreement and the Stock Option Agreement as summarized by AFB's legal counsel,
Alston & Bird LLP. Wheat and Keefe reported that they had conducted their due
diligence reviews and delivered their oral opinions as to the fairness, from a
financial point of view, of the Exchange Ratio to the shareholders of AFB.
On February 17, 1997, the CCBF Board also met to review the terms of the
Merger Agreement and the Stock Option Agreement as summarized by CCBF's legal
counsel, Brooks, Pierce, McLendon, Humphrey & Leonard, L.L.P. Merrill Lynch
reported that it had completed a due diligence review of AFB and rendered to the
CCBF Board it opinion as to the fairness, from a financial point of view, of the
Exchange Ratio to CCBF as of the date of such opinion.
On the basis of such presentations and the factors set forth under
" -- Reasons for the Merger," the AFB Board and the CCBF Board each unanimously
approved the Merger Agreement and the Stock Option Agreement and authorized
execution of the Merger Agreement and the Stock Option Agreement.
REASONS FOR THE MERGER. In reaching its conclusion to approve the Merger,
the AFB Board consulted with AFB's senior management, as well as with its
financial and legal advisors, and considered various factors, including the
following:
(a) THE FINANCIAL TERMS OF THE MERGER. The presentation by Wheat indicating
that the transaction multiples for AFB, based on the Exchange Ratio and the CCBF
Stock price on February 14, 1997, compared favorably with, and were among the
highest of, the other transactions reviewed by Wheat and represented multiples
(and comparable multiples for the transactions reviewed by Keefe) of 287.1% of
AFB's per common share book value at December 31, 1996, 308.8% of AFB's per
common share tangible book value at December 31, 1996, 18.9 times AFB's last
twelve months' earnings per share (before the third quarter SAIF charge
discussed elsewhere herein) through December 31, 1996, and a 40.7% premium over
the per share closing price of AFB Stock on February 14, 1997.
(b) THE EFFECT ON SHAREHOLDER VALUE OF AFB'S REMAINING INDEPENDENT COMPARED
TO THE EFFECT OF ITS COMBINING WITH CCBF. In this respect, the AFB Board
considered whether it was reasonable to anticipate that AFB as an independent
enterprise could produce the earnings necessary to result in a value comparable
to the value to be received in the Merger. Second, the AFB Board took into
account that AFB had special value to CCBF in providing CCBF with an extension
of its franchise along the Interstate 85 corridor without diluting CCBF's
franchise value. Third, the AFB Board considered that the operating philosophies
and corporate cultures of AFB and CCBF were similar and complementary in nature.
Fourth, the AFB Board considered that, based upon the current dividend payouts
by AFB and CCBF, there would be a 55.8% increase in dividends for AFB
shareholders. Fifth, the Board of Directors of AFB took into account that CCBF
was more likely than many other potential merger partners to be party to a
subsequent business combination in which a premium would be paid for the
outstanding shares of CCBF Stock.
(c) INDUSTRY CONSOLIDATION. The AFB Board considered the prevailing trend
toward consolidation in the nation's financial institution industry, and
particularly the distribution of market shares in the market areas served by
AFB.
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(d) CERTAIN FINANCIAL INFORMATION ABOUT AFB AND CCBF. Such information
included, but was not limited to, information with regard to recent and
historical stock performance, valuation analyses, pro forma analyses,
comparative financial and operating performance data, acquisition capacity
analyses, "Wall Street" research ratings comparisons, comparable merger and
acquisition transactions as presented by Wheat and Keefe and with respect to
AFB, the analysis of the potential value of the Goodwill Litigation as described
under " -- Goodwill Litigation."
(e) ADVICE OF FINANCIAL ADVISORS AND FAIRNESS OPINIONS. The opinions of
Wheat and Keefe (including the assumptions and financial information and
projections relied upon by Wheat and Keefe in arriving at their respective
opinions) that, as of February 17, 1997, the Exchange Ratio was fair, from a
financial point of view, to the shareholders of AFB. AFB obtained the opinions
of both Wheat and Keefe, due to the long-standing relationship of AFB with
certain representatives of such firms. (See " -- AFB Fairness Opinions.")
(f) CERTAIN NONFINANCIAL INFORMATION AND TERMS OF AGREEMENTS. The AFB Board
considered the terms of the Merger Agreement, including its right to terminate
the Merger Agreement in the event of a significant decline in the price of CCBF
Stock prior to consummation of the Merger unless CCBF then elected to increase
the Exchange Ratio as specified in the Merger Agreement. The AFB Board was
advised that CCBF was requiring the Stock Option Agreement as a condition to the
transaction, and the AFB Board considered that the existence of the Stock Option
Agreement might discourage third parties from seeking to acquire AFB. The AFB
Board took into account that the Merger is expected to be tax-free, for federal
income tax purposes, to AFB's shareholders to the extent they receive shares of
CCBF Stock (other than with respect to cash paid in lieu of fractional shares).
The AFB Board was reminded that the Merger would trigger certain
change-in-control provisions of certain preexisting employment agreements with
AFB's executive management and that CCBF had offered to enter into new
employment arrangements with two of such executives in consideration of such
individuals terminating their respective, existing employment agreements with
AFB. (See " -- Conversion of AFB Stock and AFB Options; Exchange Ratio, " " --
Material Income Tax Consequences," " -- Interests of Certain Persons With
Respect to the Merger," and " -- The Stock Option Agreement.")
(g) REGULATORY APPROVALS. The AFB Board considered the probability of the
regulatory approvals that would be required with respect to the Merger being
obtained. (See " -- Required Regulatory Approvals.")
(h) IMPACT ON AFB CONSTITUENCIES. The general impact of the Merger on the
various constituencies served by AFB, including its customers, employees,
communities, and others, was considered by the AFB Board. In this regard, the
AFB Board took into account CCBF's approach to its employees and the communities
in which it operates as understood by the AFB Board.
The foregoing discussion of the information and factors considered by the
AFB Board is not intended to be exhaustive, but is believed to include all
material factors considered by the AFB Board. In reaching its determination to
approve the Merger, the AFB Board did not assign any relative or specific
weights to the foregoing factors, and individual directors may have given
differing weights to different factors. After deliberating with respect to the
Merger and the other transactions contemplated thereby, and considering, among
other things, the matters discussed above and the oral opinions of Wheat and
Keefe referred to above, the AFB Board unanimously approved the Merger Agreement
as being in the best interests of AFB and its shareholders and determined to
recommend that AFB shareholders vote "For" approval of the Merger Agreement and
the Plan of Merger.
CCBF's Board of Directors, as a part of its long-range strategic plan to
increase shareholder value, has sought growth in CCBF's business by expanding
its geographic markets and increasing its presence in its existing markets. In
that regard, potential acquisition candidates have been identified and evaluated
and growth through other means, including the establishment of new branch
offices, has been explored. CCBF's Board believes that the acquisition of
profitable, well-managed financial institutions is the most effective means of
expanding CCBF's markets and market presence. For the reasons discussed below,
CCBF's Board has concluded that a combination with AFB through the Merger fits
into the Board's long-range strategic plan to maximize CCBF shareholder value
through growth.
In reaching its conclusion that the Merger is fair to, and in the best
interests of, CCBF's shareholders, CCBF's Board of Directors consulted with
legal, financial and accounting advisors, as well as CCBF's management, and
considered a number of factors. CCBF's Board did not assign any relative or
specific weights to the factors considered. These factors included:
(a) CCBF's Board's review, based in part on the advice of Merrill Lynch,
its financial advisor, and presentations by CCBF's management of (i) the
business, operations, earnings and financial condition of CCBF and AFB on
historical, prospective and pro forma bases, including AFB's return on average
assets, return on average shareholders' equity, net interest margin and
efficiency ratio for each of the five years ended December 31, 1996, both
independently and in comparison to
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comparable commercial banks and thrift institutions, (ii) the enhanced
opportunities for operating efficiencies, competitiveness and growth that the
Merger may make possible, including anticipated cost savings from the
combination of certain operating systems, the extension of CCBF's branch network
along the Interstate 85/Interstate 40 urban corridor of North Carolina and South
Carolina, and the economics of scale and the increased range of products and
services that AFB's combination with a significantly larger company would
permit, and (iii) the respective financial resources, market capitalization and
earnings (on both a historical and pro forma basis) contributions the parties
would bring to a combined entity;
(b) the assumptions and methodologies used in setting the Exchange Ratio
and other financial terms of the Merger Agreement;
(c) the financial presentation and opinion of Merrill Lynch rendered to the
CCBF Board as of February 17, 1997, that the Exchange Ratio was fair, from a
financial point of view, to CCBF as of such date;
(d) the terms of the Merger Agreement, including CCBF's right to elect not
to adjust the Exchange Ratio in the event of a significant decline in the price
of CCBF Stock prior to the consummation of the Merger, and the terms and
characteristics of the Stock Option Agreement;
(e) a variety of factors affecting and relating to the overall strategic
focus of both CCBF and AFB, including similarities in business outlook, approach
and corporate cultures, the geographic proximity and similarities of CCBF's
existing market areas to AFB's existing market areas, and the opportunity the
Merger will provide for CCBF to expand its operations into the rapidly growing
Greenville-Spartanburg market area of South Carolina;
(f) the expectation that the Merger will be tax-free for federal income tax
purposes, and accounted for under the pooling-of-interests method of accounting
(see " -- Certain Federal Income Tax Consequences" and " -- Accounting
Treatment"), and that all required regulatory approvals would be likely to be
obtained without unfavorable conditions or requirements;
(g) the potential dilution of CCBF's current book value and income per
share, (excluding restructuring charges) of approximately 7.26% and 3.32%,
respectively, forecasted as possibly resulting from the Merger during 1997, the
one-time charges to consummate the Merger then estimated to total $8.2 million,
and the demands on management resources associated with completing the Merger
and any subsequent merger of AFB into CCB Bank; and
(h) the current and prospective economic and competitive environments
facing financial institutions, including CCBF.
The foregoing discussion of the information and factors considered by the
CCBF Board is not intended to be exhaustive, but is believed to include all
material factors considered by the Board of CCBF. After considering the Merger
and related transactions contemplated by the Merger Agreement, and evaluating,
among other things, the information and factors noted above and the opinion of
Merrill Lynch, the CCBF Board unanimously approved the Merger Agreement as being
in the best interests of CCBF and its shareholders and determined to recommend
its approval by CCBF's shareholders.
CCBF'S BOARD OF DIRECTORS AND AFB'S BOARD OF DIRECTORS EACH UNANIMOUSLY
RECOMMENDS THAT THEIR RESPECTIVE SHAREHOLDERS VOTE FOR APPROVAL OF THE MERGER
AGREEMENT.
GOODWILL LITIGATION
On August 3, 1995, AFB initiated a lawsuit against the United States in the
Court of Federal Claims, styled AMERICAN FEDERAL BANK, FSB V. THE UNITED STATES
OF AMERICA, IN THE UNITED STATES COURT OF FEDERAL CLAIMS, CASE NO. 95-498C (the
"Goodwill Litigation"). In instituting this litigation, AFB seeks damages from
the United States as a result of the 1989 enactment of FIRREA, which imposed new
capital requirements on the thrift industry and mandated certain levels of
"tangible capital," "core capital," and "risk-based capital" and defined those
terms so as to exclude, following a five-year transition period, intangible
assets, such as goodwill, from the calculation of the various capital
requirements. As applied to AFB, the FIRREA capital requirements eliminated
approximately $48.7 million of goodwill from tangible capital and $32.7 million
from core and risk-based capital at year-end 1989.
The goodwill that was eliminated by FIRREA from AFB's capital calculations
was the unamortized portion of the qualifying "supervisory" goodwill incurred by
AFB in effecting the acquisition of four other thrift institutions during a two-
month period from April to May 1982. Information relating to each of the
acquisitions is set forth in the table below (in thousands):
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<PAGE>
<TABLE>
<CAPTION>
DATE OF FAIR MARKET RESULTING
ACQUIRED INSTITUTION ACQUISITION VALUE OF ASSETS GOODWILL
<S> <C> <C> <C>
Home Saving and Loan Association........................ April 16, 1982 $ 89,748 29,092
United Federal Savings and Loan Association............. April 26, 1982 34,199 11,963
Bell Federal Savings and Loan Association............... May 31, 1982 47,217 14,624
Family Federal Savings and Loan Association............. May 31, 1982 15,390 5,479
Total................................................. $186,544 61,158
</TABLE>
At the time of the acquisitions of such institutions by AFB, the Federal
Home Loan Bank Board ("FHLBB") was actively encouraging healthy thrifts and
other investor groups to acquire or recapitalize troubled institutions to
eliminate or delay the cost of liquidation of such institutions to the Federal
Savings and Loan Insurance Corporation. As an inducement to encourage healthy
thrifts to consolidate with troubled or failing institutions, the FHLBB
permitted the thrifts to utilize the purchase method of accounting in connection
with the mergers. Under this method, which was in accordance with generally
accepted accounting principles, the assets acquired and liabilities assumed by
the surviving thrift were recorded at their estimated fair market value at the
date of acquisition. The balance between the assets and liabilities was recorded
as "goodwill." As the four thrifts acquired by AFB had aggregate total assets of
$187 million and total liabilities of $248 million, based on fair market values,
AFB recorded approximately $61.2 million of goodwill and began amortizing such
goodwill, with the approval of the FHLBB, over a period of 40 years using the
straight-line method.
Subsequent to these mergers, and until the passage of FIRREA, AFB included
the unamortized goodwill when calculating regulatory net worth and capital
ratios. On January 25, 1989, after lengthy negotiations with the FHLBB in
connection with the Conversion, AFB agreed to reduce prospectively the
amortization period for the goodwill to 23.25 years, beginning in October 1988.
With the inclusion of goodwill in the calculation of its regulatory capital
requirements, AFB had an excess capital position of approximately $27 million,
but was placed in a capital deficient position, as indicated below, with the
elimination of goodwill from the calculation of the various capital requirements
imposed by FIRREA. Total assets at December 31, 1989 were $1.1 billion and
equity computed under generally accepted accounting principles totaled $35.9
billion. The following reflects the application of the FIRREA capital
requirements mandating certain levels of tangible capital, core capital and
risk-based capital on AFB as of December 31, 1989 (in thousands):
<TABLE>
<CAPTION>
TANGIBLE CAPITAL CORE CAPITAL RISK-BASED CAPITAL
ACTUAL REQUIRED EXCESS ACTUAL REQUIRED EXCESS ACTUAL REQUIRED EXCESS
AMOUNT AMOUNT (DEFICIENCY) AMOUNT AMOUNT (DEFICIENCY) AMOUNT AMOUNT (DEFICIENCY)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$(12,849) 15,987 (28,836) 3,138 31,974 (28,836) 6,276 49,788 (43,512)
</TABLE>
Following FIRREA, AFB was required to submit capital plans that conformed
to the new capital requirements and to phase out the inclusion of goodwill as
regulatory capital. As a consequence of not satisfying its then minimum capital
requirements imposed by the OTS, AFB was subject to various other limitations in
the conduct of its business.
Through its earnings and higher capital levels, AFB was able to satisfy its
minimum core and tangible capital requirements by year-end 1991, and to meet all
FIRREA capital requirements for the first time on September 30, 1992. In order
to satisfy its fully phased-in capital requirements under FIRREA, AFB effected
in March 1993 a capital instruments exchange of its Series A Debentures and
Series I Preferred Stock and a public offering of AFB Stock. Upon completing the
capital instruments exchange and public offering, AFB satisfied all fully
phased-in capital requirements imposed by the OTS and had the requisite capital
levels to qualify as a "well-capitalized" institution under the applicable
provisions of FDICIA.
With the filing of the Goodwill Litigation, AFB joined approximately 120
other institutions that have similar claims pending against the United States in
the Court of Federal Claims (the "Goodwill Cases"). In most of these Goodwill
Cases, the plaintiffs claim that the United States breached its "contract" to
permit the inclusion of goodwill as capital and effected a "taking" of property
without just compensation in violation of the Fifth Amendment of the United
States Constitution.
Prior to the filing of the Goodwill Litigation, three Goodwill Cases had
proceeded through the Court of Federal Claims and the Court of Appeals and were
consolidated for review in the United States Supreme Court. In each of these
suits, WINSTAR CORPORATION V. THE UNITED STATES OF AMERICA; GLENDALE FEDERAL
BANK, FSB V. THE UNITED STATES OF AMERICA; and, STATESMAN SAVINGS HOLDING CORP.
V. THE UNITED STATES OF AMERICA (collectively, the "Winstar Cases"), the Court
of Federal Claims had ruled that the United States had a contract with the
plaintiffs that had been breached as a result of FIRREA, for which the
government was liable in damages, and the Court of Appeals had affirmed. On July
1, 1996, the United States Supreme Court affirmed the Court of Appeals decision
and remanded the cases for a trial on damages.
25
<PAGE>
Over the past several years, the Court of Federal Claims has stayed all
other Goodwill Cases, including the Goodwill Litigation, while the Winstar Cases
proceeded through the court system. Therefore, the Winstar Cases are the only
cases in which there has been a ruling on the government's contract liability
and they serve as a benchmark by which the remaining 117 Goodwill Cases will be
measured. In addition, no court has ruled on the appropriate measure of damages
in the Winstar Cases, although a damages trial related to the claim of Glendale
Federal Bank, FSB is proceeding as of the date of this Prospectus/Joint Proxy
Statement. No record, however, has been established that would indicate what, if
any, damages the plaintiffs in the Winstar Cases are entitled to recover.
After the United States Supreme Court ruling in the Winstar Cases on July
1, 1996, the Goodwill Cases have been proceeding pursuant to an Omnibus Case
Management Order ("OCMO"). The OCMO alters the procedure and timetable for the
Goodwill Cases and, in general, will prolong the litigation. Under the OCMO, it
is contemplated that plaintiffs in the Goodwill Cases, including AFB, will file
motions for summary judgment on the issue of contract liability. The United
States is not required to file an answer to AFB's complaint or to raise any
affirmative defenses until it responds to the motion for summary judgment. The
issue of liability under each contract claim in the Goodwill Cases will then be
determined by a judge in the Court of Federal Claims. If a motion for summary
judgment is successful, the plaintiff may proceed to trial before the judge on
the damages issue. If the issue of liability cannot be determined on a motion
for summary judgment, the plaintiff will present the issue at a full evidentiary
trial before the judge, at which time the measure of damages, if any, will also
be determined. The United States may also file a motion for summary judgment,
requesting that the court determine that there is no liability, thus eliminating
the need for a trial on damages.
In connection with considering the merits of the Merger, the management and
Board of Directors of AFB undertook an analysis of the Goodwill Litigation for
purposes of attempting to quantify, taking into account a variety of factors,
the possible range of damage that could reasonably be anticipated to be awarded
to AFB based on the merits of AFB's claim in the Goodwill Litigation and the
status of the Goodwill Cases during February 1997. In its consideration, the AFB
Board considered, among other factors: (i) findings of the Court of Appeals and
the United States Supreme Court in the Winstar Cases; (ii) the procedural
posture of the Goodwill Cases; (iii) the merits of the Goodwill Litigation as to
the issue of contract liability of the government as reviewed by its counsel,
Alston & Bird LLP, relative to the decisions in the Winstar Cases; (iv) the
possible range of damages that could be awarded to AFB; and (v) the timing of
any award of damages.
As part of attempting to quantify the appropriate measure of damages,
assuming the United States government is found liable in the Goodwill
Litigation, Alston & Bird LLP, AFB's legal counsel, retained Feldman Financial
Advisors, Inc. ("FFA"), a financial advisory consulting firm which is serving as
an expert witness in the damages trial in one of the Winstar Cases, to prepare a
preliminary estimate of the range of damages that, based on current theories
being proposed by the plaintiffs in the Winstar Cases, could result if AFB
prevails on the issue of the contract liability of the government. In its
analysis, FFA considered three theories for measuring damages: (i) lost profits
or expectancy damages; (ii) restitution damages; and (iii) reliance damages, as
briefly summarized below. The calculations performed, the underlying factors
incorporated and the results presented by FFA were specific to the facts and
circumstances of the Goodwill Litigation and subject to the limited scope of
FFA's analysis.
Under the lost profits or expectancy damages theory, FFA attempted to
determine the profits that AFB could reasonably have been expected to have
earned if the goodwill had not been disallowed as a component of regulatory
capital. This level of expected profits was then compared to the actual and
estimated profits generated by AFB, operating with the stipulated exclusion of
goodwill under FIRREA, in order to calculate the amount of profits forever lost.
Under the restitution theory of damages, each party is required to return
to the other party the benefits received under the bargained for contract or
agreement. In the case of AFB, the benefits that accrued to the United States
government were chiefly AFB's absorption of four insolvent thrifts (as measured
on a fair market value basis) and the estimated liquidation costs associated
with these thrifts. The restitution damages would equal the total benefits
received by the government, net of any benefits realized by AFB.
Finally, under the reliance method of damages calculation, an analysis is
made to determine the cost to the injured party of relying on the breached
contract. In the case of AFB, AFB's initial cost or investment in the four
acquired thrifts can be regarded as the goodwill it recorded. Additional costs
and benefits incurred by AFB in relying on the contract would be determined,
including the measurable impact of any indirect consequences attributable to the
breach.
Under these three theories of damages, FFA estimated that the range of
damages, depending upon which theory of damage was utilized, was from
approximately $50 million to approximately $100 million, even though AFB has not
asserted definitive damage amounts or specific recovery theories in its court
filings. While noting that the actual outcome of the
26
<PAGE>
Goodwill Litigation is indeterminate and subject to substantial risk and
uncertainties, FFA applied various discount factors to the range of damages to
reflect probability factors of success in the Goodwill Litigation (reflecting
blended probabilities of success both on the contract liability claim and the
various damage theories being determined as the appropriate measure of damages)
ranging from 40% to 70%. These results were then discounted to present value at
a 14% discount rate and over time periods ranging from two to five years, which
represent assumed time periods necessary to prosecute the litigation and receive
final award or settlement proceeds. The present value amounts resulting from
this analysis were then expressed on a per share basis of AFB Stock, assuming
11.18 million fully diluted shares of AFB Stock outstanding.
Based on this analysis, FFA estimated a range of values of the Goodwill
Litigation on a per share basis of AFB Stock from $0.93 to $4.82. This range of
values, as reflected on a per share basis of AFB Stock, was further reduced by
approximately a 23% factor to reflect that AFB shareholders would own
approximately 23.8%, on a pro forma basis, of the outstanding shares of CCBF
Stock immediately upon consummation of the Merger. Assuming that AFB's goodwill
damages claim accrued to the benefit of the combined company after the Merger is
completed, the former shareholders of AFB (through their continuing ownership
interest in CCBF) could participate in the successful realization of a
subsequent damages award in the Goodwill Litigation. Thus, it was believed that
in considering the foregone value of a potential award, the proportionate
benefit that remains available to the AFB shareholders as CCBF shareholders
should be excluded. In applying this analysis, the value of the Goodwill
Litigation on a per share value of AFB Stock ranged from $0.72 to $3.71.
Based on its analysis of the Goodwill Litigation and the presentations made
by Alston & Bird LLP and FFA relating to the merits of the Goodwill Litigation
and the reasonably anticipated damage awards resulting therefrom, the Board of
Directors of AFB determined that a reasonable value to place on the Goodwill
Litigation, based on the current status of the Goodwill Cases at the time of its
determination, was approximately $2.00 per share of AFB Stock (or approximately
$1.53 per share of AFB Stock of foregone value resulting from consummation of
the Merger). With this determination, the AFB Board advised Wheat and Keefe to
take into account the valuation of the Goodwill Litigation made by the Board of
$2.00 per share of AFB Stock (the "Per Share Net Present Value") in determining
whether the Exchange Ratio was fair, from a financial point of view, to the
shareholders of AFB.
IN ANALYZING THE POTENTIAL VALUE OF THE GOODWILL LITIGATION, AFB'S BOARD
WAS ADVISED AND WAS FULLY AWARE THAT THE ACTUAL OUTCOME OF THE GOODWILL
LITIGATION IS INDETERMINATE AND SUBJECT TO SUBSTANTIAL RISKS AND UNCERTAINTIES
EVEN AFTER THE RULINGS IN THE WINSTAR CASES, DUE TO POTENTIAL FACTUAL
DISTINCTIONS BETWEEN THE WINSTAR CASES AND AFB'S CASE ON THE ISSUE OF LIABILITY,
LACK OF ANY AUTHORITY ON THE APPROPRIATE METHOD OF CALCULATING DAMAGES, THE
EXTENDED TIME PERIOD FOR ANY FINAL JUDGMENT, AND THE UNCERTAINTIES INHERENT IN
THE JUDICIAL PROCESS, AND MAY NOT RESULT IN ANY AWARD OR SETTLEMENT, OR POSSIBLY
COULD RESULT IN A HIGHER AWARD OR RESULT THAN THAT CONTEMPLATED BY THE VARIOUS
RANGES OF POTENTIAL DAMAGES. ACCORDINGLY, NO ASSURANCES CAN BE GIVEN THAT THE
VALUE ATTRIBUTED BY AFB'S BOARD OF DIRECTORS TO THE GOODWILL LITIGATION OR THE
METHODOLOGY UTILIZED BY THE BOARD OR FFA WILL PROVE TO BE AN ACCURATE ASSESSMENT
OF THE VALUE OF THE GOODWILL LITIGATION.
IN ADDITION, AT THE TIME AFB'S BOARD CONSIDERED AND VOTED UPON THE MERGER
AGREEMENT, THE MERGER AGREEMENT PROVIDED THAT AS SOON AS REASONABLY PRACTICABLE
FOLLOWING THE EFFECTIVE TIME, CCBF WOULD TAKE ALL ACTION NECESSARY TO
DISTRIBUTE, AND WOULD DISTRIBUTE, FOR EACH SHARE OF CCBF STOCK OUTSTANDING
IMMEDIATELY FOLLOWING THE EFFECTIVE TIME, ONE SHARE OF A NEW SERIES OF CCBF
PREFERRED STOCK REPRESENTING, AS CALCULATED IN ACCORDANCE WITH THE MERGER
AGREEMENT, THE RIGHT TO RECEIVE A CASH PAYMENT IN RESPECT OF A FINAL,
NONAPPEALABLE JUDGMENT IN, OR FINAL SETTLEMENT OF, THE GOODWILL LITIGATION. THIS
AGREEMENT ON THE PART OF CCBF WAS CONDITIONED UPON SATISFACTION OF VARIOUS
CONDITIONS, INCLUDING THE CONDITION THAT THE DISTRIBUTION OF SUCH CCBF PREFERRED
STOCK WOULD NOT PREVENT THE MERGER FROM QUALIFYING FOR POOLING-OF-INTERESTS
ACCOUNTING TREATMENT. THE STAFF OF THE COMMISSION WAS CONSULTED ON THIS ISSUE
AND BASED ON SUCH CONSULTATION, CCBF AND AFB CONCLUDED THAT THE ISSUANCE OF SUCH
PREFERRED STOCK AS CONTEMPLATED BY THE MERGER AGREEMENT WOULD PRECLUDE
POOLING-OF-INTERESTS ACCOUNTING TREATMENT OF THE MERGER. ACCORDINGLY, THE
PROVISIONS OF THE MERGER AGREEMENT REQUIRING THE ISSUANCE OF SUCH PREFERRED
STOCK IS WITHOUT, AND WILL NOT BE GIVEN, EFFECT. WHILE AFB'S BOARD OF DIRECTORS
BELIEVED THIS PROVISION OF THE MERGER AGREEMENT WAS IN THE BEST INTEREST OF THE
SHAREHOLDERS OF AFB, THE ELIMINATION OF THE PROVISION RELATING TO THE ISSUANCE
OF THE CCBF PREFERRED STOCK DOES NOT CHANGE THE AFB BOARD'S VIEW THAT THE MERGER
IS FAIR TO, AND IN THE BEST INTEREST OF, THE SHAREHOLDERS OF AFB. THE BOARD'S
VIEW IS BASED IN PART ON ITS BELIEF THAT (I) THE ACTUAL OUTCOME OF THE GOODWILL
LITIGATION IS INDETERMINATE AND SUBJECT TO SUBSTANTIAL RISKS AND UNCERTAINTIES
AND (II) EVEN IF THE ENTIRE PER SHARE NET PRESENT VALUE OF THE GOODWILL
LITIGATION IS VIEWED AS FOREGONE AS A RESULT OF CONSUMMATING THE MERGER, THE
MERGER REMAINS FAIR TO THE SHAREHOLDERS OF AFB. IN ADDITION, THE BOARD
RECOGNIZED THAT IMMEDIATELY UPON CONSUMMATION OF THE MERGER, AFB SHAREHOLDERS
WOULD CONTINUE TO OWN, ON A PRO FORMA BASIS, APPROXIMATELY 24% OF THE
OUTSTANDING SHARES OF CCBF STOCK AND, ACCORDINGLY, APPROXIMATELY 24% OF ANY
RESULTING AWARD WOULD INURE TO THE BENEFIT OF THE FORMER SHAREHOLDERS OF AFB,
27
<PAGE>
TO THE EXTENT THAT THEY RETAIN THE SHARES OF CCBF STOCK RECEIVED IN THE MERGER
IN EXCHANGE FOR THEIR SHARES OF AFB STOCK. WHILE CCBF WILL LIKELY ISSUE
ADDITIONAL SHARES OF CCBF STOCK IN THE FUTURE IN EFFECTING VARIOUS CORPORATE
OPPORTUNITIES, THEREBY DILUTING THE OWNERSHIP INTEREST OF THE FORMER
SHAREHOLDERS OF AFB IN CCBF, THE POSITION OF THE AFB SHAREHOLDERS WITH RESPECT
TO ANY AWARD IN THE GOODWILL LITIGATION WOULD NOT, IN MOST RESPECTS (OTHER THAN
WITH RESPECT TO THEIR PROPORTIONATE INTEREST IN SUCH AWARD), BE ANY DIFFERENT
UPON CONSUMMATION OF THE MERGER FROM THEIR CURRENT POSITION, IN THAT THEIR
INTEREST IN AN AWARD IN THE GOODWILL LITIGATION CURRENTLY IS, AND WOULD BE UPON
CONSUMMATION OF THE MERGER, AN INDIRECT INTEREST AS A SHAREHOLDER, AND NOT AS A
HOLDER OF A CERTIFICATE ACTUALLY REPRESENTING THE RIGHT TO RECEIVE A PORTION OF
THE NET PROCEEDS OF AN AWARD AND, AFB, LIKE CCBF, COULD DILUTE THEIR INTEREST IN
SUCH AN AWARD BY ISSUING ADDITIONAL SHARES OF AFB STOCK TO EFFECT OTHER
CORPORATE OPPORTUNITIES.
28
<PAGE>
AFB FAIRNESS OPINIONS
OPINION OF WHEAT. AFB retained Wheat to act as its financial advisor in
connection with the Merger and to render an oral opinion to the AFB Board of
Directors as to the fairness, from a financial point of view, to the holders of
AFB Stock of the Exchange Ratio, and to confirm that oral opinion in writing as
of the date of this Prospectus/Joint Proxy Statement. Wheat is a nationally
recognized investment banking firm regularly engaged in the valuation of
businesses and their securities in connection with mergers and acquisitions,
negotiated underwritings, competitive biddings, secondary distributions of
listed and unlisted securities, private placements and valuations for estate,
corporate and other purposes. The AFB Board of Directors selected Wheat to serve
as its financial advisor in connection with the Merger on the basis of such
firm's expertise. Wheat regularly publishes research reports regarding the
financial services industry and the businesses and securities of publicly owned
companies in that industry, including AFB and CCBF. In the ordinary course of
its business, Wheat and its affiliates may actively trade in the equity
securities of AFB and CCBF for their accounts and the accounts of their
customers, and therefore may from time to time hold long or short positions in
such securities.
Representatives of Wheat attended the meeting of the AFB Board of Directors
on February 17, 1997 at which the Merger Agreement was considered and adopted.
At the meeting, Wheat issued an oral opinion that, as of such date, the Exchange
Ratio was fair, from a financial point of view, to the holders of AFB Stock.
Wheat's written AFB Fairness Opinion, dated as of the date of this
Prospectus/Joint Proxy Statement, has been delivered to the AFB Board of
Directors to the effect that, as of such date, the Exchange Ratio is fair, from
a financial point of view, to the holders of AFB Stock (other than CCBF and its
affiliates).
The full text of Wheat's AFB Fairness Opinion which sets forth certain
assumptions made, matters considered and limitations on review undertaken is
attached as Appendix B to this Prospectus/Joint Proxy Statement, is incorporated
herein by reference, and should be read in its entirety in connection with this
Prospectus/Joint Proxy Statement. The summary of Wheat's AFB Fairness Opinion
set forth in this Prospectus/Joint Proxy Statement is qualified in its entirety
by reference to Appendix B. Wheat's opinion is directed only to the fairness,
from a financial point of view, of the Exchange Ratio to the holders of AFB
Stock and does not constitute a recommendation to any shareholder of AFB as to
how such shareholder should vote on the Merger.
In arriving at its opinion, Wheat reviewed certain publicly available
business and financial information relating to AFB and CCBF and certain other
information provided to it, including, among other things, the following: (i)
AFB's Annual Reports to Stockholders, Annual Reports on Form 10-K and related
financial information for the three fiscal years ended December 31, 1995; (ii)
AFB's Quarterly Reports on Form 10-Q and related financial information for the
periods ended March 31, 1996, June 30, 1996 and September 30, 1996, and certain
financial data provided by AFB's management for the period ended December 31,
1996; (iii) CCBF's Annual Reports to Shareholders, Annual Reports on Form 10-K
and related financial information for the three fiscal years ended December 31,
1995; (iv) CCBF's Quarterly Reports on Form 10-Q and related financial
information for the periods ended March 31, 1996, June 30, 1996 and September
30, 1996, and certain financial data provided by CCBF's management for the
period ended December 31, 1996; (v) CCBF's Prospectus/Proxy Statements dated
October 4, 1996 and November 27, 1996; (vi) certain publicly available
information with respect to historical market prices and trading activities for
AFB Stock and CCBF Stock and for certain publicly traded financial institutions
which Wheat deemed relevant; (vii) certain publicly available information with
respect to banking companies and the financial terms of certain other mergers
and acquisitions which Wheat deemed relevant; (viii) the Merger Agreement; (ix)
certain estimates of the cost savings and revenue enhancements projected by AFB
and CCBF for the combined company; (x) other financial information concerning
the businesses and operations of AFB and CCBF, including certain audited
financial information and certain internal financial analyses and forecasts for
AFB and CCBF prepared by their respective managements; and (xi) such financial
studies, analyses, inquiries and other matters as Wheat deemed necessary. In
addition, Wheat met with members of the senior managements of AFB and CCBF to
discuss the business and prospects of each company.
In connection with its review, Wheat relied upon and assumed the accuracy
and completeness of all of the foregoing information provided to it or publicly
available, including representations and warranties of AFB and CCBF included in
the Merger Agreement, and Wheat has not assumed any responsibility for
independent verification of such information. Wheat relied upon the managements
of AFB and CCBF as to the reasonableness and achievability of the financial and
operational forecasts and projections, and the assumptions and bases therefor,
provided to Wheat, and assumed that such forecasts and projections reflect the
best currently available estimates and judgments of such managements and that
such forecasts and projections will be realized in the amounts and in the time
periods currently estimated by such managements. Wheat also assumed, without
independent verification, that the aggregate allowances for loan losses and
other contingencies for AFB and
29
<PAGE>
CCBF are adequate to cover such losses. Wheat did not review any individual
credit files of AFB or CCBF, nor did it make an independent evaluation or
appraisal of the assets or liabilities of AFB or CCBF.
Additionally, Wheat considered certain financial and stock market data of
AFB and CCBF and compared that data with similar data for certain publicly-held
financial institutions, and reviewed the financial terms of certain other
comparable transactions that recently have been announced or effected, as
further discussed below. Wheat also evaluated such other information, financial
studies, analyses and investigations and financial, economic and market criteria
as it deemed relevant.
In connection with rendering its opinion, Wheat performed a variety of
financial analyses. The preparation of a fairness opinion involves various
determinations as to the most appropriate and relevant methods of financial
analysis and the application of those methods to the particular circumstances.
Accordingly, such an opinion is not readily susceptible to partial analysis or
summary description. Moreover, the evaluation of the fairness, from a financial
point of view, of the Exchange Ratio to holders of AFB Stock was to some extent
a subjective one based on the experience and judgment of Wheat and not merely
the result of mathematical analysis of financial data. Accordingly,
notwithstanding the separate factors summarized below, Wheat believes that its
analyses must be considered as a whole and that selecting portions of its
analyses and of the factors considered by it, without considering all analyses
and factors, could create an incomplete view of the evaluation process
underlying its opinion. The ranges of valuations resulting from any particular
analysis described below should not be taken to be Wheat's view of the actual
value of AFB or CCBF.
In performing its analyses, Wheat made numerous assumptions with respect to
industry performance, business and economic conditions and other matters, many
of which are beyond the control of AFB or CCBF. The analyses performed by Wheat
are not necessarily indicative of actual values or future results, which may be
significantly more or less favorable than suggested by such analyses.
Additionally, analyses relating to the values of businesses do not purport to be
appraisals or to reflect the prices at which businesses actually may be sold. In
rendering its opinion, Wheat assumed that, in the course of obtaining the
necessary regulatory approvals for the Merger, no conditions will be imposed
that will have a material adverse effect on the contemplated benefits of the
Merger, on a pro forma basis, to CCBF.
In arriving at its opinion, Wheat was advised by the Board of Directors of
AFB to take into account the Per Share Net Present Value of the Goodwill
Litigation, as determined by the Board and described under " -- Goodwill
Litigation." Wheat is not an expert in making legal determination and,
accordingly, has made no determinations or drawn any conclusions, legal or
otherwise, as to the merits or possible outcomes of the Goodwill Litigation. It
has relied solely on the Per Share Net Present Value attributable to the
Goodwill Litigation as determined by AFB's Board of Directors. Wheat did not
review (i) the merits (and probability of success) of AFB's position with
respect to the liability of the United States government in the Goodwill
Litigation, (ii) the theories that may be applied in awarding damages to AFB in
the event AFB prevails in its position with respect to the liability of the
United States government in the Goodwill Litigation, (iii) the assumptions
underlying the analysis prepared by FFA in applying to AFB the various damage
theories being proposed by the plaintiffs in the Goodwill Cases, or (iv) the
reasonableness of the time frame selected by AFB's Board as the most likely time
frame for an award of damages to be made to AFB in the event AFB prevails in its
position with respect to the liability of the United States government in the
Goodwill Litigation. In evaluating the fairness of the Exchange Ratio, Wheat
did, however, take into account the Per Share Net Present Value of the Goodwill
Cases, as determined by the Board of Directors of AFB. For information with
respect to the methodology utilized by AFB's Board in valuing the Goodwill
Litigation and arriving at the Per Share Net Present Value attributable to the
Goodwill Litigation, see " -- Goodwill Litigation."
Wheat's opinion is just one of the many factors taken into consideration by
the AFB Board of Directors in determining to adopt the Merger Agreement. Wheat's
opinion does not address the relative merits of the Merger as compared to any
alternative business strategies that might exist for AFB, nor does it address
the effect of any other business combination in which AFB might engage.
The following is a summary of the analyses performed by Wheat in connection
with its AFB Fairness Opinion:
COMPARISON OF SELECTED COMPANIES. Wheat compared the financial performance
and market trading information of CCBF to that of the following group of
southeastern regional bank holding companies (the "Wheat Bank Group"): Centura
Banks Inc.; Central Fidelity Banks Inc.; Compass Bancshares Inc.; Deposit
Guaranty Corporation; First American Corporation; First Commerce Corporation;
FirstMerit Corporation; Jefferson Bankshares Inc.; Mercantile Bankshares
Corporation; National Commerce Bancorporation; One Valley Bancorp Inc.;
Provident Bancorp Inc.; Signet Banking Corporation; and, Trustmark Corporation.
Based on financial data as of and for the three-month period ended December
31, 1996, or September 30, 1996, CCBF had: (i) equity to assets of 8.88%
compared to an average of 8.74%, a minimum of 6.80%, and a maximum of 12.59% for
the
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Wheat Bank Group; (ii) nonperforming assets to total assets of 0.24% compared to
an average of 0.29%, a minimum of 0.00%, and a maximum of 0.48% for the Wheat
Bank Group; (iii) reserves for loan losses to nonperforming assets of 386.33%
compared to an average of 351.18%, a minimum of 203.60%, and a maximum of
566.34% for the Wheat Bank Group; (iv) returns on average assets before
extraordinary items of 1.45% compared to an average of 1.35%, a minimum of
1.11%, and a maximum of 1.82% for the Wheat Bank Group; and (v) returns on
average equity before extraordinary items of 16.32% compared to an average of
15.50%, a minimum of 12.20%, and a maximum of 18.86% for the Wheat Bank Group.
Based on the market values as of February 14, 1997 and financial data as of
December 31, 1996, CCBF had: (i) a stock price to book value multiple of 216.15%
compared to an average of 227.18%, a minimum of 176.55%, and a maximum of
334.63% for the Wheat Bank Group; (ii) a stock price to "First Call" (as
hereinafter defined) 1997 estimated earnings per share before extraordinary
items multiple of 12.83x compared to an average of 13.83x, a minimum of 12.32x,
and a maximum of 16.35x for the Wheat Bank Group; (iii) a stock price to First
Call 1998 estimated earnings per share multiple of 11.81x compared to an average
of 12.55x, a minimum of 11.32x, and a maximum of 14.48x for the Wheat Bank
Group; and (iv) an indicated dividend yield of 2.47% compared to an average of
2.50%, a minimum of 1.52%, and a maximum of 3.54% for the Wheat Bank Group.
First Call is a data service that monitors and publishes a compilation of
earnings estimates produced by selected research analysts regarding companies of
interest to institutional investors.
ANALYSIS OF SELECTED TRANSACTIONS. Wheat performed an analysis of premiums
paid in eight selected recently completed southeastern mid-tier thrift
acquisitions announced between May 30, 1995 and February 17, 1997 (the "Wheat
Selected Transactions"). Multiples of book value, premium to prior week price,
trailing twelve months earnings and estimated current year earnings paid in the
Wheat Selected Transactions were compared to the multiples and premiums implied
by the consideration offered by CCBF in the Merger. The Wheat Selected
Transactions are composed of the following transactions (identified by
acquiror/acquiree): First Union Corporation/Home Financial Corporation;
NationsBank Corporation/Chase Federal Bank; Union Planters Corporation/Leader
Financial Corporation; First Maryland Bancorp; First Washington Bancorp, Inc.;
SouthTrust Corporation/Bankers First Corporation; United Bankshares, Inc./Eagle
Bancorp Inc.; NationsBank Corporation/CSF Holdings, Inc.; and, First Union
Corporation/RS Financial Corp.
Based on the market value of CCBF Stock on February 14, 1997, and financial
data as of December 31, 1996, the analysis yielded ratios of the implied
consideration to be paid by CCBF to AFB: (i) to book value of 278.35% compared
to an average of 165.16%, a minimum of 100.59%, and a maximum of 198.30% for the
Wheat Selected Transactions; (ii) to latest quarter earnings per share ("EPS")
annualized of 18.01x compared to an average of 14.70x, a minimum of 10.88x, and
a maximum of 20.13x for the Wheat Selected Transactions; (iii) to trailing
twelve months earnings per share multiple of 18.34x compared to an average of
14.62x, a minimum of 11.30x, and a maximum of 19.93x for the Wheat Selected
Transactions; and (iv) to First Call current year estimated earnings per share
multiple of 16.67x compared to an average of 14.60x, a minimum of 11.72x, and a
maximum of 19.63x for the Wheat Selected Transactions.
CONTRIBUTION ANALYSIS. Wheat analyzed the relative contribution made by
each of AFB and CCBF to certain balance sheet and income statement items,
including assets, deposits, shareholders' equity and estimated earnings. Wheat
then compared the relative contribution of such balance sheet and income
statement items with the fully diluted ownership percentage of the combined
company of approximately 24% for AFB shareholders based on the Exchange Ratio of
0.445. The contribution analysis showed that under the CCBF proposal, AFB would
contribute approximately 19.22% of the combined assets, 18.92% of the combined
shareholder's equity (before Merger-related expenses) and 18.76% of the First
Call current year estimated earnings of the two companies (before cost savings).
DISCOUNTED DIVIDENDS ANALYSIS. Using discounted dividends analysis, Wheat
estimated the present value of the future stream of dividends that AFB could
produce over the next five years, under various circumstances, assuming AFB
performed in accordance with the earnings forecasts of management and an assumed
level of expense savings were achieved. Wheat then estimated the terminal values
for AFB Stock at the end of the period by applying EPS multiples ranging from
11x to 13x earnings projected in year five. The dividend streams and terminal
values were then discounted to present values using different discount rates
(ranging from 13% to 15%) chosen to reflect different assumptions regarding the
required rates of return to holders or prospective buyers of AFB Stock. This
discounted dividend analysis indicated reference ranges of between $24.59 and
$29.99 per share for AFB Stock. These values compare to the implied
consideration to be offered by CCBF to AFB in the Merger of $30.26 based on the
market value of CCBF Stock on February 14, 1997.
No company or transaction used as a comparison in the above analyses is
identical to AFB, CCBF or the Merger. Accordingly, an analysis of the results of
the foregoing necessarily involves complex considerations and judgments
concerning differences in financial and operating characteristics of the
companies and other factors that could affect the public trading value of the
companies used for comparison in the above analysis.
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Wheat's AFB Fairness Opinion is based solely upon the information available
to Wheat and the economic, market and other circumstances as they existed as of
the date of such opinion. Events occurring after that date could materially
affect the assumptions and conclusions contained in such opinion. Wheat did not
undertaken to reaffirm or revise its opinion or otherwise comment on any events
occurring after the date thereof.
As compensation for Wheat's services, AFB agreed to pay Wheat a financial
advisory fee of $300,000, of which $50,000 was paid upon the execution of the
Merger Agreement and $250,000 was paid upon Wheat's delivery of its oral opinion
to AFB's Board of Directors. AFB will also pay to Wheat on the Closing Date an
amount equal to 0.79% of the aggregate consideration received by AFB's
shareholders in the Merger (less the $650,000 in total fees paid to Keefe and
otherwise paid to Wheat). AFB has agreed also to reimburse Wheat for up to
$30,000 of its out-of-pocket expenses incurred in connection with the activities
contemplated by its engagement, regardless of whether the Merger is consummated.
AFB has further agreed to indemnify Wheat against certain liabilities, including
certain liabilities under federal securities laws. AFB's obligation to pay the
above fees is not contingent upon Wheat rendering a favorable fairness opinion
with respect to the Merger.
OPINION OF KEEFE. AFB retained Keefe to render an opinion with respect to
the fairness from a financial point of view of the Exchange Ratio to the
shareholders of AFB. In conjunction with Wheat, AFB's other financial advisor,
Keefe was selected to provide such opinion to AFB based upon its qualifications,
expertise and reputation. Keefe specializes in the securities of banking
enterprises and regularly engages in the valuation of banking businesses and
their securities in connection with mergers and acquisitions, negotiated
underwritings, competitive biddings, secondary distributions of listed and
unlisted securities, private placements and valuations for estate, corporate and
other purposes.
In the ordinary course of its business as a broker-dealer, Keefe may, from
time to time, purchase securities from, and sell securities to, AFB and CCBF,
and in its activities as a market maker in securities, Keefe may from time to
time have a long or short position in, and buy or sell, equity securities of AFB
and CCBF for its own account and for the accounts of its customers. To the
extent that Keefe has any such position as of the date of the AFB Fairness
Opinion of Keefe, a copy of which is attached as Appendix C to this
Prospectus/Joint Proxy Statement, it has been disclosed to AFB. (See "AMERICAN
FEDERAL BANK -- Beneficial Ownership of AFB Stock.")
On February 17, 1997, at the meeting at which the AFB Board adopted the
Merger Agreement, the Stock Option Agreement and the transactions contemplated
thereby, Keefe rendered its oral opinion to the AFB Board that, as of such date,
the Exchange Ratio was fair to the shareholders of AFB from a financial point of
view. That oral opinion was confirmed in the written AFB Fairness Opinion of
Keefe dated as of the date of this Prospectus/Joint Proxy Statement. No
limitations were imposed by the AFB Board upon Keefe with respect to the
investigations made or procedures followed by Keefe in rendering its opinion.
Keefe's AFB Fairness Opinion is directed to the AFB Board and addresses
only the Exchange Ratio. It does not address AFB's underlying business decision
to proceed with the Merger and does not constitute, nor should it be construed
as, a recommendation to any AFB shareholder as to how such shareholder should
vote at the AFB Special Meeting on the Merger or any other matter considered in
connection therewith.
In arriving at its opinion, Keefe was advised by Board of Directors of AFB
to take into account the Per Share Net Present Value of the Goodwill Litigation,
as determined by the Board and described under " -- Goodwill Litigation." Keefe
is not an expert in making legal determinations. Accordingly, it has made no
determinations or drawn any conclusions, legal or otherwise, as to the merits or
possible outcomes of the Goodwill Litigation, and relied solely on the Per Share
Net Present Value attributable to the Goodwill Litigation as determined by AFB's
Board. Keefe did not review (i) the merits (and probability of success) of AFB's
position with respect to the liability of the United States government in the
Goodwill Litigation, (ii) the theories that may be applied in awarding damages
to AFB in the event AFB prevails in its position with respect to the liability
of the United States government in the Goodwill Litigation, (iii) the
assumptions underlying the analysis prepared by FFA in applying to AFB the
various damage theories being proposed by the plaintiffs in the Goodwill Cases,
or (iv) the reasonableness of the time frame selected by AFB's Board as the most
likely time frame for an award of damages to be made to AFB in the event AFB
prevails in its position with respect to the liability of the United States
government in the Goodwill Litigation. In evaluating the fairness of the
Exchange Ratio, Keefe did, however, take into account the Per Share Net Present
Value of the Goodwill Cases, as determined by AFB's Board. For information with
respect to the methodology utilized by AFB's Board in valuing the Goodwill
Litigation and arriving at the Per Share Net Present Value attributable to the
Goodwill Litigation, see " -- Goodwill Litigation."
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In rendering its opinion, Keefe reviewed, analyzed and relied upon the
following material relating to the financial and operating condition of AFB and
CCBF: (i) the Merger Agreement; (ii) AFB's and CCBF's Annual Reports to
Shareholders for the three years ended December 31, 1995; (iii) certain interim
reports to shareholders of AFB and CCBF, certain Quarterly Reports on Form 10-Q
of AFB and CCBF and certain other communications from AFB and CCBF to their
respective shareholders; (iv) other financial information concerning the
businesses and operations of AFB and CCBF furnished to Keefe by AFB and CCBF for
the purpose of Keefe's analysis, including certain internal financial analyses
and forecasts for AFB and CCBF prepared by their managements; (v) certain
publicly available information concerning the trading of, and the trading market
for, shares of AFB Stock and CCBF Stock; and (vi) certain publicly available
information with respect to banking and thrift companies and the nature and
terms of certain other transactions that Keefe considered relevant to its
inquiry. Additionally, in connection with its AFB Fairness Opinion, Keefe
reviewed a draft of this Prospectus/Joint Proxy Statement in substantially the
form hereof. Keefe also held discussions with the management of AFB concerning
AFB's past and current operations, financial condition and prospects, as well as
the results of regulatory examinations. Keefe also considered such financial and
other factors as it deemed appropriate under the circumstances and took into
account its assessment of general economic, market and financial conditions and
its experience in similar transactions, as well as its experience in securities
valuation and its knowledge of banks, bank holding companies and thrift
institutions generally. Keefe's opinion was necessarily based upon conditions as
they existed and could be evaluated on the date thereof and the information made
available to Keefe through the date thereof.
In preparing its opinion, Keefe has assumed and relied on the accuracy and
completeness of all information supplied or otherwise made available to it by
AFB and CCBF, and has not assumed any responsibility for independently verifying
such information or undertaking an independent evaluation or appraisal of the
assets or liabilities of AFB or CCBF or any of their subsidiaries nor has it
been furnished any such evaluation or appraisal. Keefe has also assumed and
relied upon the managements of CCBF and AFB as to the reasonableness and
achievability of their financial forecasts (and the assumptions and bases
therefor) provided to Keefe. In that regard, with AFB's consent, Keefe assumed
that such forecasts, including, without limitation, financial forecasts,
projected cost savings and operating synergies resulting from the Merger and
projections regarding under performing and nonperforming assets, net
charge-offs, adequacy of reserves, future economic conditions and results of
operations reflect the best currently available estimates and that such
projections and forecasts will be realized in the amounts and in the time
periods currently estimated. Keefe's opinion is necessarily based on economic,
market and other conditions as in effect on, and the information made available
to it as of, the date of the opinion. Keefe is not an expert in the evaluation
of allowances for loan losses and has not assumed any responsibility for making
an independent evaluation of the adequacy of the allowance for loan losses of
AFB and CCBF nor has Keefe reviewed any individual credit files, and it has
assumed that the aggregate allowances for loan losses are adequate to cover such
losses. Keefe was informed by AFB, and assumed for purposes of its opinion, that
the Merger would be accounted for as a pooling-of-interests under generally
accepted accounting principles.
The full text of the AFB Fairness Opinion of Keefe, which sets forth a
description of the procedures followed, assumptions made, matters considered and
limits on the review of the undertaken is attached to this Prospectus/Joint
Proxy Statement as Appendix C and is incorporated herein by reference.
Shareholders are urged to read such AFB Fairness Opinion in its entirety. The
following is a summary of the certain considerations of Keefe in connection with
providing its oral opinion of February 17, 1997, and does not purport to be a
complete description of all analyses employed by Keefe.
SUMMARY OF PROPOSAL. Keefe reviewed the terms of the Merger, including the
Exchange Ratio and the aggregate transaction value. Keefe reviewed the implied
value of the consideration offered based upon the closing share price of CCBF
Stock on February 14, 1997 which showed that the implied value of the CCBF
proposal was approximately $30.25 per share of AFB Stock, representing a 41%
premium to the February 14, 1997 stock market price of $21.50 per share of AFB
Stock, or a total transaction value of approximately $338 million. Based on the
aggregate consideration offered using the February 14, 1997 price for CCBF
Stock, Keefe calculated the price to book and price to earnings multiples and
the implied deposit premium paid (defined as the aggregate transaction value
minus tangible book value divided by total deposits) in the contemplated
transaction. This analysis yielded a price to book multiple of 2.93x, a price to
earnings multiple of 20.9 times (based on trailing twelve month earnings), a
price to earnings multiple of 17.1 times (based on projected earnings for the 12
months ended December 1997), and an implied deposit premium of 23.5%.
PRO FORMA MERGER ANALYSIS. Keefe analyzed, based on discussions with senior
management of AFB, certain pro forma effects resulting from the Merger as if
consummated on December 31, 1997. This analysis indicated that the transaction
(excluding the effect of any restructuring charges) would be modestly dilutive
to projected earnings per share of CCBF Stock in 1998 assuming CCBF achieves 20%
cost reductions of AFB's operating expense base, would be neutral to projected
earnings per share if 24% cost savings are achieved, and would be accretive to
projected earnings per share if more than 24%
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cost savings are achieved. The analysis also showed that the Merger was dilutive
to the book value and tangible book value per share of CCBF Stock. In this
analysis, Keefe assumed CCBF and AFB performed in accordance with the Keefe's
Equity Research, 1997 and 1998 earning estimates, which were similar to First
Call consensus figures.
SELECTED PEER GROUP ANALYSIS. Keefe compared the financial performance and
market performance of AFB to a group of southeastern regional banks having
between $2.2 billion and $10.5 billion in assets (the "Keefe Bank Group ") and
to a group of southeastern thrifts having between $1.1 billion and $2.8 billion
in assets (the "Keefe Thrift Group "). These comparisons were based on various
financial measures of earnings performance, operating efficiency, capital
adequacy and asset quality and various measures of market performance, including
market/book values, price to earnings and dividend yields to those of these
comparable companies. For purposes of such analysis, the financial information
used by Keefe for AFB and the comparable companies was as of and for the quarter
ended December 31, 1996 and the market price information was as of February 14,
1997. The Keefe Bank Group consisted of the following: Central Fidelity Banks,
Inc.; First American Corp.; First Virginia Banks, Inc.; First Citizens
Bankshares, Inc.; Centura Banks, Inc.; One Valley Bancorp, Inc.; United
Bankshares, Inc.; F&M National Corporation; and, Jefferson Bankshares, Inc. The
Keefe Thrift Group included Great Financial Corporation, First Financial
Holdings, Inc., Maryland Federal Bancorp and Harbor Federal Savings Bank.
Keefe's analysis showed the following concerning the financial performance
of AFB: (i) AFB's return on equity on an annualized basis was 16.10% compared to
an average of 14.00% for Keefe's Bank Group and 8.74% for the Keefe Thrift
Group; (ii) AFB's return on assets on an annualized basis was 1.43% compared to
an average of 1.30% and .75% for the Keefe Bank Group and the Keefe Thrift
Group, respectively; (iii) the net interest margin of AFB on an annualized basis
was 4.21% compared with an average of 4.54% for the Keefe Bank Group and 3.13%
for the Keefe Thrift Group; (iv) efficiency ratio on an annualized basis was
55.08% compared to an average of 58.92% and 60.59% for the Keefe Bank Group and
the Keefe Thrift Group, respectively; (v) AFB's equity to assets ratio was 8.77%
compared to an average of 9.11% and 8.04% for the Keefe Bank Group and the Keefe
Thrift Group, respectively; (vi) the tangible equity to assets ratio of AFB was
8.15% compared to Keefe Bank Group average of 8.30% and the Keefe Thrift Group
average of 7.77%; (vii) AFB's ratio of nonperforming assets to total loans and
other real estate assets was .75% compared to the Keefe Bank Group and Keefe
Thrift Group averages of .57% and .79%, respectively; and, (viii) AFB's ratio of
loan loss reserves to nonperforming loans of AFB was 201% compared to averages
of 402% and 223%, respectively, for the Keefe Bank Group and the Keefe Thrift
Group.
With regard to the market performance of AFB Stock, Keefe's analysis
further showed, among other things, that AFB's price to earnings multiple based
on Keefe's Equity Research 1997 estimated earnings was 12.15 times compared to
an average of 13.38 times for the Keefe Bank Group and 14.70 times for the
thrift peer group; that the price to book value multiple was 2.08, times
compared to averages of 2.01 times and 1.73 times, respectively, for the Keefe
Bank Group and Keefe Thrift Group, respectively; AFB's price to tangible book
value was 2.24 times compared to averages of 2.22 times and 1.73 times,
respectively, for the Keefe Bank Group and the Keefe Thrift Group; and the
dividend yield of AFB Stock was 2.23% compared to the Keefe Bank Group's and the
Keefe Thrift Group's respective averages of 2.68% and 1.73%.
ANALYSIS OF SELECTED MERGER TRANSACTIONS. Keefe reviewed certain financial
data related to a set of recent comparable bank and thrift acquisitions. The set
was comprised of southeast bank and thrift acquisitions announced since January
1, 1995 with an average deal value greater than $100 million and included the
following transactions (identified by acquirer/acquiree): First Union
Corp./Coral Gables Fedcorp; First Union Corp./United Financial Corp. of South
Carolina; First Union Corp./Columbia First FSB; First Union Corp./RS Financial
Corp.; NationsBank Corp./Intercontinental Bank; NationsBank Corp./CSF Holdings;
Huntington Bancshares/Peoples Bank of Lakeland; NationsBank Corp./Bank South
Corp.; Regions Financial/First National Bancorp; South Trust Corp./Bankers First
Corp.; First Union Corp./Society First FSB; Union Planters Corp./Leader
Financial Corp.; NationsBank Corp./TAC Bancshares; Regions Financial/Allied
Bankshares, First Union Corp./Home Financial Corp.; First Virginia Banks/Premier
Bankshares; Huntington Bancshares/Citi-Bancshares; Southern National
Corp./United Carolina Bancshares; and, First Commercial Corp./Southwest
Bancshares (the "Keefe Selected Transactions").
Keefe calculated an average and median for the multiple of the acquirees'
earnings (trailing 12 months) in Keefe Selected Transactions of 17.4 times and
17.0 times compared to a multiple of 20.86 times associated with the CCBF
proposal; an average and median premium to the acquirees' stated book value of
192% and 194% compared to a multiple of 293% associated with the CCBF proposal;
an average and median premium to the acquirees' tangible book value of 205% and
194% compared to a multiple of 315% associated with the CCBF proposal; and, an
average and median premium to the acquirees' core deposits (net of tangible
equity) of 14.1% and 16.1% compared to a 22.56% associated with the CCBF
proposal.
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No company or transaction used as a comparison in the above analyses is
identical to AFB, CCBF or the Merger. Accordingly, an analysis of the results of
the foregoing is not mathematical; rather, it involves complex considerations
and judgments concerning differences in financial and operating characteristics
of the companies and other factors that could affect the public trading value of
the companies to which they are being compared.
CONTRIBUTION ANALYSIS. Keefe analyzed the relative contribution that AFB
would make to the pro forma combined company with respect to certain balance
sheet and income statement items. The contribution analysis showed that in a
merger with CCBF, AFB would contribute approximately 20% of the combined assets,
20% of the combined shareholders' equity and 20% of the estimated earnings of
the two companies (before cost savings). KBW compared these figures to the fact
that AFB shareholders would own approximately 24% of the pro forma shares of
CCBF Stock outstanding following the consummation of the Merger.
The summary contained herein provides a description of the material
analyses prepared by Keefe in connection with the rendering of its opinion, but
does not purport to be a complete description of all analyses performed by Keefe
in connection therewith. The preparation of a fairness opinion is not
necessarily susceptible to partial analysis or summary description. Keefe
believes that its analyses and the summary set forth above must be considered as
a whole and that selecting portions of its analyses without considering all
analyses, or selecting part of the above summary, without considering all
factors and analyses, would create an incomplete view of the processes
underlying the analyses set forth in Keefe's opinion. The ranges of valuations
resulting from any particular analysis described above should not be taken to be
Keefe's view of the actual value of AFB and CCBF. The fact that any specific
analysis has been referred to in the summary above is not meant to indicate that
such analysis was given greater weight than any other analyses.
In performing its analyses, Keefe made numerous assumptions with respect to
industry performance, general business and economic conditions and other
matters, many of which are beyond the control of AFB and CCBF. The analyses
performed by Keefe are not necessarily indicative of actual values or actual
future results which may be significantly more or less favorable than suggested
by such analyses. Such analyses were prepared solely as part of Keefe's analysis
of the fairness, from a financial point of view, of the Exchange Ratio and were
provided to the AFB Board in connection with the delivery of Keefe's oral
opinion. The analyses do not purport to be appraisals or to reflect the prices
at which a company actually might be sold or the prices at which any securities
may trade at the present time or at any time in the future. In addition, as
described above, Keefe's oral opinion, along with its presentation to the AFB
Board, was just one of many factors taken into consideration by the AFB Board in
unanimously approving the Merger Agreement.
Finally, certain projections furnished to Keefe and used by it in certain
of its analyses were prepared by the managements of CCBF and AFB. CCBF and AFB
do not publicly disclose internal management projections of the type provided to
Keefe in connection with its review of the Merger. Such projections were not
prepared with a view towards public disclosure. The projections were based on
numerous variables and assumptions which are inherently uncertain, including,
without limitation, factors related to general economic and competitive
conditions. Accordingly, actual results could vary significantly from those set
forth in such projections.
In connection with its written AFB Fairness Opinion and for purposes of the
inclusion of that opinion in this Prospectus/Joint Proxy Statement, Keefe
performed procedures to update, as necessary, certain of the analyses described
above and reviewed the assumptions on which such analyses described above were
based and the factors considered in connection therewith.
Pursuant to an engagement letter, dated February 19, 1997, between AFB and
Keefe, AFB agreed to pay Keefe a cash fee of $100,000 upon the issuance of
Keefe's AFB Fairness Opinion and $250,000 upon the closing of the Merger.
CCBF FAIRNESS OPINION
CCBF retained Merrill Lynch to act as its financial advisor in connection
with the Merger and related matters based upon its qualifications, expertise and
reputation, as well as Merrill Lynch's prior investment banking relationship and
general familiarity with CCBF. At the February 17, 1997 meeting of the CCBF
Board, Merrill Lynch rendered an opinion to the CCBF Board that, as of such
date, the proposed Exchange Ratio in the Merger was fair from a financial point
of view to CCBF. Merrill Lynch subsequently delivered to the CCBF Board a
written opinion, dated as of the date of this Prospectus/Joint Proxy Statement
(the "CCBF Fairness Opinion"), confirming its opinion of February 17, 1997.
The full text of the CCBF Fairness Opinion which sets forth, among other
things, assumptions made, procedures followed, matters considered, and
limitations on the scope of review undertaken, is attached as Appendix D to this
Prospectus/Joint Proxy Statement and is incorporated herein by reference. CCBF's
shareholders are urged to read the CCBF Fairness
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Opinion in its entirety. This summary of the CCBF Fairness Opinion is qualified
in its entirety by reference to the full text of such opinion.
Merrill Lynch's opinions are directed to the CCBF Board and are not
intended to be, do not constitute, nor should they be construed as, a
recommendation to any shareholder of CCBF as to how such shareholder should vote
at any meeting held in connection with the Merger.
In arriving at its opinion dated as of the date of this Prospectus/Joint
Proxy Statement, Merrill Lynch, among other things: (i) reviewed certain
publicly available business and financial information relating to CCBF and AFB
which it deemed to be relevant; (ii) reviewed certain information, including
financial forecasts, relating to the business, earnings, cash flow, assets,
liabilities and prospects of CCBF and AFB, as well as the amount and timing of
the cost savings and related expenses and revenue enhancements expected to
result from the Merger (the "Expected Synergies") furnished to it by senior
management of CCBF and AFB; (iii) conducted discussions with members of senior
management of CCBF and AFB concerning their respective financial condition,
businesses, earnings, cash flow, assets, liabilities, operations, regulatory
condition, financial forecasts, contingencies and prospects before and after
giving effect to the Merger and the Expected Synergies; (iv) reviewed the market
prices and valuation multiples for the CCBF Stock and the AFB Stock and compared
them with that of certain publicly traded companies which Merrill Lynch deemed
to be relevant; (v) reviewed the results of operations of CCBF and AFB and
compared them with those of certain publicly traded companies which Merrill
Lynch deemed to be relevant; (vi) reviewed the proposed financial terms of the
Merger with the financial terms of certain other transactions which Merrill
Lynch deemed to be relevant; (vii) reviewed the pro forma impact of the Merger;
(viii) reviewed the Merger Agreement and the Stock Option Agreement; and (ix)
reviewed such other financial studies and analyses and took into account such
other matters as Merrill Lynch deemed necessary, including its assessment of
general economic, market and monetary conditions.
In preparing its opinion dated as of the date of this Prospectus/Joint
Proxy Statement, with CCBF's consent, Merrill Lynch assumed and relied on the
accuracy and completeness of all information supplied or otherwise made
available to it, discussed with or reviewed by or for it, or publicly available,
and Merrill Lynch did not assume responsibility for independently verifying such
information or undertake an independent evaluation or appraisal of the assets or
liabilities, contingent or otherwise, of CCBF and AFB or any of their
subsidiaries, nor was Merrill Lynch furnished with any such evaluation or
appraisal. Merrill Lynch is not expert in the evaluation of allowances for loan
losses and, with CCBF's consent, did not make an independent evaluation of the
adequacy of the allowance for loan losses of CCBF or AFB, nor did Merrill Lynch
review any individual credit files relating to CCBF or AFB and, with CCBF's
consent, Merrill Lynch assumed that the aggregate allowance for loan losses for
both CCBF and AFB was adequate to cover such losses and would be adequate on a
pro forma basis for the combined entity. In addition, Merrill Lynch did not
assume any obligation to conduct any physical inspection of the properties or
facilities of CCBF or AFB. With CCBF's consent, Merrill Lynch also assumed and
relied upon the managements of CCBF and AFB as to the reasonableness and
achievability of the financial forecasts (and the assumptions and bases
therefor) provided to, and discussed with, Merrill Lynch. In that regard,
Merrill Lynch assumed and relied, with CCBF's consent, that such forecasts,
including, without limitation, financial forecasts, evaluations of
contingencies, Expected Synergies and projections regarding underperforming and
non-performing assets, net charge-offs, adequacy of reserves, future economic
conditions and results of operations reflected the best currently available
estimates, allocations and judgments of such respective managements as to the
future financial performance of CCBF, AFB or the combined entity, as the case
may be. Merrill Lynch expresses no opinion as to such financial forecast
information or the Expected Synergies or the assumptions on which they were
based. The CCBF Fairness Opinion is predicated on the Merger receiving the tax
and accounting treatment contemplated in the Merger Agreement. Each of Merrill
Lynch's opinions was necessarily based on economic, market and other conditions
as in effect on, and the information made available to Merrill Lynch as of, the
date thereof. No limitations were imposed by CCBF on the scope of Merrill
Lynch's investigation or on the procedures followed by Merrill Lynch in
rendering its opinions.
For purposes of rendering its opinions, Merrill Lynch assumed, in all
respects material to its analysis, that the representations and warranties of
each party to the Merger Agreement and all related documents and instruments
(collectively, the "Documents") contained therein are true and correct, that
each party to the Documents had performed and would perform all of the covenants
and agreements required to be performed by such party under such Documents, and
that all conditions to the consummation of the Merger would be satisfied without
waiver thereof. Merrill Lynch also assumed that, in the course of obtaining the
necessary regulatory or other consents or approvals (contractual or otherwise)
for the Merger, no restrictions, including any divestiture requirements or
amendments or modifications, had been or would be imposed that have had or will
have a material adverse effect on the contemplated benefits of the Merger.
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Certain internal management forecasts, projections and estimates were
furnished to Merrill Lynch in connection with its analysis of the Merger. As a
matter of policy, CCBF does not publicly disclose forecasts, projections and
estimates of this type and such forecasts, projections and estimates were not
prepared with a view towards public disclosure. These forecasts, projections and
estimates were based on numerous variables and assumptions which are inherently
uncertain and which may not be within the control of management, including,
without limitation, general economic, regulatory and competitive conditions.
Accordingly, actual results could vary materially from those set forth in such
forecasts, projections and estimates.
In connection with rendering its February 17, 1997 opinion to the CCBF
Board, Merrill Lynch performed a variety of financial analyses. The summary set
forth below does not purport to be a complete description of the analyses
performed by Merrill Lynch in this regard, although it describes all material
analyses performed by Merrill Lynch. The preparation of a fairness opinion is a
complex process involving various subjective determinations as to the most
appropriate and relevant methods of financial analysis and the application of
these methods to the particular circumstances, and, therefore, such an opinion
is not readily susceptible to a partial analysis or summary description.
Accordingly, notwithstanding the separate factors summarized below, Merrill
Lynch believes that its analyses must be considered in their entirety and that
selecting portions of its analyses and factors considered by it, without
considering all analyses and factors, or attempting to ascribe relative weights
to some or all such analyses and factors, could create an incomplete view of the
evaluation process underlying Merrill Lynch's opinions. In addition, Merrill
Lynch may have given various analyses more or less weight than the other
analyses, it may have used them for different purposes and may have deemed
various assumptions more or less probable than other assumptions, so that the
ranges of valuations resulting from any particular analysis described below
should not be taken to be Merrill Lynch's view of the actual value of CCBF or
AFB. The fact that any specific analysis has been referred to in the summary
below is not meant to indicate that such analysis was given more weight than any
other analysis.
In performing its analyses, Merrill Lynch made numerous assumptions with
respect to industry performance, general business and economic conditions and
other matters, all of which are beyond the control of Merrill Lynch, CCBF and
AFB. The analyses performed by Merrill Lynch are not necessarily indicative of
actual values or actual future results, which may be significantly more or less
favorable than suggested by such analyses. In addition, the analyses do not
purport to be appraisals or to reflect the prices at which any securities of
CCBF or AFB may trade at the present time or at any time in the future. Such
analyses were prepared solely as part of Merrill Lynch's analysis of the
fairness of the Exchange Ratio to CCBF from a financial point of view and were
provided to the CCBF Board in connection with the delivery of Merrill Lynch's
opinions. With respect to the comparison of selected companies analysis
summarized below, no public company utilized as a comparison is identical to
CCBF or AFB, and such analyses necessarily involve complex considerations and
judgments concerning the differences in financial and operating characteristics
of the companies and other factors that could affect the public trading values
of the companies concerned.
The following is a summary of the material analyses presented by Merrill
Lynch to the CCBF Board in connection with its February 17, 1997 opinion, which,
as indicated above, was confirmed as of the date hereof.
(a) OFFER VALUATION. Merrill Lynch reviewed the terms of the proposed
Merger, including the Exchange Ratio and the aggregate transaction value.
Merrill Lynch reviewed the implied value of the consideration offered based upon
the average closing share price of CCBF Stock over the five-day period ended
February 14, 1997 (the last trading day prior to the announcement of the Merger)
(the "CCBF Five-Day Average"), which indicated that the implied value of the
consideration offered in the CCBF proposal was approximately $28.86 per share of
AFB Stock, representing a 34% premium to the February 14, 1997 AFB Stock closing
market price of $21.50 per share (the "AFB February 14 Closing Price "), or a
total transaction value of approximately $325.1 million. Further, Merrill Lynch
reviewed the implied premium offered by the Exchange Ratio based upon the CCBF
Five-Day Average compared to the average share price of AFB Stock for the 30-day
period ended February 14, 1997 (38.7%) and the high share price of AFB Stock for
the 52-week period ended February 14, 1997 (28.3%). In addition, Merrill Lynch
reviewed the implied value of the consideration offered based upon the closing
share price of CCBF Stock on February 14, 1997 and the average closing share
prices of CCBF Stock for each of the 5-day, 10-day, 15-day, 20-day, 30-day,
60-day and 90-day periods ending on February 14, 1997, which resulted in a range
of implied values per share of AFB Stock of $28.42 to $30.26. Based on the
aggregate consideration offered using the CCBF Five-Day Average, Merrill Lynch
calculated the multiplies of implied purchase price in the contemplated
transaction to CCBF's fully diluted book value per share, fully diluted tangible
book value per share, earnings per share for the year ended December 31, 1996
and estimated 1997 and 1998 earnings per share as published by First Call. This
analysis resulted in the following multiples: an implied purchase price to fully
diluted book value per share multiple of 2.81x; an implied purchase price to
fully diluted tangible book value per share multiple of 3.03x; an implied
purchase price to earnings per share for the year ended December 31, 1996
multiple of 18.04x; and an implied purchase price multiple to estimated 1997 and
1998 earnings per share as published by First Call of 16.40x and 15.04x,
respectively.
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(b) PRO FORMA MERGER ANALYSIS. Based on projections provided by CCBF and
AFB, Merrill Lynch analyzed certain pro forma effects resulting from the Merger.
This analysis indicated that the transaction would be dilutive to estimated
earnings per share of CCBF Stock in 1997 and slightly accretive to earnings per
share in 1998 and 1999 (before considering potential revenue enhancements
anticipated to be achievable after the Merger), and that the Merger was dilutive
to CCBF's book value per share and tangible book value per share.
(c) CONTRIBUTION ANALYSIS. Merrill Lynch reviewed the relative
contributions to be made by CCBF and AFB to the combined entity. The financial
and operating information reviewed in such analysis included total assets, total
loans (net), investment securities, total deposits, common equity, tangible
common equity, market capitalization, net income for the year ended December 31,
1996 and estimated net income for the years ending December 31, 1997 and 1998
(calculated as the product of the number of fully diluted shares outstanding and
management earnings per share estimates). Except as indicated in the preceding
sentence, such data was as of December 31, 1996, was given on a pro forma basis
for a pending acquisition by CCBF, and, in the case of AFB, was given prior to a
pre-tax restructuring charge of $10.0 million. This analysis showed that, based
upon the Exchange Ratio, the shareholders of CCBF would own approximately 76.00%
of the outstanding shares the combined company immediately following the Merger
and that CCBF would be contributing 80.83% of total assets, 81.96% of total
loans (net), 68.23% of investment securities, 82.78% of total deposits, 81.10%
of common equity, 81.28% of tangible common equity, 81.23% of market
capitalization, 81.14% of net income for the year ended December 31, 1996 and
80.12% and 79.91% of estimated net income for the calendar years ending December
31, 1997 and 1998, respectively.
(d) DISCOUNTED DIVIDEND STREAM ANALYSIS. Using a discounted dividend stream
analysis, Merrill Lynch estimated the present value of the future streams of
after-tax cash flows that AFB could produce on a stand-alone basis from 1997
through 2001 and distribute to AFB's shareholders ("Dividendable Net Income").
In this analysis, Merrill Lynch assumed that AFB performed in accordance with
the earnings forecasts provided to Merrill Lynch by CCBF's management, assumed
projected cost savings would be fully phased-in in 1998 and projected the
maximum dividends that would permit AFB's tangible common equity to tangible
asset ratio to be maintained at a minimum 6.5% level. Merrill Lynch calculated
the sum of (i) the terminal values per share of AFB Stock based on assumed
multiples of AFB's projected 2002 net income (plus goodwill amortization)
ranging from 10.00x to 12.00x plus (ii) the projected 1997-2001 five-year
Dividendable Net Income streams per share, in each case, discounted to present
values at assumed discount rates ranging from 12.00% to 13.00%. This discounted
dividend stream analysis indicated a reference range of $27.00 to $31.65 per
share of AFB Stock before considering any revenue enhancements expected to
result from the Merger and a reference range of $27.97 to $32.81 per share of
AFB Stock assuming 50% of projected revenue enhancements were to be achieved in
1998 and 100% were to be achieved by 1999. The analysis was based upon the
projections of CCBF's management, which were based upon many factors and
assumptions, many of which are beyond the control of CCBF. As indicated above,
this analysis did not purport to be indicative of actual future results and did
not purport to reflect the prices at which shares of AFB Stock may trade.
Discounted cash flow analysis was included because it is a widely used valuation
methodology, but the results of such methodology are highly dependent upon the
numerous assumptions that must be made, including earnings growth rates,
dividend payout rates, terminal values and discount rates.
Merrill Lynch also estimated the present value of the Dividendable Net
Income that CCBF could produce on a stand-alone basis from 1997 through 2001. In
this analysis, Merrill Lynch assumed that CCBF performed in accordance with the
earnings forecasts provided to Merrill Lynch by CCBF's management, did not give
effect to any potential cost savings or revenue enhancements relating to the
Merger and assumed that capital in excess of a tangible equity to tangible asset
ratio of 6.50% was dividendable. Merrill Lynch calculated the sum of (i) the
terminal values per share of CCBF Stock based on assumed multiples of CCBF's
projected 2002 net income (plus goodwill amortization) ranging from 10.00x to
12.00x plus (ii) the projected 1997-2001 five-year Dividendable Net Income
streams per share, in each case, discounted to present values at assumed
discount rates ranging from 12.00% to 13.00%. This discounted dividend stream
analysis indicated a reference range of $63.64 to $74.32 per share of CCBF
Stock. The analysis was based upon projections of CCBF's senior management,
which were based upon many factors and assumptions, many of which were beyond
the control of CCBF. As indicated above, this analysis did not purport to be
indicative of actual future results and did not purport to reflect the prices at
which shares of CCBF Stock may trade before or after the Merger.
(e) ANALYSIS OF SELECTED ACQUISITION TRANSACTIONS. Merrill Lynch reviewed
publicly available information regarding selected bank acquisitions in the
United States with a value of greater than $100 million which occurred after
January 1, 1996. Merrill Lynch calculated the premium represented by the
purchase price paid in such acquisitions to market price, earnings per share,
book value per share, tangible book value per share and total deposits of the
acquired bank, which Merrill Lynch determined resulted in relevant ranges of
premiums of (i) with respect to market price, 0.88x to 1.68x, with a mean of
1.34x and a median of 1.29x (resulting in imputed values per share of AFB Stock
of $18.92, $36.12, $28.81 and $27.74,
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respectively); (ii) with respect to earnings per share, 7.07x to 24.52x, with a
mean of 16.90x and a median of 17.41x (resulting in imputed values per share of
AFB Stock of $11.31, $39.23, $27.04 and $27.86, respectively); (iii) with
respect to book value per share, 1.20x to 2.89x, with a mean of 2.22x and a
median of 2.29x (resulting in imputed values per share of AFB Stock of $12.32,
$29.66, $22.79 and $23.50, respectively); (iv) with respect to tangible book
value per share, 1.36x to 4.09x, with a mean of 2.40x and a median of 2.44x
(resulting in imputed values per share of AFB Stock of $12.97, $39.00, $22.89
and $23.27, respectively) and (v) with respect to total deposits, 3.14% to
23.52%, with a mean of 14.15% and a median of 14.63% (resulting in imputed
values per share of AFB Stock of $12.29, $30.14, $21.93 and $22.35,
respectively).
Merrill Lynch also reviewed publicly available information regarding
selected thrift acquisitions in the United States with a value of greater than
$100 million which occurred after January 1, 1996. Merrill Lynch calculated the
premium represented by the purchase price paid in such acquisitions to market
price, earnings per share, book value per share, tangible book value per share
and total deposits of the acquired bank, which Merrill Lynch determined resulted
in relevant ranges of premiums of (i) with respect to market price, 0.97x to
1.63x, with a mean of 1.26x and a median of 1.23x (resulting in imputed values
per share of AFB Stock of $20.86, $35.05, $27.09 and $26.45, respectively); (ii)
with respect to earnings per share, 11.97x to 24.69x, with a mean of 16.72x and
a median of 16.57x (resulting in imputed values per share of AFB Stock of
$19.15, $39.50, $26.75 and $26.51, respectively); (iii) with respect to book
value per share, 0.97x to 2.11x, with a mean of 1.64x and a median of 1.70x
(resulting in imputed values per share of AFB Stock of $9.96, $21.66, $16.83 and
$17.45, respectively); (iv) with respect to tangible book value per share, 1.08x
to 2.60x, with a mean of 1.77x and a median of 1.71x (resulting in imputed
values per share of AFB Stock of $10.30, $24.79, $16.88 and $16.31,
respectively) and (v) with respect to total deposits, 2.94% to 17.52%, with a
mean of 7.85% and a median of 6.41% (resulting in imputed values per share of
AFB Stock of $12.11, $24.89, $16.41 and $15.15, respectively).
No company or transaction used in the above analysis as a comparison is
identical to AFB or the contemplated transaction. Accordingly, an analysis of
the results of the foregoing necessarily involves complex considerations and
judgments concerning differences in financial and operating characteristics of
the companies and other factors that could affect the value of the companies and
other factors that could affect the value of the companies to which they are
being compared. Mathematical analysis (such as determining the mean or median)
is not, in itself, a meaningful method of using comparable data.
(f) COMPARISON OF SELECTED COMPANIES. Merrill Lynch reviewed and compared
certain financial information, ratios, and public market multiples relating to
AFB to the publicly available corresponding data compiled by First Call for a
group of selected banks and a group of selected thrifts, in each case with
Merrill Lynch deemed to be relevant. The group of selected banks (the "Merrill
Lynch-AFB Selected Banks") consisted of Alabama National BanCorp, BancorpSouth,
Carolina First Corporation, Capital Bancorp, City Holding Company, F&M National
Corporation, George Mason Bankshares, Hancock Holding Company, Horizon Bancorp,
Jefferson Bankshares, MainStreet BankGroup, Peoples Holding Company, Republic
Bancshares, Simmons First National Corp, Triangle Bancorp, United Bankshares,
First United Bankshares and WesBanco. The group of selected thrifts (the
"Merrill Lynch-AFB Selected Thrifts") consisted of BankAtlantic Bancorp,
BankUnited Financial, First Financial Holdings, Fidelity Bankshares, First Palm
Beach, First Liberty Financial, HFNC Financial, Life Bancorp, Magna Bancorp and
Virginia First Financial.
Based on a review of such information for the Merrill Lynch-AFB Selected
Banks, Merrill Lynch determined: (i) that, with respect to the ratio of
non-performing assets to total assets, analysis of the Merrill Lynch-AFB
Selected Banks showed a mean of 0.58%, and analysis of the Merrill Lynch-AFB
Selected Thrifts showed a mean of 1.17%, compared to 0.51% for AFB as of
December 31, 1996; (ii) that, with respect to the ratio of non-performing loans
to total loans, analysis of the Merrill Lynch-AFB Selected Banks showed a mean
of 0.63%, and analysis of the Merrill Lynch-AFB Selected Thrifts showed a mean
of 1.20%, compared to 0.78% for AFB as of December 31, 1996; (iii) that, with
respect to the ratio of loan loss reserves to non-performing loans, analysis of
the Merrill Lynch-AFB Selected Banks showed a mean of 359.22%, and analysis of
the Merrill Lynch-AFB Selected Thrifts showed a mean of 103.06%, compared to
159.95% for AFB as of December 31, 1996; (iv) that, with respect to the ratio of
loan loss reserves to non-performing assets, analysis of the Merrill Lynch-AFB
Selected Banks showed a mean of 268.79%, and analysis of the Merrill Lynch-AFB
Selected Thrifts showed a mean of 78.78%, compared to 150.52% for AFB as of
December 31, 1996; (v) that, with respect to the ratio of common equity to total
assets, analysis of the Merrill Lynch-AFB Selected Banks showed a mean of 9.26%,
and analysis of the Merrill Lynch-AFB Selected Thrifts showed a mean of 10.17%,
compared to 8.77% for AFB as of December 31, 1996; (vi) that, with respect to
the ratio of tangible common equity to tangible assets, analysis of the Merrill
Lynch-AFB Selected Banks showed a mean of 8.86%, and analysis of the Merrill
Lynch-AFB Thrifts showed a mean of 9.90%, compared to 8.21% for AFB as of
December 31, 1996; (vii) that the Merrill Lynch-AFB Selected Banks had a mean
Tier 1 capital ratio of 13.76% and the Merrill Lynch-AFB Selected Thrifts had a
mean Tier 1 capital ratio of 16.57%, compared to 12.47% for AFB as of December
31, 1996; (viii) that the Merrill Lynch-AFB Selected Banks had a mean total
capital ratio of 15.08%, and the Merrill Lynch-AFB
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Selected Thrifts had a mean total capital ratio of 17.67%, compared to 13.72%
for AFB as of December 31, 1996; (ix) that the Merrill Lynch-AFB Selected Banks
had a mean return on average assets of 1.15%, and the Merrill Lynch-AFB Selected
Thrifts had a mean return on average assets of 1.02%, compared to 1.34% for AFB
for the twelve-month period ended December 31, 1996; (x) that the Merrill
Lynch-AFB Selected Banks had a mean return on average equity of 12.38%, and the
Merrill Lynch-AFB Selected Thrifts had a mean return on average equity of
10.98%, compared to 16.37% for AFB for the twelve-month period ended December
31, 1996; (xi) that the Merrill Lynch-AFB Selected Banks had a mean net interest
margin of 4.83%, and the Merrill Lynch-AFB Selected Banks had a mean net
interest margin of 3.71%, compared to 4.29% for AFB for the twelve month period
ended December 31, 1996; (xii) that the Merrill Lynch-AFB Selected Banks had a
mean efficiency ratio (defined as noninterest expense divided by the sum of
noninterest income and net interest income before provision for loan losses) of
61.39%, and the Merrill Lynch-AFB Selected Thrifts had a mean efficiency ratio
of 60.10%, compared to 53.24% for the twelve-month period ended December 31,
1996; (xiii) that the mean estimated 1996 and 1997 earnings per share multiples
for the Merrill Lynch-AFB Selected Banks and the mean for the Merrill Lynch-AFB
Selected Thrifts (based on February 14, 1997 closing market prices and projected
earnings per share for the applicable year ended December 31 as reported by
First Call) were 15.06x and 13.35x, and 14.67x and 12.16x, respectively,
compared to 13.44x and 12.22x for AFB; (xiv) that the mean book value multiples
for the Merrill Lynch-AFB Selected Banks and the mean for the Merrill Lynch-AFB
Selected Thrifts (based on February 14, 1997 closing market prices and book
value at December 31, 1996) were 1.85x and 1.49x, respectively, compared to
2.04x for Merrill Lynch-AFB Selected Banks and the mean for Merrill Lynch-AFB
Selected Thrifts (based on February 14, 1997 closing market prices and tangible
book value at December 31, 1996) were 1.96x and 1.56x, respectively, compared to
2.20x for AFB; (xv) that the mean tangible book value for the and (xvi) that the
mean dividend yield for the Merrill Lynch-AFB Selected Banks and the mean for
the Merrill Lynch-AFB Selected Thrifts (based on February 14, 1997 closing
market prices and the regular dividend rates declared as of December 31, 1996)
were 2.39% and 2.12%, respectively, compared to 2.21% for AFB.
Merrill Lynch also reviewed and compared certain financial information,
ratios and public market multiples relating to CCBF to the publicly available
corresponding data for a peer group consisting of BancorpSouth; Centura Banks,
Inc.; Colonial BancGroup; Deposit Guaranty Corporations; First Commercial;
National Commerce Bancorporation; One Valley Bancorp, Inc; and Trustmark
Corporation which Merrill Lynch deemed to be relevant (collectively the "CCBF
Selected Companies").
Based on a review of such information for the CCBF Selected Companies,
Merrill Lynch determined: (i) that, with respect to the ratio of non-performing
assets to total assets, analysis of the CCBF Selected Companies showed a mean of
0.29%, a low of 0.00% and a high of 0.65%, compared to 0.24% for CCBF as of
December 31, 1996; (ii) that, with respect to the ratio of non-performing loans
to total loans, analysis of the CCBF Selected Companies showed a mean of 0.33%,
a low of 0.00% and a high of 0.59%, compared to 0.30% for CCBF as of December
31, 1996; (iii) that, with respect to the ratio of loan loss reserves to
non-performing loans, analysis of the CCBF Selected Companies showed a mean of
407.61%, a low of 212.54% and a high of 750.89%, compared to 434.94% for CCBF as
of December 31, 1996; (iv) that, with respect to the ratio of loan loss reserves
to non-performing assets, analysis of the CCBF Selected Companies showed a mean
of 371.39%, a low of 148.03% and a high of 619.59%, compared to 386.33% for CCBF
as of December 31, 1996; (v) that, with respect to the ratio of common equity to
total assets, analysis of the CCBF Selected Companies showed a mean of 8.48%, a
low of 7.00% and a high of 10.09%, compared to 8.88% for CCBF as of December 31,
1996; (vi) that, with respect to the ratio of tangible common equity to tangible
assets, analysis of the CCBF Selected Companies showed a mean of 7.92%, a low of
6.39% and a high of 9.82%, compared to 8.39% for CCBF as of December 31, 1996;
(vii) that the CCBF Selected Companies had a mean Tier 1 capital ratio of
12.95%, a low of 9.08% and a high of 17.56%, compared to 11.56% for CCBF as of
December 31, 1996; (viii) that the CCBF Selected Companies had a mean total
capital ratio of 14.27%, a low of 10.56% and a high of 18.82%, compared to
13.67% for CCBF as of December 31, 1996; (ix) that the CCBF Selected Companies
had a mean return on average assets of 1.28%, a low of 1.14% and a high of
1.51%, compared to 1.39% for CCBF for the twelve-month period ended December 31,
1996; (x) that the CCBF Selected Companies had a mean return on average equity
of 15.20%, a low of 13.12% and a high of 18.86%, compared to 15.67% for CCBF for
the twelve-month period ended December 31, 1996; (xi) that the CCBF Selected
Companies had a mean net interest margin of 4.48%, a low of 3.75% and a high of
4.83%, compared to 4.69% for CCBF for the twelve-month period ended December 31,
1996; (xii) that the CCBF Selected Companies had a mean efficiency ratio of
58.82%, a low of 51.68% and a high of 63.83%, compared to 53.45% for CCBF for
the twelve-month period ended December 31, 1996; (xiii) that the high, mean and
low 1996 and estimated 1997 price to earnings multiples for the CCBF Selected
Companies (based on February 14, 1997 closing market prices and earnings per
share for the applicable year ended December 31 as reported by First Call) were
19.02x, 14.31x and 6.83x and 16.76x, 13.06x and 6.30x, respectively, compared to
13.99x and 12.83x, respectively, for CCBF; (xiv) that the high, mean and low
book value multiples for the CCBF Selected Companies (based on February 14, 1997
closing market prices and book value per share at
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December 31, 1996) were 3.40x, 2.14x and 1.13x, respectively, compared to 2.14x
for CCBF; (xv) that the high, mean and low tangible book value multiples for the
CCBF Selected Companies (based on February 14, 1997 closing market prices and
tangible book value per share at December 31, 1996) were 3.45x, 2.31x and 1.25x,
respectively, compared to 2.28x for CCBF; and (xvi) that the high, mean and low
dividend yield for the CCBF Selected Companies (based on February 14, 1997
closing market prices and the regular dividend rate declared as of December 31,
1996) were 2.88%, 2.47%, 2.08%, respectively, compared to 2.59% for CCBF.
In connection with its opinion dated the date of this Prospectus/Joint
Proxy Statement, Merrill Lynch performed procedures to update, as necessary,
certain of the analyses described above and reviewed the assumptions on which
such analyses described above were based and the factors considered in
connection therewith. Merrill Lynch did not perform any analyses in addition to
those described in updating its February 17, 1997 opinion.
Merrill Lynch was retained by the CCBF Board as an independent contractor
to act as financial advisor to CCBF with respect to the Merger and will receive
a fee for its services, a significant portion of which is contingent upon the
consummation of the Merger. Merrill Lynch is a nationally recognized investment
banking firm which, among other things, regularly engages in the valuation of
businesses and securities, including banking institutions, in connection with
mergers and acquisitions. Merrill Lynch in the past may have provided financial
advisory, investment banking and other services to CCBF and received customary
fees for the rendering of such services. In addition, in the ordinary course of
its securities business, Merrill Lynch may actively trade debt and/or equity
securities of CCBF and AFB, and their respective affiliates, for its own account
and the accounts of its customers, and Merrill Lynch, therefore, may from time
to time hold a long or short position in such securities.
CCBF and Merrill Lynch have entered into a letter agreement, dated February
3, 1997, relating to the services to be provided by Merrill Lynch in connection
with the Merger. CCBF agreed to compensate Merrill Lynch as follows: (i) a fee
of $150,000, which was paid in cash upon execution of the letter agreement; (ii)
an additional fee of $150,000 which was paid in cash upon execution of the
Merger Agreement; and (iii) an additional fee of $200,000 payable upon
consummation of the Merger (or of certain similar business combination
transactions between CCBF and AFB). CCBF also agreed to reimburse Merrill Lynch
for its reasonable out-of-pocket expenses incurred in connection with its
advisory work, including the reasonable fees and disbursements of its legal
counsel, and to indemnify Merrill Lynch against certain liabilities relating to
or arising out of the Merger, including liabilities with might arise under the
federal securities laws.
REQUIRED SHAREHOLDER APPROVALS
The Merger Agreement must be approved by CCBF's shareholders and AFB's
shareholders. The North Carolina Business Corporation Act ("NCBCA") does not
require that CCBF's shareholders vote on or approve the Merger Agreement.
However, the rules of the NYSE (which apply to CCBF by virtue of the listing of
CCBF Stock on the NYSE) require that the Merger Agreement be approved by the
affirmative vote of the holders of at least a majority of the shares of CCBF
Stock represented, in person and by proxy, and entitled to be voted at the CCBF
Special Meeting and that a majority of all shares of CCBF Stock be represented,
in person or by proxy, at the CCBF Special Meeting and vote on such proposal.
Under the OTS Merger Law, the affirmative vote at the AFB Special Meeting of the
holders of at least two-thirds of the shares of AFB Stock entitled to be voted
is required for AFB shareholders to approve the Merger Agreement. The Merger
Agreement provides that the receipt of these approvals of CCBF's and AFB's
shareholders are conditions to consummation of the Merger. (See " -- Conditions
to the Merger.")
REQUIRED REGULATORY APPROVALS
The Merger is subject to approval by the Federal Reserve under the BHCA.
The formation of Interim FSB and its merger into AFB are subject to the approval
of the OTS. Both such approvals have been received.
Under the BHCA, the Federal Reserve was required, in approving a
transaction such as the Merger, to take into consideration, among other factors,
the financial and managerial resources and future prospects of the combined
company and its financial institution subsidiaries and the convenience and needs
of the communities served. Under the BHCA, the Federal Reserve was prohibited
from approving the Merger if it would result in a monopoly or be in furtherance
of any combination or conspiracy to monopolize or to attempt to monopolize the
business of banking in any part of the United States, or if its effect in any
section of the country may be substantially to lessen competition or to tend to
create a monopoly, or if it would in any other manner result in a restraint of
trade, unless the Federal Reserve found that the anti-competitive effects of the
Merger were clearly outweighed in the public interest by the probable effect of
the transaction in meeting the convenience and needs of the communities served.
In addition, under the Community Reinvestment Act of 1977, as amended, the
Federal
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Reserve was required to take into account the record of performance of CCBF's
financial institution subsidiaries and AFB in meeting the credit needs of the
entire communities, including low- and moderate-income neighborhoods, served by
such institutions.
CCBF and AFB are not aware of any governmental approvals or actions that
may be required for consummation of the Merger except as described above. Should
any such approval or action be required, it is presently contemplated that such
approval or action would be sought. There is no assurance, however, that any
such approval or action, if needed, could be obtained and would not be
conditioned in a manner that would cause the parties to abandon the Merger.
CONDUCT OF BUSINESS PENDING THE MERGER
The Merger Agreement provides that until the Effective Time, except as
provided in the Merger Agreement, AFB will conduct, and will cause each of its
subsidiaries to conduct, its business in the usual, regular and ordinary course
and take no action which would materially adversely affect the ability of either
CCBF or AFB to obtain any governmental approvals required for the Merger or the
other transactions contemplated by the Merger Agreement without the imposition
of conditions or restrictions of a type set forth in the Merger Agreement or to
perform its covenants and agreements under the Merger Agreement. AFB is also
obligated to preserve intact its business organizations and assets, to use its
reasonable efforts to retain the services of its officers and key employees, and
to consult with CCBF prior to approving a new loan in excess of 25% of AFB's
legal lending limit and prior to purchasing or selling any asset with a cost or
book value, as applicable, in excess of $250,000. CCBF has agreed that, until
the Effective Time, it will continue to conduct its business and the business of
its subsidiaries in a manner designated, in its reasonable judgment, to enhance
the long-term value of the CCBF Stock and the business prospects of CCBF and
subsidiaries and to preserve intact the core business and goodwill of CCBF and
its subsidiaries.
In addition to other restrictions described elsewhere herein, the Merger
Agreement generally provides that, prior to the Effective Time, AFB shall
refrain from taking certain actions, except with CCBF's prior written consent,
including (a) amending its federal stock charter (the "AFB Charter") or Bylaws,
(b) incurring any additional debt obligation or other obligation for borrowed
funds in excess of $250,000 except in the ordinary course of its business
consistent with past practices, (c) repurchasing or redeeming any AFB Stock or
any other securities of AFB convertible into AFB Stock, (d) declaring or paying
any dividend or making any other distribution to AFB's shareholders other than
the payment of regular quarterly dividends not in excess of $.12 per share of
AFB Stock, (e) other than pursuant to the AFB Option Plans or the CCBF Option,
issuing, pledging, or authorizing the issuance of any capital stock of AFB or
any option, warrant or other right to acquire capital stock of AFB, (f)
adjusting, splitting, combining or reclassifying the capital stock of AFB or of
any AFB subsidiary or issuing or authorizing the issuance of any securities in
respect of or in substitution for shares of AFB Stock, or selling, leasing,
mortgaging or otherwise disposing of, or otherwise encumbering, any shares of
capital stock of any AFB subsidiary, (g) purchasing, making an investment in, or
agreeing to purchase or invest in the securities or assets of any other entity
(other than certain U.S. Treasury and U.S. governmental agency securities or in
connection with foreclosures in the ordinary course of business and investments
in subsidiaries of AFB, (h) increasing the compensation or benefits of its
directors, officers or employees except in accordance with past practices or as
required by applicable law (i) making any severance or termination payments
other than pursuant to an agreement existing on the date of the Merger
Agreement, (j) accelerating voluntarily the vesting of any AFB Options, other
stock-based compensation or employee benefits, (k) entering into or amending any
employment agreement that cannot be terminated by AFB without liability at any
time on or after the Effective Time, (l) adopting new benefit plans or
terminating or amending existing benefit plans except as required by law, (m)
making any change in AFB's tax or accounting methods or internal accounting
controls systems except as required by applicable law, regulatory accounting
requirements or generally accepted accounting principles, (n) commencing any
litigation other than in accordance with past practice or settling any material
litigation, or (o) except in the ordinary course of business, modifying,
amending or terminating any material contract or waiving, compromising or
assigning any material rights or claims.
AFB has agreed in the Merger Agreement that neither it, any of its
subsidiaries nor their respective directors, officers or representatives will
solicit any individual, corporation, or other entity to effect or propose an
Acquisition Proposal; provided, however, that if AFB's Board of Directors, after
consultation with and receipt of advice from AFB's outside legal counsel,
reasonably determines in good faith that its fiduciary duties requires such
Board to provide non-public information in connection with, to negotiate with
respect to, or to enter into agreement with respect to any Acquisition Proposal,
AFB may take such action. AFB may communicate with its shareholders concerning
an Acquisition Proposal and must notify CCBF of any Acquisition Proposal and all
developments related thereto.
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CCBF has agreed in the Merger Agreement that, except with the prior written
consent of AFB, it will not, prior to the Effective Time, (a) amend its Restated
Articles of Incorporation, as amended (the "CCBF Restated Articles"), or Bylaws
in any manner adverse to the holders of AFB Stock compared to the holders of
CCBF Stock, or (b) issue, sell, authorize the issuance or obligate itself to
issue any shares of the capital stock of CCBF or any CCBF subsidiary, or any
option, warrant or right to acquire any such shares, other than pursuant to the
Merger Agreement, its stock option plans in existence as of the date of the
Merger Agreement and options outstanding thereunder as of such date, or options
subsequently granted under such stock option plans in accordance with past
practice, and other than in connection with acquisitions of depository or non-
depository institutions or companies respecting which the effective dates of the
consummation of such transactions occur subsequent to the Effective Time, or (c)
take any action which would materially adversely affect the ability of either
CCBF or AFB to obtain any governmental approvals required for the Merger or the
other transactions contemplated by the Merger Agreement or to perform its
covenants and agreements under the Merger Agreement.
DIVIDENDS
Under the Merger Agreement, AFB has agreed that it will not declare or pay
any dividends other than such regular quarterly dividends as may be in
accordance with its ordinary and customary practices and as do not exceed $.12
per share of AFB Stock. Further, the Merger Agreement provides that any dividend
declared or payable on the shares of AFB Stock for the quarterly period during
which the Effective Time occurs shall be declared only if the corresponding
record date for the quarterly dividend of CCBF Stock occurs before the Effective
Time. This provision is designed to ensure the current holders of AFB Stock will
only receive one dividend for the quarter in which the Effective Time occurs,
whether from AFB or CCBF, unless otherwise agreed upon in writing by CCBF and
AFB.
THE STOCK OPTION AGREEMENT
In connection with, and as an inducement to CCBF's willingness to enter
into the Merger Agreement, CCBF and AFB executed the Stock Option Agreement
pursuant to which AFB granted CCBF the CCBF Option to acquire up to the full
amount of the Option Shares (i.e., 2,188,180 shares of AFB's authorized, but
unissued, Common Stock, as such number may be adjusted under the Stock Option
Agreement) at a purchase price of $25.00 per share, as such price may be
adjusted under the Stock Option Agreement (the "Purchase Price"). The Option
Shares were equal to 19.9% of the AFB Stock outstanding on February 17, 1997
(16.6% of the total of the Option Shares and such AFB Stock). The Stock Option
Agreement provides that should AFB issue any additional shares of its Common
Stock other than pursuant to AFB Options outstanding under the AFB Option Plans
on February 17, 1997, the number of Option Shares shall be adjusted to maintain
the foregoing percentages.
If CCBF is not in material breach of the Stock Option Agreement or the
Merger Agreement and no injunction or other order against delivery of the Option
Shares is in effect, CCBF may exercise the CCBF Option, in whole or in part, at
any time and from time to time following the occurrence of a Purchase Event. A
Purchase Event is (a) AFB, without CCBF's consent, authorizing, recommending,
publicly proposing or publicly announcing an intention to authorize, recommend
or propose, or entering into an expression of intent or agreement with any
person other than CCBF, to effect an "Acquisition Transaction" (as defined
below), or (b) the acquisition by any person other than CCBF of beneficial
ownership, or the right to acquire beneficial ownership, of 20% or more of the
outstanding shares of AFB Stock. An Acquisition Transaction is (i) a merger,
consolidation or similar transaction involving AFB or any of its subsidiaries,
(ii) the sale, lease, exchange or other disposition of 20% or more of the
consolidated assets of AFB and its subsidiaries without the consent of CCBF; or
(iii) the issuance, sale or other disposition (including by way of a merger,
consolidation, share exchange or any similar transaction) of securities having,
or securities convertible into, or exchangeable for, securities having, 20% or
more of the voting power of the outstanding voting securities of AFB or any of
its subsidiaries.
Under the Stock Option Agreement, the CCBF Option will terminate upon the
earliest to occur of (a) the Effective Time; (b) the termination of the Merger
Agreement other than as a result of AFB's willful breach of any representation,
warranty or covenant (a "Default Termination") prior to the occurrence of a
Purchase Event or a Preliminary Purchase Event; and (c) twelve months after the
termination of the Merger Agreement (other than pursuant to a Default
Termination) following the occurrence of a Purchase Event or a Preliminary
Purchase Event. A Preliminary Purchase Event is generally (i) the commencement
by any third party of a tender or exchange offer to purchase 15% or more of the
AFB Stock, (ii) the failure of the shareholders of AFB to approve the Merger
Agreement, (iii) the failure to hold the AFB Special Meeting, or (iv) the
withdrawal or modification, in a manner adverse to CCBF, by the Board of
Directors of AFB of such Board's recommendation to AFB's shareholders contained
herein that they approve the Merger Agreement.
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Upon the occurrence of a Repurchase Event and during the subsequent
twelve-month period, CCBF may require AFB to repurchase the CCBF Option and all
shares of the Common Stock of AFB purchased pursuant to CCBF Option ("Repurchase
Rights"). A Repurchase Event is generally (i) the acquisition of actual
ownership or control by a third party of 50% or more of the outstanding AFB
Stock, (ii) merger or consolidation of AFB into any other entity, (iii) the
merger of another entity into AFB with the result that (A) the AFB Stock shall
be exchanged for cash or the securities of any other person or (B) the AFB Stock
outstanding immediately prior to the merger constitutes less than 50% of the
outstanding capital stock of the merged company, or (iv) the sale or other
transfer by AFB of all or substantially all of its assets to a third party.
In the event CCBF exercises its Repurchase Rights, the aggregate purchase
price paid to CCBF by AFB would be the sum of (i) the aggregate Purchase Price
paid by CCBF for shares of AFB's Common Stock acquired by it under the CCBF
Option; (ii) the excess of the "Applicable Price" (as defined below) over the
Purchase Price multiplied by the number of shares of AFB's Common Stock with
respect to which the CCBF Option has not been exercised, and (iii) the excess of
the Applicable Price over the Purchase Price paid (or, in the case of Option
Shares with respect to which the CCBF Option has been exercised but the purchase
thereof has not occurred) payable by CCBF for shares of AFB's Common Stock with
respect to which the CCBF Option has been exercised, multiplied by the number of
such shares. Applicable Price means the highest of (i) the highest price per
share of AFB Stock paid in a Repurchase Event in which a third party acquired
ownership or control of 50% or more of the AFB Stock, (ii) the price per share
of AFB Stock paid in connection with a Repurchase Event involving the merger or
consolidation of AFB with or into, or the sale of all or substantially all of
the assets to, another entity, or (iii) the highest closing price per share of
AFB Stock quoted on the Nasdaq National Market during the 60 business days
preceding CCBF's exercise of its Repurchase Rights. In those instances involving
an asset sale as a Repurchase Event or the payment of value by the applicable
third party in a Repurchase Event other than in the form of cash, the Stock
Option Agreement provides for determinations of the Applicable Price by an
investment banking firm acceptable to CCBF and AFB.
ACCOUNTING TREATMENT
The Merger Agreement requires that the Merger be treated as a
"pooling-of-interests" for accounting purposes. Accordingly, under generally
accepted accounting principles, the consolidated assets and liabilities of AFB
will be reported on the books of CCBF at their respective book values at the
Effective Time and CCBF's consolidated financial statements for prior periods
will be restated to reflect the consolidated assets, liabilities and operations
of AFB for such periods. No goodwill or other intangible assets will be created
in connection with the Merger.
Among other requirements, in order for the Merger to qualify for
pooling-of-interests accounting treatment, substantially all (at least 90%) of
the outstanding shares of AFB Stock must be exchanged for CCBF Stock.
Consummation of the Merger is conditioned on receipt by CCBF and AFB of the
Pooling Opinion by their independent accountants, KPMG Peat Marwick LLP, that
the Merger will qualify to be treated as a pooling-of-interests for accounting
purposes. (See " -- Conditions to the Merger.")
MATERIAL INCOME TAX CONSEQUENCES
The following is a summary discussion of the material federal income tax
consequences of the Merger to shareholders of AFB. The summary is based on the
law as currently constituted and is subject to change in the event of changes in
the law, including amendments to applicable statutes or regulations or changes
in judicial or administrative rulings, some of which could be given retroactive
effect.
THIS SUMMARY IS NOT A COMPLETE DESCRIPTION OF ALL TAX CONSEQUENCES OF THE
MERGER. THE SUMMARY DOES NOT ADDRESS ANY FOREIGN, STATE OR LOCAL TAX
CONSEQUENCES, EXCEPT FOR CERTAIN SOUTH CAROLINA INCOME TAX CONSEQUENCES, NOR
DOES IT ADDRESS ALL ASPECTS OF FEDERAL INCOME TAXATION THAT MAY APPLY TO THE
MERGER. ALSO, THE TAX OPINION DOES NOT ADDRESS INCOME TAX CONSIDERATIONS THAT
MAY AFFECT THE TREATMENT OF A PARTICIPANT IN AN AFB OPTION PLAN OR AN AFB
SHAREHOLDER WHO ACQUIRED AFB STOCK PURSUANT TO SUCH PLAN. EACH AFB SHAREHOLDER'S
INDIVIDUAL CIRCUMSTANCES MAY AFFECT THE TAX CONSEQUENCES OF THE MERGER TO SUCH
SHAREHOLDER. THEREFORE, AFB SHAREHOLDERS ARE URGED TO CONSULT THEIR OWN TAX
ADVISORS AS TO THE SPECIFIC TAX CONSEQUENCES TO THEM OF THE MERGER AND THE
EXCHANGE OF THEIR AFB STOCK FOR SHARES OF CCBF STOCK (INCLUDING, WITHOUT
LIMITATION, TAX RETURN REPORTING REQUIREMENTS, THE APPLICATION AND EFFECT OF
FEDERAL, FOREIGN, STATE AND LOCAL AND OTHER TAX LAWS, AND THE IMPLICATIONS OF
ANY PROPOSED CHANGES IN THE TAX LAWS).
CCBF and AFB have received the Tax Opinion of KPMG Peat Marwick LLP, tax
advisors to CCBF and AFB, which reaches conclusions with respect to the material
federal and South Carolina income tax consequences of the Merger. Where
appropriate or useful, this discussion will refer to the Tax Opinion and
particular conclusions expressed therein. Additionally,
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the facts and representations upon which the Tax Opinion is based are set forth
in such Tax Opinion which is an exhibit to CCBF's Registration Statement (See
"AVAILABLE INFORMATION.") However, the Tax Opinion represents only KPMG Peat
Marwick LLP's best judgment as to the matters expressed therein and has no
binding effect on the Internal Revenue Service (the "IRS") or any official
status of any kind. There is no assurance that the IRS could not successfully
contest in the courts an opinion expressed by KPMG Peat Marwick LLP as set forth
in the Tax Opinion or that legislative, administrative or judicial decisions or
interpretations may not be forthcoming that would significantly change the
opinions set forth in the Tax Opinion. The IRS will not currently issue private
letter rulings concerning a transaction's qualification under certain types of
reorganizations or certain federal income tax consequences resulting from such
qualification. Accordingly, no private letter ruling has been, nor is it
anticipated that such a ruling will be, requested from the IRS with respect to
the Merger.
The Tax Opinion concludes that:
(i) The Merger will constitute a tax-free reorganization within the meaning
of Section 368(a) of the Code;
(ii) No gain or loss will be recognized by CCBF, AFB or Interim FSB by
reason of the Merger;
(iii) No gain or loss will be recognized by AFB's shareholders upon their
receipt solely of CCBF Stock (including any fractional share interests to which
they may be entitled), together with attached CCBF Rights, in exchange for their
holdings of AFB Stock;
(iv) The tax basis in the CCBF Stock received by an AFB shareholder
(including any factional share interests to which they may be entitled) will be
the same as the tax basis in the AFB Stock surrendered in the exchange therefor;
(v) The holding period for CCBF Stock received by an AFB shareholder
(including any fractional share interests to which they may be entitled) in
exchange for AFB Stock will include the period during which the shareholder held
the AFB Stock surrendered in the exchange, provided that the AFB Stock was held
as a capital asset at the Effective Time; and
(vi) The receipt of cash in lieu of a fractional share of CCBF Stock will
be treated as if the fractional share of CCBF Stock was distributed as part of
the exchange to the AFB shareholder and then redeemed by CCBF, resulting in
capital gain or loss measured by the difference, if any, between the amount of
cash received for such fractional share and the shareholders' basis in the
fractional share.
The Tax Opinion also concludes that the Merger will be treated in
substantially the same manner for South Carolina income tax purposes as for
federal income tax purposes.
AFB'S SHAREHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISERS IN ORDER TO
MAKE AN INDIVIDUAL EVALUATION OF THE FEDERAL, STATE AND LOCAL TAX CONSEQUENCES
OF THE MERGER FOR THEM.
ABSENCE OF DISSENTERS' RIGHT
Under the OTS Merger Law, because the AFB Stock is qualified for quotation
on the Nasdaq National Market (and assuming the AFB Stock remains so qualified
on the date of the AFB Special Meeting), no shareholder of AFB will be entitled
to dissent from the Merger and demand payment of the "fair or appraised value,"
as such terms are defined under the OTS Merger Law, of such holder's AFB Stock.
Under the NCBA, no shareholder of CCBF will be entitled to dissent from the
Merger and demand payment of the "fair value" of such holder's CCBF Stock.
CONDITIONS TO THE MERGER
Consummation of the Merger is subject to various conditions specified in
the Merger Agreement, including without limitation, (i) receipt of the required
approvals of the Merger Agreement by CCBF's and AFB's respective shareholders;
(ii) receipt of all regulatory approvals required for consummation of the Merger
and the other transactions described in the Merger Agreement without the
imposition by any regulatory agency of a condition or requirement to any such
approval that so materially adversely impacts the economic or business
assumptions of the transaction contemplated that, had such condition or
requirement been known to CCBF or AFB it would not, in its Board's reasonable
judgment, have entered into the Merger Agreement (provided that CCBF must use
reasonable efforts to cause such condition or requirement removed or modified as
appropriate and that any such condition or requirement arising from a legal or
regulatory issue resulting from another acquisition by CCBF will not entitle
CCBF to refuse to consummate the Merger); (iii) the absence of any legal
proceeding, law, or governmental rule, order or regulation prohibiting or
restricting the consummation of the Merger and the
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other transactions contemplated by the Merger Agreement; (iv) qualification of
the Merger for pooling-of-interests accounting treatment and the receipt by CCBF
and AFB of the Pooling Opinion; (v) the listing of the shares of CCBF Stock to
be issued in connection with the Merger on the NYSE; and (vi) receipt of the Tax
Opinion.
CCBF's and AFB's separate obligations under the Merger Agreement are
subject to various other conditions specified therein, including without
limitation, (i) that the representations and warranties of the other party be
and remain true and accurate as of the Effective Time under the standards set
forth in the Merger Agreement; (ii) that the other party perform in all material
respects all agreements and covenants required to be performed by it under the
Merger Agreement; (iii) receipt of certain certificates and opinions of the
other party's senior officers and legal counsel; and (iv) receipt by each party
of its respective Fairness Opinion(s). CCBF's obligations also are subject to
receipt of a written agreement as to certain matters from each person who is
considered an "Affiliate" of AFB. (See " -- Restrictions on Resale of CCBF Stock
Received By Certain Persons.")
AMENDMENT OF THE MERGER AGREEMENT; WAIVER
Prior to the Effective Time, any provision of the 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 order, rule or regulation.
The Merger Agreement may be amended, modified or supplemented at any time prior
to the Effective Time, and whether before or after the Special Meetings, by an
agreement in writing approved by CCBF's and AFB's respective Board of Directors.
However, following the Special Meetings, no amendment may be made that reduces
or modifies in any material respect the consideration to be received by AFB's
shareholders in the Merger without the requisite approval of AFB's shareholders
and no amendment may be made, in any manner adverse to CCBF's shareholders, to
the provisions of the Merger Agreement relating to the manner or basis in which
shares of AFB Stock will be converted into and exchanged for CCBF Stock without
the requisite approval of CCBF's shareholders.
TERMINATION OF THE MERGER AGREEMENT
The Merger Agreement may be terminated, whether before or after the Special
Meetings, upon the mutual consent of CCBF and AFB, and may be terminated by
either CCBF or AFB (if the terminating party is not then in material breach of
any of its representations, warranties or covenants) in the event, among other
things, that (i) any representation or warranty of the other party in the Merger
Agreement is inaccurate, such inaccuracy cannot be or has not been cured within
30 days after the giving of notice thereof by the terminating party, and the
nature of such inaccuracy violates certain materiality standards set forth in
the Merger Agreement; (ii) the other party is in material breach of any of its
covenants or agreements contained in the Merger Agreement which cannot be or has
not been cured within 30 days after the giving of notice thereof by the
terminating party; (iii) any regulatory approval required for consummation of
the Merger and the other transactions contemplated by the Merger Agreement is
denied by final nonappealable action of the applicable governmental regulator
(or if any such action is not appealed within the time limit for appeal); (iv)
the shareholders of CCBF or AFB fail to approve the Merger by the requisite
votes; (v) if the Merger is not consummated by December 31, 1997 (provided that
such failure to consummate is not caused by a breach of the Merger Agreement by
the terminating party); or (vi) if a condition precedent to the terminating
party's obligation to consummate the Merger cannot be satisfied or fulfilled by
December 31, 1997. Additionally, AFB may terminate the Merger Agreement if CCBF
exercises the CCBF Option or its Repurchase Rights (see " -- The Stock Option
Agreement.")
In the event of the termination and abandonment of the Merger Agreement
pursuant to the termination provisions thereof, the Merger Agreement will become
void and have no effect, except that certain provisions of the Merger Agreement
relating to expenses, and confidentiality of information obtained pursuant to
the Merger Agreement or in connection with the negotiation thereof will survive
any such termination and abandonment. A termination arising from an uncured
willful breach of the Merger Agreement will not relieve the breaching party from
liability for such breach.
EFFECTIVE TIME AND CLOSING DATE
The Merger will become effective at the Effective Time, the date and at the
time on which Articles of Combination and Merger executed by AFB and Interim FSB
have been endorsed by the OTS or at such other date and time as is specified by
the OTS. CCBF and AFB shall use their reasonable efforts to cause the Effective
Time to occur on the last day of the month in which the last to occur of (i) the
effective date (including all applicable waiting periods) of the last required
order, approval or exemption of any regulatory authority having authority over
and approving or exempting and (ii) the later of the dates on which CCBF's
shareholders and AFB's shareholders approve the Merger Agreement. CCBF and AFB
have agreed to modify
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this provision to specify that the Effective Time shall occur on the first day
of the calendar month following the month in which the last of such events
occurs.
Following and subject to the fulfillment of all conditions described in the
Merger Agreement, the closing of the Merger will be held on the date that the
Effective Time occurs or on such other prior date as is mutually agreed upon by
CCBF and AFB (the "Closing Date"). Although there is no assurance as to whether
or when the Merger will occur, it presently is expected that the Effective Time
will occur on August 1, 1997. (See " -- Conditions to Merger" and " -- Required
Approvals.")
SURRENDER AND EXCHANGE OF CERTIFICATES
Immediately prior to the Effective Time, AFB's stock transfer books will be
closed and no further transfer of AFB Stock will be made or recognized. Promptly
after the Effective Time, AFB's shareholders will receive transmittal forms with
instructions for forwarding their certificates formerly evidencing shares of AFB
Stock ("Old Certificates") for surrender to CCBF's exchange agent (the "Exchange
Agent"). Upon surrender to the Exchange Agent of their Old Certificates, AFB
shareholders will be entitled to receive certificates ("New Certificates")
evidencing the number of whole shares of CCBF Stock into which their shares of
AFB Stock will have been converted, together with cash for any fractional share.
(See
" -- Treatment of Fractional Shares.") Each New Certificate also evidences the
CCBF Rights attached to the shares of CCBF Stock represented thereby.
A New Certificate, or any check representing cash in lieu of fractional
shares and/or declared but unpaid dividends, may be issued in a name other than
the name in which a surrendered Old Certificate is registered only if (i) the
Old Certificate surrendered is properly endorsed, accompanied by a guaranteed
signature if required by the transmittal form, and otherwise in proper form for
transfer, and (ii) the person requesting the issuance of such New Certificate
either affixes any required stock transfer stamps to the Old Certificates
surrendered, or pays to the Exchange Agent funds for the purchase of such tax
stamps and for any other taxes required by reason of the issuance of the New
Certificate in a name other than the registered holder of the Old Certificate
surrendered, or establishes to the satisfaction of the Exchange Agent that all
such taxes have been paid or are not applicable.
AFB shareholders whose Old Certificates have been lost, stolen or destroyed
will be required to furnish to CCBF evidence satisfactory to the Exchange Agent
of ownership of such Old Certificates and of such loss, theft or destruction,
appropriate and customary bond security or indemnification (which may include an
indemnity bond) and such other documents as CCBF may reasonably require in order
to receive the New Certificates or cash to which they are entitled.
Until surrendered as described above, each Old Certificate will be deemed
for all corporate purposes to evidence only the right to receive the number of
shares of CCBF Stock to which the AFB shareholder has become entitled. However,
after the Effective Time and regardless of whether they have surrendered their
Old Certificates, AFB shareholders shall be entitled to vote and to receive any
dividends or other distributions (for which the record date is after the
Effective Time) on the number of whole shares of CCBF Stock into which their AFB
Stock has been converted; provided, however, that no such dividends or other
distributions that become payable following the Effective Time to the owners of
CCBF Stock will be paid to the holders of such Old Certificates unless and until
their Old Certificates are surrendered. Upon surrender of each Old Certificate,
there will be paid the amount, without interest thereon, of dividends and other
distributions, if any, that became payable on the shares of CCBF Stock
represented by such certificates after the Effective Time but had not been paid
to the record owner thereof.
Neither CCBF, the Exchange Agent, AFB nor any other person will be liable
to former holders of AFB Stock for any amount properly delivered to a public
official pursuant to applicable abandoned property, escheat or similar law.
Approval of the Merger Agreement by AFB's shareholders at the AFB Special
Meeting shall constitute ratification of CCBF's appointment of the Exchange
Agent.
AFB'S SHAREHOLDERS SHOULD NOT FORWARD THEIR OLD CERTIFICATES TO THE
EXCHANGE AGENT UNTIL THEY RECEIVE INSTRUCTIONS TO DO SO.
INTERESTS OF CERTAIN PERSONS WITH RESPECT TO THE MERGER
GENERAL. Certain members of AFB's management and its Board of Directors
have interests in the Merger in addition to their interests as shareholders of
AFB generally. As more fully described below, those interests relate to, among
other things, provisions in the Merger Agreement regarding indemnification,
eligibility for certain employee benefits, election of certain individuals to
the Boards of CCBF and AFB, and agreements by CCBF to enter into employment
agreements with certain
47
<PAGE>
executive officers of AFB at the Effective Time in exchange for such executive
officers terminating their existing employment agreements with AFB and to induce
such officers to remain in the employ of AFB following the Effective Time.
POST-MERGER MANAGEMENT MATTERS. CCBF has agreed to cause Mr. Abercrombie,
Chairman, President and Chief Executive Officer of AFB, and three other current
members of the AFB Board to be appointed to the CCBF Board following
consummation of the Merger. AFB has recommended to CCBF that Blake P. Garrett,
Jr., C. Dan Joyner and Dr. David E. Shi be appointed to serve on the CCBF Board
in addition to Mr. Abercrombie. CCBF has also agreed to permit the remaining
current members of the AFB Board to continue to serve on the Board of Directors
of AFB, together with up to four individuals to be selected by CCBF. In
addition, CCBF will cause Mr. Abercrombie to be appointed to the position of
Vice Chairman of CCBF and to serve on the Executive Committee of CCBF's Board.
AFB has previously entered into substantially identical employment
agreements with Mr. Abercrombie and Mr. Trimble, Chief Operating and Chief
Financial Officer of AFB, the terms of which are described in detail in the 1997
Annual Meeting Proxy Statement of AFB (the "AFB Employment Agreements"). The AFB
Employment Agreements generally provide for the employment of Messrs.
Abercrombie and Trimble as Chairman of the Board, President and Chief Executive
Officer and Chief Operating and Chief Financial Officer, respectively, for a
period, in each case of 36 calendar months, which can be extended by the AFB
Board for a period of up to twelve additional months, based on an annual review
of the performance of each such officer by the AFB Board.
The AFB Employment Agreements currently provide for annual base salaries of
$276,000 and $182,400 for Messrs. Abercrombie and Trimble, respectively, subject
to annual adjustment by the AFB Board, together with such bonuses as the AFB
Board of Directors, in its discretion and upon an evaluation of performance may
determine. The AFB Employment Agreements generally provide for the participation
by such individuals in all AFB benefit plans. In addition, such agreements
provide for benefits payable upon the disability or death of Messrs. Abercrombie
and Trimble, and provide for certain severance payments, whether without a
"change-in-control" of AFB or after a change-in-control, subject to various
limitations.
CCBF desires to seek the continued employment of Messrs. Abercrombie and
Trimble after closing the Merger and has agreed to offer employment to Messrs.
Abercrombie and Trimble pursuant to individual employment contracts to be dated
as of the Effective Time (each a "CCBF Employment Agreement"). CCBF or AFB will
enter into each CCBF Employment Agreement in consideration of Messrs.
Abercrombie and Trimble terminating such officer's existing AFB Employment
Agreement and agreeing to continued employment under the CCBF Employment
Agreement.
In the case of Mr. Abercrombie, the CCBF Employment Agreement provides that
Mr. Abercrombie will be employed as Vice Chairman of the Board of Directors of
CCBF and President and Chief Executive Officer of CCBF's principal banking
subsidiary located in South Carolina. In addition, the Board of Directors of
CCBF shall nominate and use its best efforts to secure the election of Mr.
Abercrombie as a director of CCBF during the term of the CCBF Employment
Agreement and, if Mr. Abercrombie is so elected, he shall serve as a member of
the Executive Committee of the CCBF Board. The CCBF Employment Agreement with
Mr. Abercrombie will have a five-year term, beginning at the Effective Time and
will automatically, without further action by the CCBF Board, be extended for an
additional one-year period on each anniversary of the Effective Time, provided
that neither party may cause the term of the CCBF Employment Agreement to cease
to extend automatically.
In the case of Mr. Trimble, the CCBF Employment Agreement provides that Mr.
Trimble will be employed as the Executive Vice President and Chief Operating
Officer of CCBF's principal banking subsidiary located in South Carolina. The
CCBF Employment Agreement with Mr. Trimble will have a two-year term beginning
at the Effective Time, but does not include any renewal provisions.
During the employment term, Messrs. Abercrombie and Trimble will receive
cash compensation consisting of a base salary of $300,000 and $193,000 per year,
respectively, and will be entitled to participation in all incentive, savings,
retirement and welfare plans, practices, policies and programs applicable
generally to senior executive officers of CCBF on the same basis as such other
senior executive officers with full credit given for Messrs. Abercrombie's and
Trimble's total accumulated years of service at AFB for purposes of determining
vesting and eligibility. CCBF shall also, if requested by Mr. Abercrombie,
assume and maintain on his behalf, that certain supplemental retirement benefit
between AFB and Mr. Abercrombie.
For 1997, the CCBF Employment Agreements provide that Messrs. Abercrombie
and Trimble will receive an incentive bonus under CCBF's regular incentive plan
for 1997 on the basis of a full year of service, and that the stock options to
be granted to Mr. Abercrombie during 1997 shall be based on the same percentage
of base salary as are the options granted to other Executive Vice Presidents of
CCBF, less the value of any options granted in 1997 to Mr. Abercrombie by AFB
prior to
48
<PAGE>
the Effective Time. To encourage Messrs. Abercrombie and Trimble to remain in
the employment of AFB until the Effective Time, CCBF will pay at the Effective
Time to Messrs. Abercrombie and Trimble closing bonuses in the amounts of
$275,000 and $180,000, respectively. To further encourage Messrs. Abercrombie
and Trimble to remain in the employment of CCBF following the Effective Time,
CCBF will pay Messrs. Abercrombie and Trimble additional amounts of $24,300 and
$15,800, respectively, for each of the 24 months following the Effective Time,
which, in the case of Mr. Trimble, will be paid in a lump sum if Mr. Trimble
retires prior to the payment in full of such amounts.
Under the terms of each of the CCBF Employment Agreements, either the
executive or CCBF may terminate the executive's employment in consideration of
various payments by CCBF, based upon the circumstances of the executive's
employment termination. In addition, during the six-month period immediately
following the second anniversary of the Effective Time, either Mr. Abercrombie
or CCBF may terminate Mr. Abercrombie's employment. In such event, Mr.
Abercrombie will continue to receive payments from CCBF calculated on the basis
of the remaining period of the employment term, but not to exceed three years.
Mr. Trimble will have the right to retire at any time after December 31, 1997,
at which time CCBF's obligation to pay Mr. Trimble his base salary of $193,000
per year will cease and in lieu thereof, Mr. Trimble will receive until January
1, 2002, an amount equal to $9,500 for each full month occurring after the date
of his retirement.
During the employment term and the remaining employment term after
termination of the executive's employment, each of Messrs. Abercrombie and
Trimble has agreed to refrain, within the States of South Carolina and North
Carolina, directly or indirectly, and in any capacity, from rendering his
services, or engaging or having a financial interest in, any business that is
competitive with any of those business activities in which CCBF or its
subsidiaries is engaged as of the date of the executive's termination of
employment, with certain exceptions.
In the event that Mr. Abercrombie or Mr. Trimble were to elect not to enter
into the CCBF Employment Agreement at the Effective Time and payments were
required to be made to him under his existing AFB Employment Agreement, the
estimated amount of such payments due Mr. Abercrombie and Mr. Trimble under the
terms of the respective AFB Employment Agreements would be $1.5 million and $1.0
million, respectively.
EXECUTIVE OFFICER STOCK OPTIONS. AFB has granted AFB Options to its
executive officers under the AFB 1988 Stock Option and Incentive Plan and to
members of AFB's Board of Directors under the 1995 Directors' Performance Plan
(the "AFB Option Plans"). The Merger Agreement provides that CCBF will assume
any outstanding option grants, whether vested or unvested, which have been
granted under the AFB Option Plans on a basis adjusted to reflect the Exchange
Ratio. (See "The Merger -- Conversion of AFB Stock and AFB Options; Exchange
Ratio.")
The following table sets forth, with respect to (i) certain executive
officers, (ii) all executive officers as a group (the "Executive Officer
Group"), and (iii) the Board of Directors of AFB as a group (the "Director
Group"), the number of shares of AFB Stock covered by outstanding AFB Options
held by such persons as of May 31, 1997:
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
OPTIONS CURRENTLY EXERCISE PRICE AGGREGATE VALUE
OPTIONS HELD EXERCISABLE PER OPTION OF OPTION(1)
<S> <C> <C> <C> <C>
William L. Abercrombie, Jr. 88,200 88,200 $ 8.91 $ 1,926,087
Michael A. Trimble 48,400 48,400 10.53 978,612
Executive Officer Group 213,150 213,150 9.87 4,450,924
(16 persons)
Director Group 46,700 46,700 15.09 731,137
(6 persons)
</TABLE>
(1) Based on the closing price of AFB Stock of $30.75 as quoted on the Nasdaq
National Market on May 30, 1997.
INDEMNIFICATION AND INSURANCE. Pursuant to the Merger Agreement, from and
after the Effective Time, CCBF will indemnify, defend and hold harmless the
present and former officers, directors, employees and agents of AFB and its
subsidiaries from and against all suits, actions, complaints, demands, costs,
fines, losses, expenses, claims, damages or liabilities arising out of actions
or omissions occurring on or prior to the Effective Time (including the
transactions contemplated by the Merger Agreement) to the full extent then
permitted under HOLA and by AFB's Charter and Bylaws as in effect on the date of
the Merger Agreement, including provisions relating to advances of expenses
incurred in defense of any such proceeding.
Furthermore, for a period of at least three years after the Effective Time,
CCBF or AFB (as the surviving federal stock savings bank of the Merger) will
maintain AFB's existing directors' and officers' liability insurance policy (or
a substitute
49
<PAGE>
policy of at least the same coverage and amounts and containing terms and
conditions which are substantially no less advantageous or, with the consent of
AFB given prior to the Effective Time, any other policy) covering those persons
who were, on the date of the Merger Agreement, covered by AFB's directors' and
officers' liability insurance policy; provided, however, that neither CCBF nor
AFB shall be obligated to make annual premium payments for such coverage during
such three year period in excess of 150% of the annual premium payments required
under AFB's existing directors' and officers' liability insurance policy. If the
amount of premiums necessary to maintain the required coverage after the
Effective Time exceeds this 150% maximum amount, CCBF will use its reasonable
efforts to maintain the most advantageous coverage for such 150% maximum amount.
EFFECT ON EMPLOYEE BENEFIT PLANS AND AFB OPTIONS
The Merger Agreement provides that AFB's employee benefit plans will be
reviewed and appropriate amendments, consolidations or terminations will be made
thereto at or after the Effective Time; provided, however, that the employees of
AFB and its subsidiaries (i) shall be eligible to receive group hospitalization,
medical, life, disability and similar benefits on the same basis and under the
same terms available to the present employees of CCBF and its subsidiaries, and
(ii) that the overall level of benefits offered or provided to the employees of
AFB and its subsidiaries under the CCBF benefit plans will be no less than that
offered or provided to the present employees of CCBF and its subsidiaries, and
(iii) that for purposes of qualification and vesting, the employees of AFB and
its subsidiaries shall receive credit for their periods of service to AFB and
its subsidiaries.
The various deferred compensation plans and agreements of certain current
and former officers and directors of AFB or one or more of its subsidiaries will
be continued (and, if deemed appropriate and practical by CCBF's Board of
Directors, merged with comparable plans of CCBF) after the Effective Time;
provided, however, that (i) no existing rights or benefits of the persons who
have deferred or who are deferring compensation under any deferred compensation
plan or agreement of AFB or any of its subsidiaries will be eliminated, reduced
or adversely affected in any manner, (ii) AFB's deferred compensation plan for
its directors will continue in effect, but no further deferrals of directors'
fees shall be made thereunder, after the Effective Time, and (iii) AFB's
deferred compensation plan for its senior executive management shall remain in
effect and further deferrals of compensation may be made thereunder after the
Effective Time.
Under the Merger Agreement, at the Effective Time, all rights with respect
to AFB Options which are outstanding at the Effective Time, whether or not then
exercisable, will be converted into and will become rights with respect to CCBF
Stock, and CCBF will assume AFB's obligations with respect to each such AFB
Option, in accordance with the terms of the applicable AFB Option Plan and the
related option agreements. From and after the Effective Time, (i) each AFB
Option assumed by CCBF may be exercised solely for shares of CCBF Stock, (ii)
the number of shares of CCBF Stock subject to each AFB Option will be equal to
the number of shares of AFB Stock subject to such AFB Option immediately prior
to the Effective Time multiplied by the Exchange Ratio, and (iii) the per share
exercise price under each such AFB Option will be adjusted by dividing the per
share exercise price thereunder by the Exchange Ratio and rounding down to the
nearest cent, provided that the number of shares of CCBF Stock subject to each
AFB Option and the per share exercise price will, in accordance with the terms
of the AFB Option and the per share exercise price, be subject to further
adjustment as appropriate to reflect any stock split, stock dividend,
recapitalization or other similar transaction subsequent to the Effective Time.
Under the Merger Agreement, after the date thereof, no further options to
acquire AFB Stock may be granted to AFB.
Under the Merger Agreement, all restrictions or limitations on transfer
with respect to AFB Stock awarded under AFB Option Plans or any other plan,
program or arrangement, to the extent that such restrictions or limitations have
not already lapsed, will remain in full force and effect with respect to the
CCBF Stock into which AFB Stock is converted pursuant to the Merger Agreement.
Additional information regarding CCBF's and AFB's respective employee
benefit plans, as well as information with regard to their executive
compensation and employment agreements, and with regard to transactions with
AFB's directors and executive officers, is incorporated by reference as set
forth in CCBF's Annual Report on Form 10-K for the year ended December 31, 1996
and in AFB's Annual Report on Form 10-K for the year ended December 31, 1996,
which documents are incorporated herein by reference. (See "INCORPORATION OF
CERTAIN DOCUMENTS BY REFERENCE.")
NEW YORK STOCK EXCHANGE LISTING
The CCBF Stock is listed for trading on the NYSE. The AFB Stock is
qualified for quotation on the Nasdaq National Market. The Merger Agreement
provides that the listing of the shares of CCBF Stock issuable pursuant to the
Merger on the NYSE is a condition to the consummation of the Merger.
50
<PAGE>
DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN
CCBF has in effect a Dividend Reinvestment and Stock Purchase Plan (the
"CCBF Stock Plan") pursuant to which its shareholders may purchase shares of
CCBF Stock through the reinvestment of dividends and optional cash payments.
Under the CCBF Stock Plan, CCBF Stock is purchased by the plan administrator in
open market transactions and/or in negotiated transactions only, and no
newly-issued shares of CCBF Stock are issued to participants in the CCBF Stock
Plan. After the Effective Time, the CCBF Stock Plan will be continued in effect
and be available to AFB's former shareholders who have become CCBF shareholders.
RESTRICTIONS ON RESALE OF CCBF STOCK BY AFFILIATES
Certain restrictions under the 1933 Act will apply to the resale of shares
of CCBF Stock issued to certain persons in connection with the Merger. Any
person who is an "Affiliate" of CCBF or AFB at the time the Merger Agreement is
submitted to a vote of AFB's shareholders may not resell or transfer shares of
CCBF Stock received in connection with the Merger during a period of two years
following the Effective Time unless (i) such person's offer and sale of those
shares has been registered under the 1933 Act, (ii) such person's offer and
resale is made in compliance with Rule 145 promulgated under the 1933 Act (which
permits limited sales under certain circumstances), or (iii) another exemption
from registration is available. Additionally, as a condition of treating the
Merger as a pooling-of-interests for accounting purposes, Affiliates of CCBF and
AFB will be prohibited from selling or transferring any shares of CCBF Stock or
AFB Stock from a date generally 30 days prior to the consummation of the Merger
until CCBF shall have published results of its operations for a period of at
least 30 days following the Effective Time. Because the CCBF Rights to be
received by AFB's shareholders pursuant to the Merger are attached to, and
cannot be transferred separately from, the shares of CCBF Stock to which they
relate, the CCBF Rights held by Affiliates of CCBF and AFB will be subject to
these same restrictions.
The above restrictions are expected to apply to the directors and executive
officers of AFB (and to any relative or spouse of any such person or any
relative of any such spouse, any of whom live in the same house as such person,
and any trust, estate, corporation or other entity in which such person as a 10%
or greater beneficial or equity interest). Stock transfer instructions will be
given by CCBF to its stock transfer agent with respect to the CCBF Stock to be
received by persons deemed by CCBF to be subject to these restrictions, and the
certificates for such stock may be appropriately legended.
The Merger Agreement provides that AFB will use its best efforts to cause
each of its Affiliates to deliver to CCBF, at least 30 days prior to the
Effective Time, a written agreement (an "Affiliate Agreement") providing that
such person will not offer, sell, pledge, transfer or otherwise dispose of any
shares of CCBF Stock except in compliance with the restrictions described above.
CCBF's obligation to consummate the Merger is conditioned on its receipt of the
Affiliate Agreements (See " -- Conditions to the Merger.")
PERSONS WHO ARE OR MAY BE AFFILIATES OF AFB SHOULD CONSULT WITH THEIR OWN
LEGAL COUNSEL REGARDING THE APPLICATION OF THE ABOVE RESTRICTIONS TO THEIR CCBF
STOCK.
EXPENSES
The Merger Agreement provides that CCBF and AFB will each pay its own
expenses incident to preparing, entering into and carrying out the Merger
Agreement and the transactions contemplated thereby, including filing fees and
the fees and expenses of its financial advisors, investment bankers, accountants
and counsel; provided, however, that CCBF has paid the filing fees associated
with the filing of the Registration Statement and will bear the costs of
printing this Prospectus/Joint Proxy Statement.
51
<PAGE>
PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION
(UNAUDITED)
The following 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 AFB's historical financial positions 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.
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
reflects estimates of the restructuring expenses which may be recognized and
transaction expenses which will be incurred. The Pro Forma Combined Condensed
Statements of Income do not reflect restructuring expenses which may be
recognized or transaction expenses which will be incurred. The Pro Forma
Combined Condensed Balance Sheet and Statements of Income do not reflect cost
savings from operating efficiencies which may be achieved, or revenue
enhancements from the availability of additional services to AFB's customers
which may be realized in connection with the Merger. Current estimates of
restructuring expenses for 1997 are $8.9 million. Transaction expenses are
estimated to be $3.7 million. The cost savings associated with possible
operating efficiencies and synergies are forecast to be approximately $8.5
million. Possible revenue enhancements are forecast to total approximately $1.9
million and would be realized, if at all, in 1998 and following years. All of
such forecasts are based on numerous variables and assumptions which are
inherently uncertain and which may not be within the control of CCBF including,
without limitation, general economic, competitive and regulatory conditions.
Some or a substantial part of the projected estimates of cost savings and
revenue enhancements may not be achievable, if at all, unless and until AFB is
merged into CCB Bank. CCBF currently anticipates that such a merger will not
occur until approximately two years after the Effective Time. For all the
foregoing reasons, the amounts and times of realization of possible costs
savings and revenue enhancements may vary materially from those estimated above.
52
<PAGE>
PRO FORMA COMBINED CONDENSED BALANCE SHEET
AS OF MARCH 31, 1997
<TABLE>
<CAPTION>
CCBF
PRO FORMA PRO FORMA
CCBF AFB ADJUSTMENTS COMBINED
<S> <C> <C> <C> <C>
(IN THOUSANDS)
ASSETS
Cash and due from banks........................................... $ 144,637 35,857 (9,000)(2) 171,494
Time deposits in other banks...................................... 42,771 26,001 -- 68,772
Federal funds sold and other short-term investments............... 190,000 -- -- 190,000
Investment securities:
Available for sale.............................................. 1,112,702 342,829 -- 1,455,531
Held to maturity................................................ 82,152 7,717 -- 89,869
Loans and lease financing......................................... 3,855,249 866,079 -- 4,721,328
Less reserve for loan and lease losses.......................... 50,135 11,228 -- 61,363
Net loans and lease financing................................ 3,805,114 854,851 -- 4,659,965
Premises and equipment............................................ 68,647 17,371 -- 86,018
Other assets...................................................... 122,059 22,289 -- 144,348
Total assets................................................. $5,568,082 1,306,915 (9,000) 6,865,997
LIABILITIES
Deposits:
Noninterest-bearing............................................. $ 593,843 80,473 -- 674,316
Interest-bearing................................................ 4,194,480 919,043 -- 5,113,523
Total deposits............................................... 4,788,323 999,516 -- 5,787,839
Short-term borrowed funds......................................... 112,617 138,532 -- 251,149
Long-term debt.................................................... 56,726 30,601 -- 87,327
Other liabilities................................................. 107,681 20,793 -- 128,474
Total liabilities............................................ 5,065,347 1,189,442 -- 6,254,789
SHAREHOLDERS' EQUITY
Common stock...................................................... 78,920 11,035 13,517(1) 103,472
Additional paid-in capital........................................ 100,912 54,306 (13,517)(1) 141,701
Retained earnings................................................. 325,808 50,885 (9,000)(2) 367,693
Unrealized gain on investment securities available for sale....... (2,416) 1,247 -- (1,169 )
Less: Unearned common stock held by management recognition
plans........................................................... (489) -- -- (489 )
Total shareholders' equity................................... 502,735 117,473 (9,000) 611,208
Total liabilities and shareholders' equity................... $5,568,082 1,306,915 (9,000) 6,865,997
</TABLE>
(1) Based on the Exchange Ratio of .445 for conversion of AFB Stock into CCBF
Stock. At March 31, 1997, CCBF and AFB had 15,783,920 and 11,034,585 shares
outstanding, respectively.
(2) The pro forma combined retained earnings reflect the estimated 1997
restructuring expenses of $8.9 million and transaction expenses of $3.7
million related to Merger which total $9.0 million after-tax. The pro forma
combined retained earnings do not reflect cost savings from operating
efficiencies which may be achieved or revenue enhancements which may be
realized in connection with the Merger.
53
<PAGE>
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1997
<TABLE>
<CAPTION>
CCBF
PRO FORMA
CCBF AFB COMBINED(1)
<S> <C> <C> <C>
(IN THOUSANDS EXCEPT PER SHARE
DATA)
INTEREST INCOME
Loans and lease financing............................................................... $ 87,065 19,363 106,428
Investment securities................................................................... 16,406 4,967 21,373
Other................................................................................... 3,983 1,371 5,354
Total interest income.............................................................. 107,454 25,701 133,155
INTEREST EXPENSE
Deposits................................................................................ 46,664 8,918 55,582
Long-term debt and other borrowings..................................................... 2,729 2,642 5,371
Total interest expense............................................................. 49,393 11,560 60,953
Net interest income..................................................................... 58,061 14,141 72,202
Provision for loan and lease losses..................................................... 1,775 888 2,663
NET INTEREST INCOME AFTER PROVISION FOR LOAN AND LEASE LOSSES........................... 56,286 13,253 69,539
OTHER INCOME
Service charges on deposit accounts..................................................... 7,669 2,865 10,534
Nondeposit fees and commissions......................................................... 6,462 826 7,288
Other................................................................................... 3,240 361 3,601
Investment securities gains (losses), net............................................... 56 5 61
Total other income................................................................. 17,427 4,057 21,484
OTHER EXPENSES
Personnel............................................................................... 23,201 5,295 28,496
Net occupancy and equipment............................................................. 5,423 2,050 7,473
Merger-related expense.................................................................. 1,016 -- 1,016
Other operating......................................................................... 12,351 2,332 14,683
Total other expenses............................................................... 41,991 9,677 51,668
Income before income taxes.............................................................. 31,722 7,633 39,355
Income taxes............................................................................ 11,603 2,863 14,466
NET INCOME.............................................................................. $ 20,119 4,770 24,889
NET INCOME PER SHARE
Primary................................................................................. $ 1.28 .42 1.20
Fully diluted........................................................................... 1.28 .42 1.20
WEIGHTED AVERAGE SHARES OUTSTANDING
Primary................................................................................. 15,764 11,241 20,766(2)
Fully diluted........................................................................... 15,764 11,256 20,773(2)
</TABLE>
(1) No pro forma adjustments are reflected in the Pro Forma Combined Condensed
Statement of Income.
(2) Based on the Exchange Ratio of .445 for conversion of AFB Stock into CCBF
Stock.
54
<PAGE>
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1996
<TABLE>
<CAPTION>
CCBF
PRO FORMA
CCBF AFB COMBINED(1)
<S> <C> <C> <C>
(IN THOUSANDS
EXCEPT PER SHARE DATA)
INTEREST INCOME
Loans and lease financing............................................................... $ 80,204 18,634 98,838
Investment securities................................................................... 15,698 6,728 22,426
Other................................................................................... 3,850 301 4,151
Total interest income.............................................................. 99,752 25,663 125,415
INTEREST EXPENSE
Deposits................................................................................ 43,800 9,536 53,336
Long-term debt and other borrowings..................................................... 2,144 3,181 5,325
Total interest expense............................................................. 45,944 12,717 58,661
Net interest income..................................................................... 53,808 12,946 66,754
Provision for loan and lease losses..................................................... 2,133 722 2,855
NET INTEREST INCOME AFTER PROVISION FOR LOAN AND LEASE LOSSES........................... 51,675 12,224 63,899
OTHER INCOME
Service charges on deposit accounts..................................................... 6,987 2,384 9,371
Nondeposit fees and commissions......................................................... 5,580 900 6,480
Other................................................................................... 2,171 239 2,410
Investment securities gains (losses), net............................................... (15) -- (15)
Total other income................................................................. 14,723 3,523 18,246
OTHER EXPENSES
Personnel............................................................................... 21,047 4,943 25,990
Net occupancy and equipment............................................................. 5,651 1,791 7,442
Other operating......................................................................... 11,986 2,313 14,299
Total other expenses............................................................... 38,684 9,047 47,731
Income before income taxes.............................................................. 27,714 6,700 34,414
Income taxes............................................................................ 9,558 2,345 11,903
NET INCOME.............................................................................. $ 18,156 4,355 22,511
NET INCOME PER SHARE.................................................................... $ 1.16 .38 1.09
WEIGHTED AVERAGE SHARES OUTSTANDING..................................................... 15,585 11,448 20,679(2)
</TABLE>
(1) No pro forma adjustments are reflected in the Pro Forma Combined Condensed
Statement of Income.
(2) Based on the Exchange Ratio of .445 for conversion of AFB Stock into CCBF
Stock.
55
<PAGE>
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
CCBF
PRO FORMA
CCBF AFB COMBINED(1)
<S> <C> <C> <C>
(DOLLARS IN THOUSANDS
EXCEPT PER SHARE DATA)
INTEREST INCOME
Loans and lease financing............................................................... $321,696 75,484 397,180
Investment securities................................................................... 60,992 25,937 86,929
Other................................................................................... 15,076 2,571 17,647
Total interest income.............................................................. 397,764 103,992 501,756
INTEREST EXPENSE
Deposits................................................................................ 170,998 37,328 208,326
Long-term debt and other borrowings..................................................... 10,350 12,681 23,031
Total interest expense............................................................. 181,348 50,009 231,357
Net interest income..................................................................... 216,416 53,983 270,399
Provision for loan and lease losses..................................................... 12,800 4,338 17,138
NET INTEREST INCOME AFTER PROVISION FOR LOAN AND LEASE LOSSES........................... 203,616 49,645 253,261
OTHER INCOME
Service charges on deposit accounts..................................................... 29,045 10,697 39,742
Nondeposit fees and commissions......................................................... 18,863 3,544 22,407
Other................................................................................... 14,176 4,087 18,263
Investment securities gains (losses), net............................................... 505 (2,667) (2,162)
Total other income................................................................. 62,589 15,661 78,250
OTHER EXPENSES
Personnel............................................................................... 83,247 20,058 103,305
Net occupancy and equipment............................................................. 21,694 7,400 29,094
FDIC Special Assessment................................................................. 7,400 5,559 12,959
Other operating......................................................................... 49,097 9,997 59,094
Total other expenses............................................................... 161,438 43,014 204,452
Income before income taxes.............................................................. 104,767 22,292 127,059
Income taxes............................................................................ 34,452 7,800 42,252
NET INCOME.............................................................................. $ 70,315 14,492 84,807
NET INCOME PER SHARE
Primary................................................................................. $ 4.67 1.28 4.23
Fully diluted........................................................................... 4.67 1.28 4.22
WEIGHTED AVERAGE SHARES OUTSTANDING
Primary................................................................................. 15,048 11,287 20,071(2)
Fully diluted........................................................................... 15,048 11,316 20,084(2)
</TABLE>
(1) No pro forma adjustments are reflected in the Pro Forma Combined Condensed
Statement of Income.
(2) Based on the Exchange Ratio of .445 for conversion of AFB Stock into CCBF
Stock.
56
<PAGE>
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
CCBF
PRO FORMA
CCBF AFB COMBINED(1)
<S> <C> <C> <C>
(DOLLARS IN THOUSANDS
EXCEPT PER SHARE DATA)
INTEREST INCOME
Loans and lease financing............................................................... $305,165 70,058.. 375,223
Investment securities 61,282 28,322 89,604
Other................................................................................... 17,067 1,178 18,245
Total interest income.............................................................. 383,514 99,558 483,072
INTEREST EXPENSE
Deposits................................................................................ 168,983 35,501 204,484
Long-term debt and other borrowings..................................................... 10,421 15,404 25,825
Total interest expense............................................................. 179,404 50,905 230,309
Net interest income..................................................................... 204,110 48,653 252,763
Provision for loan and lease losses..................................................... 8,183 2,279 10,462
NET INTEREST INCOME AFTER PROVISION FOR LOAN AND LEASE LOSSES........................... 195,927 46,374 242,301
OTHER INCOME
Service charges on deposit accounts..................................................... 25,600 8,545 34,145
Nondeposit fees and commissions......................................................... 14,812 3,024 17,836
Other................................................................................... 12,855 1,237 14,092
Investment securities gains (losses), net............................................... (978) 162 (816)
Total other income................................................................. 52,289 12,968 65,257
OTHER EXPENSES
Personnel............................................................................... 79,298 18,269 97,567
Net occupancy and equipment............................................................. 20,929 6,747 27,676
Merger-related expenses................................................................. 10,333 -- 10,333
Other operating......................................................................... 49,663 9,584 59,247
Total other expenses............................................................... 160,223 34,600 194,823
Income before income taxes.............................................................. 87,993 24,742 112,735
Income taxes............................................................................ 30,133 6,502 36,635
INCOME BEFORE EXTRAORDINARY ITEM (2).................................................... $ 57,860 18,240 76,100
INCOME PER SHARE BEFORE EXTRAORDINARY ITEM (2)
Primary................................................................................. $ 3.87 1.60 3.80
Fully diluted........................................................................... 3.87 1.60 3.80
WEIGHTED AVERAGE SHARES OUTSTANDING
Primary................................................................................. 14,949 11,425 20,033(3)
Fully diluted........................................................................... 14,949 11,438 20,039(3)
</TABLE>
(1) No pro forma adjustments are reflected in the Pro Forma Combined Condensed
Statement of Income.
(2) Income before extraordinary item and primary and fully diluted income per
share before extraordinary item do not reflect the extraordinary item
recorded by AFB for the loss on the early extinguishment of debt. The impact
of the extraordinary item on pro forma combined net income, primary net
income per share and fully diluted net income per share was a charge of
$1,709,000, ($.09) and ($.09), respectively.
(3) Based on the Exchange Ratio of .445 for conversion of AFB Stock into CCBF
Stock.
57
<PAGE>
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
CCBF
PRO FORMA
CCBF AFB COMBINED(1)
<S> <C> <C> <C>
(DOLLARS IN THOUSANDS
EXCEPT PER SHARE DATA)
INTEREST INCOME
Loans and lease financing................................................................ $243,577 59,237 302,814
Investment securities.................................................................... 58,301 26,249 84,550
Other.................................................................................... 8,021 883 8,904
Total interest income............................................................... 309,899 86,369 396,268
INTEREST EXPENSE
Deposits................................................................................. 117,408 27,220 144,628
Long-term debt and other borrowings...................................................... 8,958 12,500 21,458
Total interest expense.............................................................. 126,366 39,720 166,086
Net interest income...................................................................... 183,533 46,649 230,182
Provision for loan and lease losses...................................................... 9,279 1,432 10,711
NET INTEREST INCOME AFTER PROVISION FOR LOAN AND LEASE LOSSES............................ 174,254 45,217 219,471
OTHER INCOME
Service charges on deposit accounts...................................................... 23,452 6,653 30,105
Nondeposit fees and commissions.......................................................... 15,650 2,599 18,249
Other.................................................................................... 9,528 (400) 9,128
Investment securities gains (losses), net................................................ 357 -- 357
Total other income.................................................................. 48,987 8,852 57,839
OTHER EXPENSES
Personnel................................................................................ 71,990 16,784 88,774
Net occupancy and equipment.............................................................. 21,492 6,616 28,108
Merger-related expenses.................................................................. 1,100 -- 1,100
Other operating.......................................................................... 52,705 8,066 60,701
Total other expenses................................................................ 147,287 31,466 178,753
Income before income taxes............................................................... 75,954 22,603 98,557
Income taxes............................................................................. 30,843 7,072 37,915
NET INCOME............................................................................... $ 45,111 15,531 60,642
NET INCOME PER SHARE
Primary.................................................................................. $ 2.94 1.37 2.97
Fully diluted............................................................................ 2.94 1.37 2.97
WEIGHTED AVERAGE SHARES OUTSTANDING
Primary.................................................................................. 15,354 11,308 20,386(2)
Fully diluted............................................................................ 15,354 11,308 20,386(2)
</TABLE>
(1) No pro forma adjustments are reflected in the Pro Forma Combined Condensed
Statement of Income.
(2) Based on the Exchange Ratio of .445 for conversion of AFB Stock into CCBF
Stock.
58
<PAGE>
PRO FORMA CAPITALIZATION
The following table sets forth: (i) the unaudited historical capitalization
of CCBF as of March 31, 1997; (ii) the unaudited historical capitalization of
AFB as of March 31, 1997; and (iii) the unaudited pro forma capitalization of
CCBF and AFB assuming the Merger had been consummated on March 31, 1997. This
financial information has been based on, and should be read in conjunction with,
CCBF's and AFB's interim unaudited financial statements, including the related
notes thereto, which are incorporated by reference in this Prospectus/Joint
Proxy Statement. (See "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE.")
<TABLE>
<CAPTION>
PRO FORMA
CCBF AFB COMBINED
<S> <C> <C> <C>
(DOLLARS IN THOUSANDS)
LONG-TERM DEBT
CCBF:
Advances from Federal Home Loan Bank with varying maturities to 2017 with rates from
0.00% to 8.63% (1)................................................................... $ 23,618 23,618
6.75% subordinated notes due 2003....................................................... 32,985 32,985
Other long-term debt.................................................................... 123 123
AFB:
Advances from Federal Home Loan Bank with varying maturities to 2015 with rates from
0.00% to 5.86%....................................................................... 601 601
Other collateralized borrowings with varying maturity dates in 1998 and with rates from
5.79% to 5.86%....................................................................... 30,000 30,000
Total long-term debt................................................................. 56,726 30,601 87,327
SHAREHOLDERS' EQUITY
CCBF:
Serial preferred stock, $5.00 par value. Authorized 5,000,000 shares; none issued....... -- --
Common stock, $5.00 par value; 50,000,000 shares authorized; 15,783,920 shares issued
and 20,694,310 shares pro forma combined issued, respectively (2).................... 78,920 103,472
Additional paid-in capital.............................................................. 100,912 141,701
Retained earnings (3)................................................................... 325,808 367,693
Less: Unrealized loss on investment securities available for sale, net of
applicable taxes..................................................................... (2,416) (1,169)
Less: Unearned common stock held by management recognition plans........................ (489) (489)
AFB:
Serial preferred stock, no par value. Authorized 10,000,000 shares; none issued......... --
Common stock, $1.00 par value; 50,000,000 shares authorized;
11,034,585 shares issued............................................................. 11,035
Additional paid-in capital.............................................................. 54,306
Retained earnings....................................................................... 50,885
Unrealized gain on investment securities available for sale, net of applicable taxes.... 1,247
Total shareholders' equity........................................................... 502,735 117,473 611,208
Total long-term debt and shareholders' equity........................................ $559,461 148,074 698,535
</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) Based on the Exchange Ratio of .445 for conversion of AFB Stock into CCBF
Stock.
(3) The pro forma combined retained earnings reflect the estimated 1997
restructuring expenses of $8.9 million and transaction expenses of $3.7
million related to Merger which total $9.0 million after-tax. The pro forma
combined retained earnings do not reflect cost savings from operating
efficiencies which may be achieved or revenue enhancements which may be
realized in connection with the Merger.
59
<PAGE>
MARKET AND DIVIDEND INFORMATION REGARDING
CCBF STOCK AND AFB STOCK
CCBF Stock is listed for trading on the NYSE and AFB Stock is qualified for
quotation on the Nasdaq National Market. As of May 31, 1997, there were
15,794,158 outstanding shares of CCBF Stock held by an aggregate of
approximately 7,500 shareholders of record, and there were 11,062,385
outstanding shares of AFB Stock held by approximately 2,800 shareholders of
record. The following table lists the high and low closing prices as reported by
the NYSE or quoted on the Nasdaq National Market, as applicable, and the amounts
of cash dividends declared, with respect to CCBF Stock and AFB Stock for each
quarterly period since January 1, 1995. (See "CAPITAL STOCK OF CCBF AND AFB.")
<TABLE>
<CAPTION>
CCBF STOCK AFB STOCK
CASH CASH
DIVIDEND DIVIDEND
HIGH LOW DECLARED HIGH LOW DECLARED
<S> <C> <C> <C> <C> <C> <C>
QUARTERLY PERIOD
YEAR ENDED DECEMBER 31, 1997:
Second Quarter (1).................................................. $70.88 62.00 .42 30.75 26.75 .12
First Quarter....................................................... 70.00 63.75 .42 29.75 18.88 .12
YEAR ENDED DECEMBER 31, 1996:
Fourth quarter...................................................... 71.75 54.75 .42 19.50 17.00 .10
Third quarter....................................................... 55.00 49.50 .42 18.25 15.50 .10
Second quarter...................................................... 54.75 49.75 .38 16.75 15.00 .10
First quarter....................................................... 55.75 49.25 .38 15.88 14.25 .07
YEAR ENDED DECEMBER 31, 1995:
Fourth quarter...................................................... 56.50 48.50 .38 15.75 14.00 .07
Third quarter....................................................... 51.63 41.75 .38 16.13 13.75 .07
Second quarter...................................................... 42.75 38.00 .34 14.75 13.50 .07
First quarter....................................................... 38.75 34.00 .34 14.25 10.25 .07
</TABLE>
(1) Through May 31, 1997.
60
<PAGE>
CCB FINANCIAL CORPORATION
GENERAL
CCBF is a North Carolina business corporation organized in 1982 and
registered as a bank holding company with the Federal Reserve under the BHCA and
the bank holding company laws of North Carolina. CCBF's principal business is
providing banking and other financial services through CCB Bank and other
banking subsidiaries. CCBF's principal offices are located at 111 Corcoran
Street, Durham, North Carolina.
Through its subsidiaries, CCBF offers numerous banking services consistent
with the needs and conveniences of the areas that it serves. These services
include accepting time and demand deposits, making secured and unsecured loans,
renting safe deposit boxes, sending and receiving wire transfers, performing
trust functions for corporations, pension trusts, and individuals, and providing
certain insurance and securities brokerage services. In addition, it provides
advisory services to individuals, institutions and corporations regarding
financial matters.
Vigorous competition exists in all major areas where CCBF is presently
engaged in business. Its financial institution subsidiaries compete not only
with other major commercial banks, but also with diversified and other financial
institutions such as thrift institutions, money market and other mutual funds,
mortgage companies, leasing companies, finance companies and a variety of
financial services and advisory companies. CCBF has primarily focused its
business and strategy on meeting this competition and the commercial banking
needs of its retail and commercial customers through its branch network.
For additional information about CCBF and its business operations,
reference should be made to CCBF's Annual Report on Form 10-K for the year ended
December 31, 1996 and the other documents incorporated by reference herein. (See
"INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE.")
SUBSIDIARIES
CCBF's wholly-owned subsidiaries include CCB Bank, a North Carolina
commercial bank headquartered in Durham, North Carolina, which operates 161
offices primarily in the urban corridor of North Carolina along Interstates 85
and 40 from Raleigh to Charlotte, North Carolina; and CCB-Georgia, a Georgia
special purpose credit card bank headquartered in Columbus, Georgia.
Additionally, CCB Bank has three wholly-owned subsidiaries: CCB Investment and
Insurance Service Corporation, CCBDE, Inc., and Southland Associates, Inc.
BENEFICIAL OWNERSHIP OF CCBF STOCK
Set forth below is information regarding the only person or entity known to
the management of CCBF to own beneficially more than 5% of the issued and
outstanding shares of CCBF Stock as of May 31, 1997.
<TABLE>
<CAPTION>
AMOUNT AND NATURE PERCENTAGE
NAME AND ADDRESS BENEFICIAL OWNERSHIP OF CLASS (1)
<S> <C> <C>
Central Carolina Bank and Trust Company
111 Corcoran Street
Post Office Box 931
Durham, North Carolina 27702-0931......................................................... 1,150,867(2) 7.29%
</TABLE>
(1) The calculation of the percentage of class beneficially owned is based on
the shares of CCBF Stock outstanding on May 31, 1997.
(2) Shares of CCBF Stock beneficially owned by CCB Bank are held through its
Trust Department in various fiduciary capacities. In addition to the shares
reflected above, CCB Bank holds certain other shares of CCBF Stock in
various fiduciary capacities as to which it disclaims beneficial ownership.
The aggregate number of such shares includes 1,117,680 shares over which CCB
Bank exercises sole voting power, 33,187 shares over which it has shared
voting power, 620,764 shares over which it has sole investment power, and
224,170 shares over which it has shared investment power.
61
<PAGE>
Set forth below is information as of May 31, 1997 regarding the beneficial
ownership of CCBF Stock by CCBF's current directors and its executive officers
individually, and by all directors and executive officers of CCBF as a group. No
director or executive officer owned more than one percent of the shares of CCBF
Stock outstanding on such date. As of May 31, 1997, CCBF's directors and
executive officers owned 526,924 shares, or approximately 3.33%, of the
outstanding CCBF Stock.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
OF BENEFICIAL
NAME OWNERSHIP (1)
<S> <C>
John M. Barnhardt....................................................................................... 12,752(2)
J. Harper Beall, III.................................................................................... 30,326(3)
James B. Brame, Jr...................................................................................... 5,551(4)
Timothy B. Burnett...................................................................................... 3,583(5)
W. L. Burns, Jr......................................................................................... 146,185(6)
Edward S. Holmes........................................................................................ 6,820(7)
Bonnie McElveen-Hunter.................................................................................. 3,507(8)
David B. Jordan......................................................................................... 43,402(9)
Owen G. Kenan........................................................................................... 6,316(10)
Eugene J. McDonald...................................................................................... 4,865(11)
Hamilton W. McKay, Jr., M.D............................................................................. 14,349(12)
George J. Morrow........................................................................................ 1,500(13)
Eric B. Munson.......................................................................................... 3,737(14)
Ernest C. Roessler...................................................................................... 40,873(15)
Miles J. Smith, Jr...................................................................................... 72,778(16)
Jimmy K. Stegall........................................................................................ 34,626(17)
H. Allen Tate, Jr....................................................................................... 13,821(18)
James L. Williamson..................................................................................... 6,629(19)
Dr. Phail Wynn, Jr...................................................................................... 4,036(20)
J. Scott Edwards........................................................................................ 39,246(21)
Richard L. Furr......................................................................................... 32,022(22)
All directors and executive officers as a group (21 persons)............................................ 526,924(23)
</TABLE>
(1) Except as otherwise noted, each individual exercises sole voting and
investment power with respect to all shares shown as beneficially owned.
(2) Includes 2,226 shares held by a company Mr. Barnhardt controls, 2,006
shares with respect to which he exercises shared voting and investment
power and 2,500 shares which he could purchase under an exercisable option
and as to which he is considered to have sole investment power only.
(3) Includes 1,440 shares with respect to which Mr. Beall exercises sole voting
power only, 8,160 shares with respect to which he exercises shared voting
and investment power and 10,142 shares which he could purchase under an
exercisable option and as to which he is considered to have sole investment
power only. Does not include 1,005 shares held by Mr. Beall's spouse and
children and with respect to which he disclaims any beneficial ownership.
(4) Includes 2,000 shares which Mr. Brame could purchase under an exercisable
option and as to which he is considered to have sole investment power only.
(5) Includes 1,500 shares which Mr. Burnett could purchase under an exercisable
option and as to which he is considered to have sole investment power only.
(6) Includes 37,884 shares with respect to which Mr. Burns exercises shared
voting and investment power, 2,000 shares with respect to which he
exercises sole voting power only, 3,792 shares under CCBF's Section 401(k)
Retirement Savings Plan (the "401(k) Plan") as to which he is considered to
have sole investment power only and 2,500 shares which he could purchase
under an exercise option and as to which he is considered to have sole
investment power only.
(7) Includes 2,500 shares which Mr. Holmes could purchase under an exercisable
option and as to which he is considered to have sole investment power only.
Does not include 21,648 shares held by his spouse and with respect to which
he disclaims any beneficial ownership.
(8) Includes 1,000 shares which Ms. McElveen-Hunter could purchase under an
exercisable option and as to which she is considered to have sole
investment power only.
(9) Includes 1,340 shares with respect to which Mr. Jordan exercises shared
voting and investment power and 1,165 shares under the 401(k) Plan and
3,147 shares which he could purchase under an exercisable option and as to
which he is considered to have sole investment power only.
62
<PAGE>
(10) Includes 3,530 shares with respect to which Mr. Kenan exercises shared
voting and investment power and 2,500 shares which he could purchase under
an exercisable option and as to which he is considered to have sole
investment power only.
(11) Includes 1,902 shares with respect to which Mr. McDonald exercises shared
voting and investment power and 2,500 shares which he could purchase under
an exercisable option and as to which he is considered to have sole
investment power only.
(12) Includes 2,500 shares which Dr. McKay could purchase under an exercisable
option and as to which he is considered to have sole investment power only.
Does not include 1,396 shares held by his spouse and son and with respect
to which he disclaims any beneficial ownership.
(13) Includes 1,000 shares which Mr. Morrow could purchase under an exercisable
option and as to which he is considered to have sole investment power only.
(14) Includes 2,500 shares which Mr. Munson could purchase under an exercisable
option and as to which he is considered to have sole investment power only.
(15) Includes 3,247 shares with respect to which Mr. Roessler exercises shared
voting and investment power and 6,224 shares under the 401(k) Plan and
13,884 shares which he could purchase under an exercisable option and as to
which he is considered to have sole investment power only.
(16) Includes 7,982 shares with respect to which Mr. Smith exercises shared
voting and investment power and 2,500 shares which he could purchase under
an exercisable option and as to which he is considered to have sole
investment power only.
(17) Includes 5,452 shares with respect to which Mr. Stegall exercises shared
voting and investment power and 2,500 shares which he could purchase under
an exercisable option and as to which he is considered to have sole
investment power only.
(18) Includes 108 shares with respect to which Mr. Tate exercises shared voting
and investment power and 2,500 shares which he could purchase under an
exercisable option and as to which he is considered to have sole investment
power only. Does not include a total of 8,068 shares held by or for Mr.
Tate's spouse, mother and children and with respect to which he disclaims
any beneficial ownership.
(19) Includes 2,500 shares which Mr. Williamson could purchase under an
exercisable option and as to which he is considered to have sole investment
power only.
(20) Includes 2,500 shares which Mr. Wynn could purchase under an exercisable
option and as to which he is considered to have sole investment power only.
(21) Includes 9,564 shares under the 401(k) Plan and 5,710 shares with respect
to which Mr. Edwards could purchase under an exercisable option and as to
which he is considered to have sole investment power only.
(22) Includes 4,159 shares with respect to which Mr. Furr exercises shared
voting and investment power and 4,910 shares under the 401(k) Plan and
5,818 shares which he could purchase under an exercisable option and as to
which he is considered to have sole investment power only.
(23) Includes an aggregate of 340,723 shares with respect to which the directors
and listed executive officers exercise sole voting and investment power,
82,905 shares with respect to which they have shared voting and investment
power, 3,440 shares with respect to which they have sole voting power only,
74,201 shares which such persons could purchase under exercisable options
and as to which they have sole investment power only and 25,655 shares
under the 401(k) Plan as to which they have sole investment power only.
MANAGEMENT AND ADDITIONAL INFORMATION
Certain information relating to CCBF's directors and executive officers,
executive and director compensation and compensation plans, certain
relationships and related transactions and other related matters as to CCBF is
incorporated by reference or set forth in CCBF's Annual Report on Form 10-K for
the year ended December 31, 1996 which is incorporated herein by reference.
Shareholders of AFB or CCBF desiring a copy of that document may contact CCBF at
its address or phone number listed elsewhere in this Prospectus/Joint Proxy
Statement under the heading "AVAILABLE INFORMATION."
63
<PAGE>
AMERICAN FEDERAL BANK, FSB
GENERAL
AFB was chartered in 1921 as a state-charted mutual building and loan
association, converted to a federal savings and loan association in 1936, and
ultimately converted to a federal stock savings bank pursuant to the Conversion
in January of 1989.
AFB is headquartered at 300 East McBee Avenue, Greenville, South Carolina
and operates through 40 branch offices located in the northwestern and central
regions of South Carolina. AFB's market includes the eight Upstate counties of
Greenville, Spartanburg, Cherokee, Oconee, Pickens, Anderson, Laurens and Union,
and four adjacent counties of Greenwood, McCormick, Saluda and Lexington located
in the Midlands Region of South Carolina. Through its branch operations, AFB
provides a wide variety of retail and commercial loan and deposit products.
At December 31, 1996, AFB had total consolidated assets of approximately
$1.3 billion, total consolidated deposits of approximately $1.0 billion, and
total consolidated shareholders' equity of approximately $115.6 million.
In its market areas, AFB is subject to intense competition from a number of
local, regional and superregional banking organizations, along with other
financial institutions and companies that offer financial services, such as
credit unions, retail credit companies, securities firms, insurance companies,
small loan companies, finance companies, mortgage companies, and other financial
service enterprises. Competition among financial institutions is based upon
rates offered on deposit accounts, interest rates charged on loans and other
credit and services charges, the quality of services rendered, the convenience
of banking facilities, and, in the case of loans to large commercial borrowers,
relative lending limits. Additional competition for depositors' funds comes from
issuers and suppliers of U.S. Government securities, private debt obligations
and other investment alternatives for depositors. Many of AFB's nonbank
competitors are not subject to the same extensive regulations that govern
federally insured banks and thrifts. As a result, such nonbank competitors may
have certain advantages over AFB in providing certain services. In addition,
many of the financial organizations in competition with AFB have much greater
financial resources than AFB, and are able to offer similar services at more
competitive costs with greater lending capacities.
64
<PAGE>
BENEFICIAL OWNERSHIP OF AFB STOCK
The following table lists, as of May 31, 1997, each holder of record of AFB
Stock who had filed with AFB a copy of a Schedule 13D or Schedule 13G indicating
that it is or may be deemed to be a beneficial owner of 5% or more of the
outstanding shares of AFB Stock.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF PERCENTAGE OF PERCENTAGE
NAME AND ADDRESS BENEFICIAL OWNERSHIP OF CLASS (1)
<S> <C> <C>
General Electric Pension Trust
G.E. Investment Corporation
3003 Summer Street
Stamford, CT 06904 1,274,755(2) 11.52%
Beck, Mack & Oliver
330 Madison Avenue
New York, NY 10017 601,560 5.43
Westport Asset Management, Inc.
253 Riverside Avenue
Westport, CT 06880 616,900 5.57
Keefe, Bruyette & Woods, Inc.
2 World Trade Center
85th Floor
New York, NY 10048 587,914 5.31(3)
</TABLE>
(1) The calculation of percentage of class beneficially owned is based on the
shares of AFB Stock outstanding on May 31, 1997.
(2) Under OTS regulations, any person or entity which beneficially owns more
than 10% (but less than 25%) of AFB Stock and is one of the two largest
shareholders of AFB is presumed, subject to rebuttal, to control AFB. In
accordance with OTS regulations, General Electric Pension Trust has made a
rebuttal of control filing with the OTS, including a rebuttal of control
agreement evidencing that its acquisition of the shares of AFB Stock did not
constitute an acquisition of control of AFB. On March 2, 1993, the OTS
accepted the rebuttal of control filing and determined that General Electric
Pension Trust had effectively rebutted the presumption of control.
(3) Keefe is one of AFB's financial advisors in connection with the Merger and
has rendered one of the AFB Fairness Opinions.
65
<PAGE>
Set forth below is information as of May 31, 1997, regarding the beneficial
ownership of AFB Stock by its current directors and certain of its officers
individually, and by all directors and executive officers of AFB as a group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE PERCENTAGE
NAME AND ADDRESS BENEFICIAL OWNERSHIP OF CLASS
<S> <C> <C>
William L. Abercrombie, Jr. 151,524(1) 1.37%
James P. Edwards 18,127(2) *
Blake P. Garrett, Jr. 92,500(3) *
C. Dan Joyner 38,378(4) *
John A. McCarroll 8,357(5) *
David E. Shi, Ph.D. 12,477(6) *
B. J. Skelton, Ph.D. 12,000(7) *
Michael A. Trimble 108,364(8) *
</TABLE>
* Except for Mr. Abercrombie, each director beneficially owns less than 1% of
AFB Stock. Except as indicated in other notes to this table describing
special relationships with other persons and specifying shares voting or
investment power, directors possess sole voting and investment power with
respect to all shares of AFB Stock set forth opposite their respective names.
The beneficial ownership of AFB Stock set forth reflects 183,300 shares of
AFB Stock that may be deemed to be beneficially owned by the directors who
have been granted AFB Options that are exercisable within 60 days of May 31,
1997. Such figures also include an aggregate of 36,489 shares allocated to
the accounts of directors who are executive officers pursuant to AFB's 401(k)
retirement savings plan (the "401(k) Plan").
(1) Includes 88,200 shares that may be acquired by exercise of AFB Options;
15,927 shares held by AFB's 401(k) Plan; 19,036 shares owned by Mr.
Abercrombie's wife, Mary Carol Abercrombie; 1,250 shares owned as custodian
for Mr. Abercrombie's son, William Travis Abercrombie; 1,079 shares owned by
William Travis Abercrombie; and 2,328 shares owned as a custodian for Mr.
Abercrombie's daughter, Kristi Cooke Abercrombie.
(2) Includes 8,000 shares that may be acquired by exercise of AFB Options and
4,127 shares held in trust for Mr. Edwards' account in AFB's Deferred
Compensation Plan for directors.
(3) Includes 8,000 shares that may be acquired by exercise of AFB Options;
13,000 shares owned as custodian for Mr. Garrett's son, Blake P. Garrett,
III; 13,000 shares owned as custodian for Mr. Garrett's daughter, Jennifer
M. Garrett, 11,000 shares owned as custodian for Mr. Garrett's daughter,
Amanda E. Garrett; 9,000 shares owned as custodian for Mr. Garrett's
daughter, Laura R. Garrett; 4,000 shares owned by Mr. Garrett's son, Blake
P. Garrett, III, as custodian for Mr. Garrett's grandson, Oakley M. Garrett;
1,000 shares owned by Mr. Garrett's son, Blake P. Garrett, III as custodian
form Mr. Garrett's grandson, Wade H. Garrett; and 2,500 shares owned by
Garrett Wenck and Garrett, Inc.
(4) Includes 8,000 shares that may be acquired by exercise of AFB Options;
11,628 shares held in trust for Mr. Joyner's account in AFB's Deferred
Compensation Plan for directors; and 2,571 shares owned by Mr. Joyner's
wife, Katherine Joyner.
(5) Includes 6,700 shares that may be acquired by exercise of AFB Options.
(6) Includes 8,000 shares that may be acquired by exercise of AFB Options.
(7) Includes 8,000 shares that may be acquired by exercise of AFB Options.
(8) Includes 48,400 shares that may be acquired by exercise of AFB Options;
20,562 shares held by AFB's 401(k) Plan; 1,597 shares owned by Mr. Trimble's
wife, Loretta Trimble; and 1,000 shares owned as custodian for Mr. Trimble's
son, Paul Trimble.
MANAGEMENT AND ADDITIONAL INFORMATION
Certain information relating to AFB's directors and executive officers,
executive and director compensation and compensation plans, certain
relationships and related transactions and other related matters as to AFB is
incorporated by reference or set forth in AFB's Annual Report on Form 10-K for
the year ended December 31, 1996 which is incorporated herein by reference.
Shareholders of AFB or CCBF desiring a copy of that document may contact AFB at
its address or phone number listed elsewhere in this Prospectus/Joint Proxy
Statement under the heading "AVAILABLE INFORMATION."
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CERTAIN REGULATORY CONSIDERATIONS
THE FOLLOWING DISCUSSION SETS FORTH CERTAIN OF THE MATERIAL ELEMENTS OF THE
REGULATORY FRAMEWORK APPLICABLE TO BANKS AND BANK HOLDING COMPANIES AND PROVIDES
CERTAIN SPECIFIC INFORMATION RELATED TO CCBF. BECAUSE AFB IS A FEDERAL STOCK
SAVINGS BANK, ITS DEPOSIT ACCOUNTS ARE INSURED BY THE SAIF OF THE FDIC AND AFB
IS SUBJECT TO REGULATION AND EXAMINATION BY THE OTS AND THE FDIC AND TO THE
REPORTING REQUIREMENTS OF THE OTS AND THE FDIC. REGULATION OF AFB BY THE OTS AND
THE FDIC IS SUBSTANTIALLY SIMILAR IN MOST MATERIAL RESPECTS TO THE REGULATION OF
CCBF AND CCB BANK BY SUCH ENTITIES' PRIMARY FEDERAL REGULATORS. FOR A MORE
DETAILED DISCUSSION OF THE REGULATORY FRAMEWORK APPLICABLE TO CCBF AND ITS
SUBSIDIARIES, INCLUDING CCB BANK, REFERENCE IS MADE TO CCBF'S ANNUAL REPORT ON
FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996, AND FOR A MORE DETAILED
DISCUSSION OF THE REGULATORY FRAMEWORK APPLICABLE TO AFB AND ITS SUBSIDIARIES,
REFERENCE IS MADE TO AFB'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED
DECEMBER 31, 1996. (SEE "AVAILABLE INFORMATION" AND "INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE.")
GENERAL. CCBF is a bank holding company, registered with the Federal
Reserve under the BHCA and with the North Carolina Commissioner of Banks (the
"Commissioner") under the North Carolina Bank Holding Company Act of 1984, as
amended (the "North Carolina Act"). As such, CCBF and its subsidiaries are
subject to the supervision, examination and reporting requirements of the BHCA
and the North Carolina Act and the regulations of the Federal Reserve and the
Commissioner.
The BHCA requires every bank holding company to obtain the prior approval
of the Federal Reserve before (i) it may acquire direct or indirect ownership or
control of any voting shares of any bank if, after such acquisition, the bank
holding company will directly or indirectly own or control more than 5% of the
voting shares of the bank, (ii) it or any of its subsidiaries, other than a
bank, may acquire all or substantially all of the assets of the bank, or (iii)
it may merge or consolidate with any other bank holding company.
The BHCA further provides that the Federal Reserve may not approve any
transaction that would result in a monopoly or would be in furtherance of any
combination or conspiracy to monopolize or attempt to monopolize the business of
banking in any section of the United States, or the effect of which may be
substantially to lessen competition or to tend to create a monopoly in any
section of the country, or that in any other manner would be in restraint of
trade, unless the anti-competitive effects of the proposed transaction are
clearly outweighed by the public interest in meeting the convenience and needs
of the community to be served. The Federal Reserve is also required to consider
the financial and managerial resources and future prospects of the bank holding
companies and banks concerned and the convenience and needs of the community to
be served. Consideration of financial resources generally focuses on capital
adequacy and consideration of convenience and needs issues includes the parties'
performance under the Community Reinvestment Act of 1977 (the "CRA"). Both
capital adequacy and CRA are discussed below.
The BHCA, as amended by the interstate banking provisions of the
Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 ("Interstate
Banking Act"), which became effective on September 29, 1995, repealed the prior
statutory restrictions on interstate acquisitions of banks by bank holding
companies, such that CCBF and any other bank holding company located in North
Carolina may now acquire a bank located in any other state, and any bank holding
company located outside North Carolina may lawfully acquire any North
Carolina-based bank, regardless of state law to the contrary, in either case
subject to certain deposit-percentage limitations, aging requirements and other
restrictions. The Interstate Banking Act also generally provides that, after
June 1, 1997, national and state-chartered banks may branch interstate through
acquisitions of banks in other states. By adopting legislation prior to that
date, a state has the ability either to "opt in" and accelerate the date after
which interstate branching is permissible or "opt out" and prohibit interstate
branching altogether. North Carolina has enacted "opt in" legislation that
permits interstate branching. Because of this action by North Carolina, CCBF is
currently able to establish and operate branches in other states that have also
enacted "opt in" legislation.
The BHCA generally prohibits CCBF from engaging in activities other than
banking or managing or controlling banks or other permissible subsidiaries and
from acquiring or retaining direct or indirect control of any company engaged in
any activities other than those activities determined by the Federal Reserve to
be so closely related to banking or managing or controlling banks as to be a
proper incident thereto. In determining whether a particular activity is
permissible, the Federal Reserve must consider whether the performance of such
an activity reasonably can be expected to produce benefits to the public, such
as greater convenience, increased competition or gains in efficiency, that
outweigh possible adverse effects, such as undue concentration of resources,
decreased or unfair competition, conflicts of interest or unsound banking
practices. For example, factoring accounts receivable, acquiring or servicing
loans, leasing personal property, conducting discount securities brokerage
activities, performing certain data processing services, acting as agent or
broker in selling credit life insurance
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and certain other types of insurance in connection with credit transactions, and
performing certain insurance underwriting activities all have been determined by
the Federal Reserve to be permissible activities of bank holding companies. The
BHCA does not place territorial limitations on permissible bank-related
activities of bank holding companies. Despite prior approval, the Federal
Reserve has the power to order a holding company or its subsidiaries to
terminate any activity or to terminate its ownership or control of any
subsidiary when it has reasonable cause to believe that continuation of such
activity or such ownership or control constitutes a serious risk to the
financial safety, soundness or stability of any bank subsidiary of that bank
holding company.
CCB Bank, CCBF's primary banking subsidiary, is a member of the FDIC, and
as such, its deposits are insured by the Bank Insurance Fund ("BIF") of the FDIC
to the extent provided by law. CCB Bank is also subject to numerous state and
federal statutes and regulations that affect its business, activities, and
operations, and CCB Bank, as a North Carolina bank that is not a member of the
Federal Reserve, is supervised and examined by the FDIC and the Commissioner.
Such agencies regularly examine the operations of CCB Bank and are given
authority to approve or disapprove mergers, consolidations, the establishment of
branches and similar corporate actions. Such agencies also have the power to
prevent the continuance or development of unsafe or unsound banking practices or
other violations of law.
It is anticipated that the Interstate Banking Act will increase competition
within the markets in which CCB Bank now operates, although the extent to which
such competition will increase in such markets or the timing of such increase
cannot be predicted.
COMMUNITY REINVESTMENT ACT. CCB Bank is subject to the provisions of the
CRA. Under the terms of the CRA, the appropriate federal bank regulatory agency
is required, in connection with its examination of a bank, to assess such bank's
record in meeting the credit needs of the community served by that bank,
including low and moderate-income neighborhoods. The regulatory agency's
assessment of the bank's record is made available to the public. Further, such
assessment is required of any bank which has applied to (i) charter a national
bank, (ii) obtain deposit insurance coverage for a newly chartered institution,
(iii) establish a new branch office that will accept deposits, (iv) relocate an
office, or (v) merge or consolidate with, or acquire the assets or assume the
liabilities of, a federally regulated financial institution. In the case of a
bank holding company applying for approval to acquire a bank or other bank
holding company, the Federal Reserve will assess the records of each subsidiary
bank of the applicant bank holding company, and such records may be the basis
for denying the application.
Under the current CRA regulations jointly adopted by all federal bank
regulatory agencies, the former process-based CRA assessment factors were
replaced with a new evaluation system that rates institutions based on their
actual performance in meeting community credit needs. The evaluation system used
to judge an institution's CRA performance consists of three tests: a lending
test; an investment test; and a service test. Each of these tests is applied by
the institution's federal regulator in an assessment context that takes into
account such factors as: (i) demographic data about the community; (ii) the
institution's capacity and constraints; (iii) the institution's product
offerings and business strategy; and (iv) data on the prior performance of the
institution and similarly-situated lenders. The new lending test the most
important of the three tests for all institutions other than wholesale and
limited purpose (e.g., credit card) banks evaluates an institution's lending
activities as measured by its home mortgage loans, small business and farm
loans, community development loans, and, at the option of the institution, its
consumer loans. The institution's regulator weighs each of these lending
categories to reflect its relative importance to the institution's overall
business and, in the case of community development loans, the characteristics
and needs of the institution's service area and the opportunities available for
this type of lending. Assessment criteria for the lending test include: (i)
geographic distribution of the institution's lending; (ii) distribution of the
institution's home mortgage and consumer loans among different economic segments
of the community; (iii) the number and amount of small business and small farm
loans made by the institution; (iv) the number and amount of community
development loans outstanding; and (v) the institution's use of innovative or
flexible lending practices to meet the needs of low-to-moderate income
individuals and neighborhoods. At the election of an institution, or if
particular circumstances so warrant, the banking agencies take into account in
making their assessments lending by the institution's affiliates as well as
community development loans made by the lending consortia and other lenders in
which the institution has invested. All financial institutions are required to
report data on their small business and small farm loans as well as their home
mortgage loans.
The joint agency CRA regulations provide that an institution evaluated
under a given test receive one of five ratings for that test: outstanding; high
satisfactory; low satisfactory; needs to improve; or substantial non-compliance.
The ratings for each test are then combined to produce an overall composite
rating of either outstanding, satisfactory (including both high and low
satisfactory), needs to improve, or substantial non-compliance. In the case of a
retail-oriented institution, its lending test rating forms the basis for its
composite rating. That rating is then increased by up to two levels in the case
of outstanding
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or high satisfactory investment performance, increased by one level in the case
of outstanding service and decreased by one level in the case of substantial
non-compliance in service. An institution found to have engaged in illegal
lending discrimination is rebuttably presumed to have a less-than-satisfactory
composite CRA rating. Each of CCB Bank and AFB has a current CRA rating of
"outstanding."
PAYMENT OF DIVIDENDS. CCBF is a legal entity separate and distinct from CCB
Bank and CCBF's other subsidiaries. The principal source of cash flow of CCBF,
including cash flow to pay dividends to its shareholders, is dividends from CCB
Bank. There are statutory and regulatory limitations on the payment of dividends
by CCB Bank to CCBF as well as CCBF to its shareholders.
Under North Carolina law, CCB Bank may pay cash dividends only out of
undivided profits and only if CCB Bank has surplus of a specified level.
Furthermore, if, in the opinion of the federal regulatory agencies, a bank under
its jurisdiction is engaged in or is about to engage in an unsafe or unsound
practice (which, depending on the financial condition of the bank, could include
the payment of dividends), such authority may require, after notice and hearing,
that such bank cease and desist from such practice. The Federal Reserve and the
FDIC have indicated that paying dividends that deplete a bank's capital base to
an inadequate level would be an unsafe and unsound banking practice. Under
FDICIA, an insured bank may not pay any dividend if payment would cause it to
become undercapitalized or once it is undercapitalized. See "Prompt Corrective
Action." Moreover, the Federal Reserve and the FDIC have issued policy
statements which provide that bank holding companies and insured banks should
generally only pay dividends out of current operating earnings.
The payment of dividends by CCBF and CCB Bank may also be affected or
limited by other factors, such as the requirement to maintain adequate capital
above regulatory guidelines.
CAPITAL ADEQUACY. CCBF and CCB Bank are required to comply with the capital
adequacy standards established by the Federal Reserve and the FDIC,
respectively. There are two basic measures of capital adequacy: a risk-based
measure and a leverage measure. All applicable capital standards must be
satisfied for an institution to be considered in compliance.
The risk-based capital standards are designed to make regulatory capital
requirements more sensitive to differences in risk profile among banks and bank
holding companies, to account for off-balance sheet exposure, and to minimize
disincentives for holding liquid assets. Assets and off-balance sheet items are
assigned to broad risk categories, each with appropriate weights. The resulting
capital ratios represent capital as a percentage of total risk-weighted assets
and off-balance sheet items.
The minimum guideline for the ratio (the "Total Capital Ratio") of total
capital ("Total Capital") to risk-weighted assets (including certain off-balance
sheet items, such as standby letters of credit) is 8.0%. At least half of Total
Capital must be composed of common equity, undivided profits, minority interests
in the equity accounts of consolidated subsidiaries, noncumulative perpetual
preferred stock, and a limited amount of cumulative perpetual preferred stock,
less goodwill and certain other intangible assets ("Tier 1 Capital"). The
remainder may consist of subordinated debt, other preferred stock, and a limited
amount of loan loss reserves ("Tier 2 Capital"). At March 31, 1997, CCBF's
consolidated Total Capital Ratio and its Tier 1 Capital Ratio (I.E., the ratio
of Tier 1 Capital to risk-weighted assets) were 13.75% and 11.64%, respectively.
In addition, the Federal Reserve has established minimum leverage ratio
guidelines for bank holding companies. These guidelines provide for a minimum
ratio of Tier 1 Capital to average assets, less goodwill and certain other
intangible assets (the "Leverage Ratio") of 3.0% for bank holding companies that
meet certain specified criteria, including having the highest regulatory rating.
All other bank holding companies generally are required to maintain a Leverage
Ratio of at least 3.0% plus an additional cushion of 100 to 200 basis points.
CCBF was in compliance with the minimum Leverage Ratio requirement as of March
31, 1997, with a Leverage Ratio of 8.52%. The guidelines also provide that bank
holding companies experiencing internal growth or making acquisitions will be
expected to maintain strong capital positions substantially above the minimum
supervisory levels without significant reliance on intangible assets.
Furthermore, the Federal Reserve has indicated that it will consider a "tangible
Tier 1 Capital leverage ratio" (deducting all intangibles) and other indicia of
capital strength in evaluating proposals for expansion or new activities.
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CCB Bank is subject to risk-based and leverage capital requirements adopted
by the FDIC and was in compliance with applicable minimum capital requirements
as of March 31, 1997. Neither CCBF nor CCB Bank has been advised by any federal
banking agency of any specific minimum Leverage Ratio requirement applicable to
it. The following table sets forth the regulatory capital positions of CCBF and
AFB on a historical basis, and of CCBF on a pro forma combined basis, as of
March 31, 1997.
<TABLE>
<CAPTION>
RISK-BASED CAPITAL
LEVERAGE CAPITAL TIER I TOTAL
AMOUNT % OF ASSETS AMOUNT % OF ASSETS AMOUNT % OF ASSETS
<S> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
CCBF
Actual......................................... $477,573 8.71% 477,573 11.93 560,592 14.01
Minimum capital standard....................... 164,491 3.00 160,106 4.00 320,212 8.00
Excess of actual regulatory over minimum
regulatory capital standard................. $313,082 5.71% 317,467 7.93 240,380 6.01
AFB
Actual......................................... $108,435 8.17% 108,435 13.56 118,443 14.81
Minimum capital standard....................... 39,795 3.00 31,988 4.00 63,976 8.00
Excess of actual regulatory over minimum
regulatory capital standard................. $ 68,640 5.17% 76,447 9.56 54,467 6.81
CCBF PRO FORMA COMBINED
Actual......................................... $586,008 8.61% 586,008 12.20 679,035 14.14
Minimum capital standard....................... 204,286 3.00 192,094 4.00 384,188 8.00
Excess of actual regulatory over minimum
regulatory capital standard................. $381,722 5.61% 393,914 8.20 294,847 6.14
</TABLE>
Failure to meet capital guidelines could subject a bank to a variety of
enforcement remedies, including the termination of deposit insurance by the
FDIC, and to certain restrictions on its business. (See " -- Prompt Corrective
Action.")
The federal bank regulators continue to indicate their desire to raise
capital requirements applicable to banking organizations beyond their current
levels. In this regard, the federal banking agencies have, pursuant to FDICIA,
recently adopted final regulations which require regulators to consider interest
rate risk (when the interest rate sensitivity of an institution's assets does
not match the sensitivity of its liabilities or its off-balance-sheet position)
in the evaluation of a bank's capital adequacy. The bank regulatory agencies
have concurrently proposed a methodology for evaluating interest rate risk which
would require banks with excessive interest rate risk exposure to hold
additional amounts of capital against such exposures.
SUPPORT OF SUBSIDIARY BANK. Under Federal Reserve policy, CCBF is expected
to act as a source of financial strength to, and to commit resources to support,
CCB Bank or its other banking subsidiaries. This support may be required at
times when, absent such Federal Reserve policy, CCBF may not be inclined to
provide it. In addition, any capital loans by a bank holding company to a
subsidiary bank are subordinate in right of payment to deposits and to certain
other indebtedness of the subsidiary bank. In the event of a bank holding
company's bankruptcy, any commitment by the bank holding company to a federal
bank regulatory agency to maintain the capital of a subsidiary bank will be
assumed by the bankruptcy trustee and entitled to a priority of payment.
Under the Federal Deposit Insurance Act ("FDIA"), a depository institution
insured by the FDIC can be held liable for any loss incurred by, or reasonably
expected to be incurred by, the FDIC after August 9, 1989, in connection with
(i) the default of a commonly controlled FDIC-insured depository institution or
(ii) any assistance provided by the FDIC to any commonly controlled FDIC-insured
depository institution "in danger of default." "Default" is defined generally as
the appointment of a conservator or receiver, and "in danger of default" is
defined generally as the existence of certain conditions indicating that a
default is likely to occur in the absence of regulatory assistance. The FDIC's
claim for damages is superior to claims of shareholders of the insured
depository institution or its holding company, but it is subordinate to claims
of depositors, secured creditors, and holders of subordinated debt (other than
affiliates) of the commonly controlled insured depository institution. The
subsidiary depository institutions of CCBF are subject to these cross-guarantee
provisions. As a result, any loss suffered by the FDIC in respect of any of
these subsidiaries would likely result in assertion of the cross-guarantee
provisions, the assessment of such estimated losses against the depository
institution's banking or thrift affiliates, if any, and a potential loss of
CCBF's investments in such other subsidiary depository institutions.
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PROMPT CORRECTIVE ACTION. FDICIA establishes a system of prompt corrective
action to resolve the problems of undercapitalized institutions. Under this
system, which became effective on December 19, 1992, the federal banking
regulators are required to establish five capital categories
("well-capitalized," "adequately capitalized," "undercapitalized,"
"significantly undercapitalized," and "critically undercapitalized") and to take
certain mandatory supervisory actions, and are authorized to take other
discretionary actions, with respect to institutions in the three
undercapitalized categories, the severity of which will depend upon the capital
category in which the institution is placed. Generally, subject to a narrow
exception, FDICIA requires the banking regulator to appoint a receiver or
conservator for an institution that is critically undercapitalized. The federal
banking agencies have specified by regulation the relevant capital level for
each category.
Under the FDIC final rule implementing the prompt corrective action
provisions, a bank that (i) has a Total Capital Ratio of 10.0% or greater, a
Tier 1 Capital Ratio of 6.0% or greater, and a Leverage Ratio of 5.0% or
greater, and (ii) is not subject to any written agreement, order, capital
directive, or prompt corrective action directive issued by the FDIC, is deemed
to be "well-capitalized." An institution with a Total Capital Ratio of 8.0% or
greater, a Tier 1 Capital Ratio of 4.0% or greater and a Leverage Ratio of 4.0%
or greater (or 3.0% or greater in the case of an institution rated composite 1
under the CAMEL rating system) is considered to be "adequately capitalized." A
bank that has a Total Capital Ratio of less than 8.0% or a Tier 1 Capital Ratio
of less than 4.0% or a Leverage Ratio of less than 4.0% (or less than 3.0% in
the case of a bank rated composite 1 under the CAMEL rating system) is
considered to be "undercapitalized." A bank that has a Total Capital Ratio of
less than 6.0%, a Tier 1 Capital Ratio of less than 3%, or a Leverage Ratio of
less than 3.0% is considered to be "significantly undercapitalized" and an
institution that has a tangible equity capital to assets ratio equal to or less
than 2.0% is deemed to be "critically undercapitalized." For purposes of the
regulation, the term "tangible equity" includes core capital elements counted as
Tier 1 capital for purposes of the risk-based capital standards plus the amount
of outstanding cumulative perpetual preferred stock (including related surplus),
minus all intangible assets with certain exceptions. A bank may be deemed to be
in a capitalization category that is lower than is indicated by its actual
capital position if it receives an unsatisfactory examination rating.
A bank that is categorized as undercapitalized, significantly
undercapitalized, or critically undercapitalized is required to submit an
acceptable capital restoration plan to its appropriate federal banking agency.
Under FDICIA, a bank holding company must guarantee that a subsidiary depository
institution meet its capital restoration plan, subject to certain limitations.
The obligation of a controlling bank holding company under FDICIA to fund a
capital restoration plan is limited to the lesser of 5.0% of an undercapitalized
subsidiary's assets or the amount required to meet regulatory capital
requirements. An undercapitalized institution is also generally prohibited from
increasing its average total assets, making acquisitions, establishing any
branches, or engaging in any new line of business except in accordance with an
accepted capital restoration plan or with the approval of the FDIC. In addition,
the appropriate federal banking agency is given authority with respect to any
undercapitalized depository institution to take any of the actions it is
required to or may take with respect to a significantly undercapitalized
institution as described below if it determines "that those actions are
necessary to carry out the purposes" of FDICIA. At March 31, 1997, CCB Bank and
AFB each had the requisite capital levels to qualify as well-capitalized.
FDIC INSURANCE ASSESSMENTS. Pursuant to FDICIA, the FDIC adopted a
risk-based assessment system for insured depository institutions that takes into
account the risks attributable to different categories and concentrations of
assets and liabilities. The risk-based system, which went into effect January 1,
1994, assigns an institution to one of three capital categories: (i) well
capitalized; (ii) adequately capitalized; and (iii) undercapitalized. These
three categories are substantially similar to the prompt corrective action
categories described above, with the "undercapitalized" category including
institutions that are undercapitalized, significantly undercapitalized and
critically undercapitalized for prompt corrective action purposes. An
institution is also assigned by the FDIC to one of three supervisory subgroups
within each capital group. The supervisory subgroup to which an institution is
assigned is based on a supervisory evaluation provided to the FDIC by the
institution's primary federal regulator and information which the FDIC
determines to be relevant to the institution's financial condition and the risk
posed to the deposit insurance funds (which may include, if applicable,
information provided by the institution's state supervisor). An institution's
insurance assessment rate is then determined based on the capital category and
supervisory category to which it is assigned.
Under the final risk-based assessment system there are nine assessment risk
classifications (I.E., combinations of capital groups and supervisory subgroups)
to which different assessment rates are applied. Assessment rates for members of
both the BIF and the SAIF for the first half of 1995, as they had been during
1994, ranged from 23 basis points (0.23% of deposits) for an institution in the
highest category (I.E., "well capitalized" and "healthy") to 31 basis points
(0.31% of deposits) for an institution in the lowest category (I.E.,
"undercapitalized" and "substantial supervisory concern"). These rates were
established for both funds to achieve a designated ratio of reserves to insured
deposits (I.E., 1.25%) within a specified period of time.
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Once the designated ratio for the BIF was reached in May 1995, the FDIC
reduced the assessment rate applicable to BIF deposits in two stages, so that,
beginning in 1996, the deposit insurance premiums for 92% of all BIF members in
the highest capital and supervisory categories were set at $2,000 per year,
regardless of deposit size. The FDIC elected to retain the assessment rate range
of 23 to 31 basis points for SAIF members given the undercapitalized nature of
that insurance fund.
A portion of CCB Bank's deposits are insured by the SAIF of the FDIC as a
result of the assumption of certain deposits of a thrift institution during
1993, CCBF's 1995 merger with SCBC, the 1995 merger of CCB Savings Bank of
Lenoir, Inc., SSB, a CCBF subsidiary, into CCB Bank, and the 1996 merger of
Graham Savings Bank, Inc. SSB, a CCBF subsidiary, into CCB Bank. At March 31,
1997, CCBF had approximately $3.4 billion in BIF-insured deposits and
approximately $1.4 billion in SAIF-insured deposits. AFB's deposits are
SAIF-insured.
Recognizing that the disparity between the SAIF and BIF premium rates have
adverse consequences for SAIF-insured institutions and other banks with SAIF
assessed deposits, including reduced earnings and an impaired ability to raise
funds in capital markets and to attract deposits, in July 1995, the FDIC, the
Treasury Department and the OTS released statements outlining a proposed plan to
recapitalize the SAIF, the principal feature of which was a special one-time
assessment on depository institutions holding SAIF-insured deposits, which was
intended to recapitalize the SAIF at a reserve ratio of 1.25%. This proposal
contemplated elimination of the disparity between the assessment rates on BIF
and SAIF deposits following recapitalization of the SAIF.
A variation of this proposal designated the Deposit Insurance Funds Act of
1996 (the "Funds Act") was enacted by Congress as part of omnibus budget
legislation and signed into law on September 30, 1996. As directed by the Funds
Act, the FDIC has implemented a special one-time assessment of approximately
65.7 basis points (0.657%) on a depository institution's SAIF-insured deposits
held as of March 31, 1995 (or approximately 52.6 basis points on SAIF deposits
acquired by banks in certain qualifying transactions). CCBF and AFB recorded
pre-tax charges against earnings for the special assessment in the year ended
December 31, 1996 of approximately $7.4 million and $5.6 million, respectively.
In addition, on December 24, 1996, in order to avoid collecting more than
needed to maintain the SAIF's capitalization rate at 1.25 percent of aggregate
insured deposits, the FDIC adopted in final a revision in the SAIF assessment
rate schedule which retroactively effected, as of December 11, 1996, (i) a
widening in the assessment rate spread among institutions in the different
capital and risk assessment categories, (ii) an overall reduction of the
assessment rate range assessable on SAIF deposits of from 0 to 27 basis points,
and (iii) a special interim assessment rate range for the last quarter of 1996
of from 18 to 27 basis points on institutions subject to FICO assessments. For
1997, FICO assessments are imposed on both BIF- and SAIF-insured deposits at
rates of 1.29 basis points and 6.44 basis points, respectively. CCBF and AFB
anticipate that the net effect of the decrease in the premium assessment rate on
their respective SAIF deposits will result in a reduction in their total deposit
insurance premium assessments for the years 1997 through 1999, assuming no
further changes in announced premium assessment rates.
Under the FDIA, insurance of deposits may be terminated by the FDIC upon a
finding that the institution has engaged in unsafe and unsound practices, is in
an unsafe or unsound condition to continue operations, or has violated any
applicable law, regulation, rule, order or condition imposed by the FDIC.
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CAPITAL STOCK OF CCBF AND AFB
AFB shareholders' current rights as shareholders are governed by the AFB
Charter and Bylaws, HOLA, and the OTS Merger Law. Upon consummation of the
Merger, AFB's shareholders will become shareholders of CCBF and their rights
will be the same as all other CCBF shareholders and will be governed by the CCBF
Restated Articles of Incorporation, as amended ("Restated Articles"), and
Bylaws, a Rights Agreement dated as of February 26, 1990 pertaining to the CCBF
Rights (the "CCBF Rights Agreement"), and by the NCBCA. Certain differences
exist between the current rights of AFB's shareholders as holders of AFB Stock
and their rights after the Effective Time as holders of CCBF Stock.
THE FOLLOWING IS ONLY A GENERAL SUMMARY OF CERTAIN MATERIAL DIFFERENCES IN
THE RIGHTS OF CCBF'S AND AFB'S SHAREHOLDERS AND IS NOT INTENDED TO BE COMPLETE.
REFERENCE IS MADE TO THE CCBF RESTATED ARTICLES, THE AFB CHARTER, CCBF'S AND
AFB'S RESPECTIVE BYLAWS, AND THE OTHER GOVERNING INSTRUMENTS OF CCBF AND AFB,
HOLA, THE OTS MERGER LAW AND THE NCBCA FOR A MORE COMPLETE DESCRIPTION OF SUCH
DIFFERENCES. AFB'S SHAREHOLDERS SHOULD ALSO CONSULT WITH THEIR OWN LEGAL COUNSEL
WITH RESPECT TO SPECIFIC DIFFERENCES AND CHANGES IN THEIR RIGHTS AS SHAREHOLDERS
WHICH WILL RESULT FROM THE MERGER.
AUTHORIZED CAPITAL STOCK
CCBF's authorized capital stock consists of 50,000,000 shares of CCBF
Stock, $5.00 par value common stock, of which 15,794,158 shares were issued and
outstanding as of May 31, 1997, and 5,000,000 shares of serial preferred stock
("CCBF Preferred Stock"), none of which were issued and outstanding at that
date.
By an amendment to the CCBF Restated Articles which may be adopted without
shareholder approval, CCBF's Board of Directors may divide shares of the CCBF
Preferred Stock into, and issue the same in, one or more classes and in one or
more series within each class, and such Board is authorized to determine and fix
the designations, relative rights, preferences and limitations of shares in each
such class and series of the CCBF Preferred Stock so established. Subject to the
provisions of the NCBCA and the rules of the NYSE, shares of CCBF Stock and each
such class or series or CCBF Preferred Stock may be issued from time to time
without shareholder approval at such times, for such purposes and for such
consideration as the CCBF Board of Directors may deem advisable.
For use in connection with the "Rights Plan" (as described below), CCBF's
Board of Directors has established a series of CCBF Preferred Stock designated
as its Series A Junior Participating Preferred Stock ("Series A Preferred")
consisting of shares and having certain special rights for purposes of dividends
and other distributions, voting, dissolution and liquidation and in connection
with certain mergers of CCBF. Although 200,000 shares of CCBF Preferred Stock
have been designated as Series A Preferred, none have been issued.
AFB's authorized capital stock consists of 50,000,000 shares of Common
Stock, $1.00 par value per share, of which 11,062,385 shares were issued and
outstanding as of May 31, 1997, and 10,000,000 shares of preferred stock, none
of which were issued and outstanding at that date.
CCBF RIGHTS PLAN
The CCBF Rights Agreement provides for a plan (the "Rights Plan") pursuant
to which one CCBF Right was distributed during 1990 to CCBF's shareholders for
each of their shares of CCBF Stock. Also under the Rights Plan, after the date
of the CCBF Rights Agreement and before the earlier of the "Distribution Date"
(as defined below) or the date of redemption or expiration of the CCBF Rights,
each new share of CCBF Stock issued (including the shares into which AFB Stock
will be converted in connection with the Merger) also has attached to it one
CCBF Right.
The CCBF Rights currently are not exercisable, but may become so in the
future on a date (the "Distribution Date") which is 20 business days after (i) a
public announcement that any person or group has become an "Acquiring Person" by
acquiring beneficial ownership of 15% or more of the outstanding CCBF Stock, or
(ii) the date of commencement by any person of, or the announcement by any
person of his intention to commence, a tender or exchange offer which would
result in his becoming an Acquiring Person. However, after the time any person
becomes an Acquiring Person, all CCBF Rights held by or transferred to such
Acquiring Person (or any associate or affiliate of such Acquiring Person) shall
be void and of no effect.
Until the Distribution Date, each CCBF Right will be evidenced by the
certificate evidencing the CCBF Stock to which it relates and may be transferred
only with such CCBF Stock, and the surrender for transfer of any CCBF Stock
certificate
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also will constitute the transfer of the CCBF Rights related thereto. After the
Distribution Date, separate certificates evidencing each CCBF Right will be
distributed to the record holders of the CCBF Stock to which such CCBF Rights
are attached, and each such CCBF Right may then be exercised to purchase .01 of
a share of Series A Preferred for a price of $100 (the "Purchase Price") (all as
adjusted from time to time as described in the CCBF Rights Agreement). In the
alternative (and subject to certain exceptions), after any person becomes an
Acquiring Person (i) each CCBF Right may be exercised to purchase the number of
shares of CCBF Stock equal to the result obtained by multiplying the then
current Purchase Price by the number of Series A Preferred interests covered by
the CCBF Right, and dividing that product by 50% of the market price of a share
of CCBF Stock, or, (ii) unless the Acquiring Person has become the beneficial
owner of more than 50% of the outstanding CCBF Stock, CCBF's Board of Directors
at its option may exchange one share of CCBF Stock, or a number of shares of
Series A Preferred having voting rights equivalent to one share of CCBF Stock,
for all or part of the outstanding CCBF Rights.
If CCBF is acquired in a merger or other business combination or if 50% of
its consolidated assets or earnings power is sold, each CCBF Right will entitle
the holder, other than the Acquiring Person, to purchase securities of the
surviving company having a market value equal to twice the exercise price of the
CCBF Right.
The CCBF Rights will expire on February 26, 2000 and may be redeemed by
CCBF at any time prior to the acquisition by a person or group of 15% or more of
the outstanding CCBF Stock at a price of $.01 per CCBF Right.
SPECIAL MEETINGS OF SHAREHOLDERS
CCBF's Bylaws require that a special meeting of shareholders may be called
by the Chairman, Vice Chairman, President or Board of Directors of CCBF or by
any CCBF shareholder pursuant to the written request of the holders of at least
10% of all shares of CCBF Stock entitled to be voted at such a meeting.
Under AFB's Bylaws, a special meeting of AFB's shareholders may be called
only by its Chairman of the Board of Directors or President, or by a majority
vote of its Board of Directors and must be called by its Chairman of the Board,
President or Secretary upon the written request of the holders of at least 20%
of the AFB Stock.
DIRECTORS
NUMBER OF DIRECTORS. Under CCBF's Bylaws, its Board of Directors consists
of not less than nine nor more than 23 directors, with the actual number of
directors to be determined by the CCBF Board or CCBF's shareholders from time to
time within the above minimum and maximum numbers. The number of directors is
fixed at 19 until the Effective Time at which time the number of directors will
be increased to 23.
The AFB Charter provides that the number of AFB's directors shall not be
less than seven nor more than fifteen. Under AFB's Bylaws, the number of
directors is fixed at eight.
ELECTION OF DIRECTORS. At CCBF's 1997 Annual Meeting of Shareholders, an
amendment to CCBF's Bylaws was approved dividing CCBF's directors into three
classes and providing that each class is to be elected to staggered three-year
terms so that the terms of approximately one-third of CCBF's directors expire
each year. In order to effect this classification of CCBF's Board, at the 1997
Annual Meeting seven directors were elected to one-year terms, six directors
were elected to two-year terms, and six directors were elected to three-year
terms. Starting with CCBF's 1998 Annual Meeting of Shareholders, one class of
directors will be elected each year for a three-year term. Under the CCBF
Restated Articles and By-Laws, shareholders of CCBF have the right to cumulate
their votes in the election of CCBF directors; provided, however, under the
NCBCA, because CCBF has a class of capital stock registered under the 1934 Act,
so long as such registration remains in effect (i.e. CCBF is a "public
corporation") such right is withdrawn.
Under the AFB Charter, AFB's shareholders have the right to cumulate their
votes in the election of directors. AFB's directors are elected to staggered
three-year terms, and the terms of approximately one-third of the AFB directors
expire each year.
VACANCIES RESULTING FROM INCREASE IN NUMBER. CCBF's Bylaws authorize the
CCBF Board or the shareholders of CCBF to appoint new directors to fill
vacancies arising by reason of death, resignation or removal or resulting from
an increase (within the above minimum and maximum numbers) by the Board of
Directors in the number of CCBF's directors.
AFB's Bylaws provide that vacancies existing on the Board of Directors
(whether by death or resignation or by an increase in the number of directors)
may be filled by a majority vote of the remaining directors, with the director
so appointed serving until the next election of directors by AFB's shareholders.
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REMOVAL OF DIRECTORS. At CCBF's 1997 Annual Meeting of Shareholders, CCBF's
shareholders approved an amendment to the CCBF Restated Articles providing that
a CCBF director may be removed only for "cause." Cause means (a) the criminal
prosecution and conviction of the director of an act of fraud, embezzlement,
theft or personal dishonesty, (b) prosecution and conviction of the director for
a criminal offense involving dishonesty or breach of trust as described by the
FDIA, or (c) the occurrence of an event causing such director to be "unbondable"
under any of CCBF's fidelity bonds or insurance policies covering directors.
AFB's Bylaws provide that at a meeting of AFB's shareholders specifically
called for such purpose, any director may be removed by a vote of the holders of
a majority of the AFB Stock; provided, however, that if less than the whole
Board is to be removed, no one director may be removed if the votes cast against
such removal would be sufficient to elect a director if cumulatively voted at an
election of the class of directors of which such a director is a part.
RELEASE FROM LIABILITY. The CCBF Restated Articles provide that to the
extent permitted by the NCBCA, CCBF's directors shall not be personally liable
for monetary damages in any action by or in the right of CCBF or otherwise for
breach of their duties as directors.
AFB does not, and under OTS regulations may not, adopt a provision to the
AFB Charter or AFB's Bylaws exculpating directors from personal liability.
NOMINATIONS. CCBF's Bylaws do not contain specific provisions restricting
or conditioning nominations of directors. CCBF's directors need not be North
Carolina residents. Under the Bank Act, each director of CCBF must beneficially
own unencumbered shares of CCBF Stock having an aggregate "book value" of at
least $1,000, and at least 75% of the directors of CCB Bank must be residents of
North Carolina.
AFB's Bylaws provide that nominations for election as a director shall be
made by AFB's Board at least 20 days prior to the relevant annual shareholders
meeting and may be made by any shareholder in a writing delivered to AFB's
Secretary at least five days prior to the annual meeting. AFB's Bylaws require
nominees for election to own at least 1,000 shares of AFB Stock.
BUSINESS COMBINATIONS AND CHANGES IN CONTROL
CHARTER PROVISIONS. In general, the NCBCA requires that any merger, share
exchange, voluntary liquidation or transfer of substantially all the assets
(other than in the ordinary course of business) of a business corporation be
approved by the corporation's shareholders by a majority of the votes entitled
to be cast on the proposed transaction. However, the CCBF Restated Articles
contain "supermajority" provisions that, in the case of certain business
combination transactions, require a higher vote of CCBF's shareholders than
otherwise would be required by the NCBCA.
This supermajority provision ("CCBF's 85% Vote Requirement") requires that
notwithstanding the fact that no vote may be required, or that a lesser
percentage may be specified, by law or in any agreement with any securities
exchange or otherwise, certain "CCBF Business Combinations" with an "Interested
Shareholder" (as those terms are defined below) require the affirmative vote of
both (i) the holders of at least 85% of each class of outstanding shares of
capital Stock entitled to vote generally in the election of directors (each
voting separately as a class), and (ii) the holders of at least a majority of
the issued and outstanding voting Stock of CCBF held by persons other than the
Interested Shareholder or an affiliate or associate of the Interested
Shareholder. However, CCBF's 85% Vote Requirement will not apply in the case of
a CCBF Business Combination that has been approved by a majority of CCBF's
directors who are not affiliated with the Interested Shareholder and who become
directors before the Interested Shareholder became such (the "CCBF Continuing
Directors") or which satisfies the "CCBF Fair Price Provisions" (as described
below) also contained in the CCBF Restated Articles.
The term "CCBF Business Combination" generally includes: (i) any merger or
consolidation of CCBF or a subsidiary with an Interested Shareholder or an
affiliate or associate of an Interested Shareholder; (ii) any sale, lease
exchange, mortgage, pledge, transfer or other disposition to or with an
Interested Shareholder or an affiliate or associated of an Interested
Shareholder of all or substantially all, or as much as 10% of, the assets or
businesses of CCBF or any subsidiary; (iii) any purchase, exchange, lease or
other acquisition by CCBF or any subsidiary of all or substantially all, or as
much as 10% of, the assets or businesses of an Interested Shareholder or an
affiliate or associate of an Interested Shareholder; (iv) the issuance or
transfer of any securities of CCBF or any subsidiary to an Interested
Shareholder or an affiliate or associate of an Interested Shareholder for
consideration having a value of more than $5 million; (v) the adoption of any
plan proposed by or on behalf of an Interested Shareholder or an affiliate or
associate of an Interested Shareholder for the liquidation or dissolution of
CCBF; (vi) any recapitalization or reclassification of securities, or any merger
or consolidation of CCBF with any of its subsidiaries, or any other transaction
(whether or not involving an Interested Shareholder) that would have the effect,
directly
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or indirectly, of increasing the proportionate share of the outstanding shares
of any class of equity or convertible securities of CCBF or any subsidiary which
is directly or indirectly owned by an Interested Shareholder or an affiliate or
associate of an Interested Shareholder.
An "Interested Shareholder" for purposes of CCBF's 85% Vote Requirement
generally is any person who: (i) together with his or its affiliates,
beneficially owns, directly or indirectly, 20% or more of any class of CCBF's
outstanding voting Stock, (ii) is an affiliate of CCBF and at any time within
the preceding two years beneficially owned, directly or indirectly, 20% or more
of any class of CCBF's outstanding voting Stock; or (iii) is an assignee of or
has otherwise succeeded to any shares of any class of outstanding voting Stock
which at any time within the preceding two years were beneficially owned by any
Interested Shareholder.
FAIR PRICE PROVISIONS. A provision of the CCBF Restated Articles (the "CCBF
Fair Price Provisions") provides that the CCBF 85% Vote Requirement will not
apply in the case of a CCBF Business Combination if: (i) the aggregate
consideration to be received per share of CCBF Stock by CCBF's shareholders is
not less than the higher of (A) the highest price per share paid by the
Interested Shareholder for CCBF Stock within two years preceding the
announcement of the CCBF Business Combination or the date the person became an
Interested Shareholder or (B) the fair market value per share of CCBF Stock on
such announcement date or on the date the person became an Interested
Shareholder; (ii) the aggregate consideration to be received by CCBF's
shareholders per share of any other class of CCBF's voting Stock other than the
CCBF Stock is not less than the higher of (A) the highest price per share paid
by the Interested Shareholder for shares of such other class of voting Stock
within two years preceding the announcement of the CCBF Business Combination or
the date the person became an Interested Shareholder, (B) the highest
preferential amount per share to which holders of shares of such other class are
entitled in the event of any liquidation, dissolution or winding up of CCBF, or
(C) the fair market value per share of such other class on such announcement
date or on the date the person became an Interested Shareholder; (iii) the
consideration to be received by CCBF's shareholders is in cash or in the same
form as the consideration paid by the Interested Shareholder in acquiring shares
already owned (provided, that if the Interested Shareholder has paid varying
forms of consideration, the form of consideration paid to CCBF's shareholders in
the CCBF Business Combination shall either be cash or in the form used to
acquire the largest number of shares of such class of voting Stock already
owned); (iv) except as approved by the CCBF Continuing Directors, after the
Interested Shareholder has become such and prior to consummation of the CCBF
Business Combination (A) there has been no failure to pay any regular quarterly
dividend on any outstanding preferred Stock or reduction in the annual dividend
rate on CCBF Stock, and (B) the Interested Shareholder shall not have acquired
beneficial ownership of any additional shares of CCBF voting Stock; (iv) after
becoming an Interested Shareholder, such person shall not have received the
benefit of certain financial assistance or tax advantages; and (v) a proxy
statement in conformity with the 1934 Act and regulations thereunder shall be
mailed to all CCBF shareholders.
NORTH CAROLINA SHAREHOLDER PROTECTION ACT. The North Carolina Shareholder
Protection Act (the "Shareholder Protection Act") generally requires that,
unless certain "fair price" and procedural requirements are satisfied, an
affirmative vote of 95% of a corporation's voting shares is required to approve
certain business combination transactions with another entity that is the
beneficial owner, directly or indirectly, of more than 20% of the corporation's
voting shares or which is an affiliate of the corporation and previously has
been a 20% beneficial holder of such shares. The Shareholder Protection Act is
applicable to CCBF.
CONTROL SHARE ACQUISITION ACT. The North Carolina Control Share Acquisition
Act (the "Control Share Act") generally provides that, except as provided below,
"Control Shares" will not have any voting rights. Control Shares are shares
acquired be a person under certain circumstances which, when added to other
shares owned, would give such person effective control over one-fifth, one-third
or a majority of all voting power in the election of the corporation's
directors. However, voting rights will be restored to Control Shares by
resolution approved by the affirmative vote of the holders of a majority of the
corporation's voting Stock (other than shares held by the owner of the Control
Shares, officers of the corporation, and directors of the corporation). If
voting rights are granted to Control Shares which give the hold a majority of
all voting power in the election of the corporation's directors, then the
corporation's other stockholders may require the corporation to redeem their
shares at their fair value. The Control Share Act is applicable to CCBF.
AMENDMENT OF ORGANIZATIONAL DOCUMENTS
ARTICLES. Subject to certain conditions, an amendment to the CCBF Restated
Articles may be effected if the amendment is approved by the vote of the holders
of a majority of the CCBF Stock present at the shareholders meeting at which
such amendment proposal is considered. However, unless recommended to CCBF's
shareholders by a vote of three-fourths of the CCBF Continuing Directors, the
affirmative vote of both (i) the holders of not less than 85% of CCBF's
outstanding voting
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Stock (each voting separately as a class) and (ii) the holders of a majority of
outstanding CCBF voting Stock held by persons other than an Interested
Shareholder or any affiliate or associate of an Interested Shareholder, is
required to amend or repeal, or to adopt provisions inconsistent with, the
provisions of the CCBF 85% Vote Requirement and the CCBF Fair Price Provisions.
An amendment to the AFB Charter may be effected by the vote of the holders
of a majority of the AFB Stock.
BYLAWS. CCBF's Bylaws may be amended or repealed, and new Bylaws may be
adopted, by the affirmative vote of a simple majority of CCBF's directors or by
the affirmative vote of the holders of a majority of the shares of CCBF Stock
represented, in person or by proxy, at a shareholders' meeting; provided,
however, that any Bylaw approved by CCBF's shareholders may be amended or
repealed only by a vote of the shareholders and any Bylaw providing for a higher
Board or shareholder vote requirement for its amendment or repeal may be amended
or repealed by such higher vote.
AFB's Bylaws may be amended or repealed, and new Bylaws may be adopted, by
the affirmative vote of a majority of AFB's directors in office at the time such
action is submitted to a vote of the AFB Board of Directors or by the holders of
a majority of the AFB Stock subject in each case to compliance with applicable
OTS regulations.
ANTI-TAKEOVER EFFECT OF CERTAIN PROVISIONS
Certain of the provisions of the CCBF Restated Articles and CCBF's Bylaws
discussed above may have the effect of preventing, discouraging or delaying a
change in control of CCBF not approved by its Board of Directors, but pursuant
to which its shareholders might receive a substantial premium for their shares
over current market prices. As a result, shareholders who might desire to
participate in such a transaction may not have an opportunity to do so.
The authority of CCBF's Board of Directors to issue CCBF Preferred Stock
with such rights and privileges as it may deem appropriate may enable such Board
to prevent a change in control despite a shift in ownership of CCBF Stock. In
addition, such Board's power to issue additional shares of CCBF Stock, as the
case may be, may help delay or discourage a change in control by increasing the
number of shares needed to gain control.
The ability of CCBF's Board to expand the number of directors up to 23,
without shareholder approval, and to fill vacancies resulting from such an
increase, may allow the Board to prevent, for a period of time, a person or
entity owning a majority of the voting shares of CCBF from electing a majority
of the directors of CCBF's Board. Further, the overall effect of the
classification of CCBF's Board may be to delay a dissatisfied shareholder or
anyone who obtains a majority of the CCBF Stock from electing its designees to a
majority of the seats on the CCBF Board.
The CCBF 85% Vote Requirement is designed to make more difficult an
acquisition of CCBF by an Interested Shareholder who has accumulated a
sufficient number of shares of CCBF Stock to influence or cause a CCBF Business
Combination on terms favoring or giving preferential treatment to the Interested
Shareholder. Should such a CCBF Business Combination be proposed and not receive
the approval of CCBF Continuing Directors, absent compliance with the CCBF Fair
Price Provisions, the holders of a small minority of CCBF Stock who elect to
oppose the proposed CCBF Business Combination could prevent the consummation of
such transaction.
The CCBF Fair Price Provisions are designed to discourage attempts to take
over CCBF in nonnegotiated transactions utilizing two-tier pricing tactics
(which typically involve the accumulation of a substantial block of the target
corporation's Stock followed by a merger or other reorganization of the acquired
company on terms determined by the purchaser). Therefore, due to the
difficulties of complying with the requirements of such provisions, they have an
anti-takeover effect and generally may discourage attempts to obtain control of
CCBF. As a result, holders of CCBF Stock may be deprived of an opportunity to
sell their shares at a premium above the market price. In addition, the CCBF
Fair Price Provisions would give veto power to the holders of a minority of the
shares of CCBF's voting shares, and could give veto power to a minority of
CCBF's Board of Directors, with respect to a CCBF Business Combination, which a
majority of the shareholders and directors may believe to be desirable and
beneficial. In any Business Combination not receiving the requisite approval of
CCBF's shareholders or directors, requirements regarding minimum price, while
providing objective pricing criteria, could be arbitrary and not indicative of
value. The purpose of the CCBF Fair Price Provisions is to encourage potential
acquirors to engage in arm's length negotiations with CCBF before attempting
takeover transactions in order to provide protection for CCBF and its
shareholders and to insure that all shareholders receive a fair price for their
shares. These provisions also are intended to prevent an acquiror from obtaining
an initial position and thereafter acquiring CCBF's remaining shares for a lower
price or with a less desirable form of consideration.
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Similarly, CCBF's Rights Plan may have an anti-takeover effect. The Rights
Plan would enable CCBF's existing shareholders to purchase shares of Series A
Preferred at the stated Purchase Price or a number of shares of CCBF Stock at a
price equal to approximately 50% of the then current fair market value of such
Stock. The effect of the Rights Plan may be to discourage an uninvited or
unfriendly attempt to acquire control of CCBF as the effect of purchases of
Series A Preferred or CCBF Stock likely would be to cause an Acquiring Person to
suffer substantial dilution of its voting power and significant deterioration in
the value of its shares.
The cumulative impact of the applicability of the Shareholder Protection
Act and the Control Share Act is to render more difficult, or to discourage, a
merger, tender offer or proxy contest, or the assumption of control by the
holder of a large block of or CCBF's voting securities, and would make more
difficult any attempt to remove incumbent management, even if any one or more of
the foregoing matters may be favorable to, or in the bests interests, of CCBF's
shareholders.
INDEMNIFICATION
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 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 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 of 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 reasonably 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 may incur on account of activities which were at the time taken, known or
believed by such person to be clearly
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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
attorney's 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.
INDEMNIFICATION BY CCBF AND AFB. Subject to restrictions as are provided by
federal securities law, CCBF's Bylaws provide for indemnification of CCBF's
directors and officers to the fullest extent permitted by the NCBCA, and require
its Board of Directors to take all actions necessary and appropriate to
authorize such indemnification. Neither the AFB Charter nor AFB's Bylaws
specifically provide for indemnification of AFB's directors and officers. AFB
has adopted by a resolution of its Board of Directors the provisions of the
regulations of the OTS applicable to indemnification of the officers and
directors of a federal savings bank. AFB's right and ability to provide
indemnity to its officers and directors under these provisions are subject to
significant limitations and procedural requirements with the result being that
CCBF's right and ability to provide indemnification to its officers and
directors are significantly broader than those of AFB. In addition, CCBF and AFB
each currently maintains directors' and officers' liability insurance.
Insofar as indemnification for liabilities arising under the 1933 Act may
be permitted to directors, officers or persons controlling CCBF or AFB pursuant
to the CCBF Restated Articles, CCBF's Bylaws, the Merger Agreement, HOLA or the
regulations of the OTS, CCBF and AFB have been informed that, in the opinion of
the Securities and Exchange Commission, such indemnification is against public
policy as expressed in the 1933 Act and, therefore, is unenforceable.
RELEASE OF DIRECTOR LIABILITY. As discussed above (see "CAPITAL STOCK OF
CCBF AND AFB -- Directors -- RELEASE FROM LIABILITY"), the CCBF Restated
Articles eliminate, to the fullest extend permitted by the NCBCA, the personal
liability of its directors in any action by or in the right of CCBF or otherwise
for monetary damages for breach of their duties as directors.
LEGAL MATTERS
The validity of the shares of CCBF Stock to be issued to AFB's shareholders
in connection with the Merger will be passed upon for CCBF by Brooks, Pierce,
McLendon, Humphrey & Leonard, L.L.P., who serves as counsel to CCBF with respect
to the Merger. Robert A. Singer, a partner in such firm, beneficially owns, or
has sole or shared voting control as a trustee or otherwise over, a total of
5,891 shares of CCBF Stock.
EXPERTS
The consolidated financial statements of CCBF as of December 31, 1996 and
1995 and for each of the years in the three-year period ended December 31, 1996
have been incorporated by reference herein in reliance upon the report of KPMG
Peat Marwick LLP, independent certified public accountants, incorporated by
reference herein, and upon the authority of said firm as experts in accounting
and auditing. KPMG Peat Marwick LLP's report refers to the fact that on January
1, 1994, CCBF adopted the provisions of SFAS No. 115, "Accounting for Certain
Investments in Debt and Equity Securities."
The consolidated financial statements of AFB as of December 31, 1996 and
1995 and for each of the years in the three-year period ended December 31, 1996
have been incorporated by reference herein in reliance upon the report of KPMG
Peat Marwick LLP, independent certified public accountants, and upon the
authority of said firm as experts in accounting and auditing.
OTHER MATTERS
CCBF's and AFB's Boards of Directors do not intend to bring any matter
before their respective Special Meetings other than as specifically set forth in
this Prospectus/Joint Proxy Statement, and they know of no other business that
will be brought before their respective Special Meetings by any other person.
However, should other matters properly be presented for action at either of the
Special Meetings, the persons named in appointments of proxy to represent
shareholders at that
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Special Meeting, or their substitutes, will be authorized to vote shares
represented by those appointments of proxy according to their best judgment on
such matters.
PROPOSALS OF SHAREHOLDERS
If for any reason the Merger is not consummated, then a 1998 Annual Meeting
of AFB's Shareholders likely would be held during April of 1998. In such event,
any proposal (other than nominations for directors) of a shareholder intended to
be presented at that meeting would have to have been received by AFB at its main
office in Greenville, South Carolina no later than November 14, 1997 to be
considered timely received for inclusion in the proxy statement and appointment
of proxy issued in connection with the meeting.
The 1998 Annual Meeting of Shareholders of CCBF will be held on or about
April 21, 1998. Any proposal (other than nominations for directors) of a CCBF
shareholder intended to be presented at that meeting would have to have been
received by CCBF at its main office in Durham, North Carolina no later than
November 17, 1997 to be considered timely received for inclusion in the proxy
statement and appointment of proxy to be issued in connection with the meeting.
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APPENDIX A
<PAGE>
APPENDIX B
<PAGE>
APPENDIX B
June , 1997
Board of Directors
American Federal Bank, FSB
300 East McBee Avenue
Greenville, South Carolina 29601
MEMBERS OF THE BOARD:
American Federal Bank, FSB ("AFB") and CCB Financial Corporation ("CCBF")
have entered into an Agreement and a Plan of Reorganization, dated as of
February 17, 1997 (the "Agreement"), pursuant to which AFB will combine with
CCBF by means of the merger (the "Merger") of a subsidiary of CCBF with AFB.
Upon consummation of the Merger, each of the outstanding shares of the $1.00 par
value common stock of AFB ("AFB Stock") will be converted into 0.445 shares of
the $5.00 par value common stock of CCBF ("CCBF Stock"), as adjusted in
accordance with the terms of the Agreement (the "Exchange Ratio").
Wheat, First Securities, Inc. ("Wheat First") as part of its investment
banking business, is regularly engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions, negotiated
underwritings, competitive biddings, secondary distributions of listed and
unlisted securities, private placements and valuations for estate, corporate and
other purposes. In the ordinary course of our business as a broker-dealer, we
may, from time to time, have a long or short position in, and buy or sell, debt
or equity securities of AFB or CCBF for our own account or for the accounts of
our customers. Wheat First will also receive a fee from AFB for rendering this
opinion.
You have asked us whether, in our opinion, the Exchange Ratio is fair, from
a financial point of view, to the holders of AFB Stock (other than CCBF and its
affiliates).
In arriving at the opinion set forth below, we have conducted discussions
with members of senior management of AFB and CCBF concerning their businesses
and prospects and have reviewed certain publicly available business and
financial information and certain other information prepared or provided to us
in connection with the Merger, including, among other things, the following:
(1) AFB's Annual Reports to Stockholders, Annual Reports on Form 10-K and
related financial information for the three fiscal years ended
December 31, 1995;
(2) AFB's Quarterly Reports on Form 10-Q and related financial information
for the periods ended March 31, 1996, and June 30, 1996, and September
30, 1996, and certain financial data provided by management of AFB for
the period ended December 31, 1996;
(3) CCBF's Annual Reports to Stockholders, Annual Reports on Form 10-K and
related financial information for the three fiscal years ended
December 31, 1995;
(4) CCBF's Quarterly Reports on Form 10-Q and related financial
information for the periods ended March 31, 1996, and June 30, 1996,
and September 30, 1996, and certain financial data provided by
management of CCBF for the period ended December 31, 1996;
(5) CCBF's Prospectus/Proxy statements on form 424B2 dated October 4, 1996
and November 27, 1996;
(6) Certain publicly available information with respect to historical
market prices and trading activities for AFB Stock and CCBF Stock and
for certain publicly traded financial institutions which Wheat First
deemed relevant;
(7) Certain publicly available information with respect to banking
companies and the financial terms of certain other mergers and
acquisitions which Wheat First deemed relevant;
(8) The Agreement;
(9) Certain estimates of the cost savings and revenue enhancements
projected by AFB and CCBF for the combined company;
(10) Other financial information concerning the businesses and operations
of AFB and CCBF, including certain audited financial information and
certain internal financial analyses and forecasts for AFB and CCBF
prepared by the senior management of these companies; and
(11) Such financial studies, analyses, inquiries and other matters as we
deemed necessary.
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In preparing our opinion, we have relied on and assumed the accuracy and
completeness of all information provided to us or publicly available, including
the representations and warranties of AFB and CCBF included in the Agreement,
and we have not assumed any responsibility for independent verification of such
information. We have relied upon the managements of AFB and CCBF as to the
reasonableness and achievability of their financial and operational forecasts
and projections, including the estimates of cost savings and revenue
enhancements expected to result from the Merger, and the assumptions and bases
therefor, provided to us, and, with your consent, we have assumed that such
forecasts and projections reflect the best currently available estimates and
judgments of such managements, and that such forecasts and projections will be
realized in the amounts and in the time periods currently estimated by such
managements. We also assumed, without independent verification, that the
aggregate allowances for loan losses and other contingencies for AFB and CCBF
are adequate to cover such losses. Wheat First did not review any individual
credit files of AFB or CCBF, nor did it make an independent evaluation or
appraisal of the assets or liabilities of AFB or CCBF. We also assumed that, in
the course of obtaining the necessary regulatory approvals for the Merger, no
conditions will be imposed that will have a material adverse effect on the
contemplated benefits of the Merger, on a pro forma basis, to CCBF.
In arriving at its opinion, Wheat First was instructed by the Board of
Directors of AFB to take into account the Per Share Net Present Value of the
Goodwill Litigation, as determined by the Board and described under "THE
MERGER -- Goodwill Litigation." Wheat First is not an expert in making legal
determinations, and accordingly has made no determinations or drawn any
conclusions, legal or otherwise, as to the merits or possible outcomes of the
Goodwill Litigation, and relied solely on the per Share Net Present Value
attributable to the Goodwill litigation as determined by the Board of Directors
of AFB. Wheat First did not review (i) the merits (and probability of success)
of AFB's position with respect to the liability of the United States government
in the Goodwill Litigation, (ii) the theories that may be applied in awarding
damages to AFB in the event AFB prevails in its position with respect to the
liability of the United States government in the Goodwill Litigation, (iii) the
assumptions underlying the analysis prepared by FFA in applying to AFB the
various damage theories being proposed by plaintiffs in the Goodwill Cases, or
(iv) the reasonableness of the time frame selected by the Board of Directors of
AFB as the most likely time frame for an award of damages to be made to AFB in
the event AFB prevails in its position with respect to the liability of the
United States government in the Goodwill Litigation. In evaluating the fairness
of the Exchange Ratio, Wheat First did, however, take into account the Per Share
Net Present Value of the Goodwill Cases, as determined by the Board of Directors
of AFB. For information with respect to the methodology utilized by the Board of
Directors of AFB in valuing the Goodwill Litigation and arriving at the Per
Share Net Present Value attributable to the Goodwill Litigation, see "THE
MERGER -- Goodwill Litigation."
Our opinion is necessarily based upon market, economic and other conditions
as they exist and can be evaluated on the date hereof and the information made
available to us through the date hereof. Events occurring after that date could
materially affect the assumptions and conclusions contained in our opinion. We
have not undertaken to reaffirm or revise this opinion or otherwise comment on
any events occurring after the date hereof. Wheat First's opinion is directed
only to the fairness, from a financial point of view, of the Exchange Ratio to
the holders of AFB Stock (other than CCBF and its affiliates) and does not
address any other aspect of the Merger or constitute a recommendation to any
shareholder of AFB as to how such shareholder should vote with respect to the
Merger and it is understood that this letter is solely for the information of
the Board of Directors of AFB. Wheat First's opinion does not address the
relative merits of the Merger as compared to any alternative business strategies
that might exist for AFB, nor does it address the effect of any other business
combination in which AFB might engage.
It is understood that this opinion may be included in its entirety in the
Prospectus/Joint Proxy Statement. This opinion may not, however, be summarized,
excerpted from or otherwise publicly referred to without our prior written
consent.
On the basis of and subject to the foregoing, we are of the opinion that as
of the date hereof the Exchange Ratio is fair, from a financial point of view,
to the holders of AFB Stock (other than CCBF and its affiliates).
Very truly yours,
WHEAT, FIRST SECURITIES, INC.
B-2
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APPENDIX C
<PAGE>
APPENDIX C
June , 1997
Board of Directors
American Federal Bank, FSB
300 East McBee Avenue
Greenville, SC 29602
MEMBERS OF THE BOARD:
You have requested our opinion as investment bankers as to the fairness,
from a financial point of view, to the shareholders of American Federal Bank,
FSB ("AFB") of the exchange ratio in the proposed merger (the "Merger") of AFB
with and into CCB Financial Corporation ("CCBF"), pursuant to the Agreement and
Plan of Merger dated as of February 17, 1997 between AFB and CCBF (the
"Agreement"). Under the terms of the Merger, each outstanding share of common
stock of AFB will be exchanged for .445 shares of common stock of CCBF (the
"Exchange Ratio"). Keefe, Bruyette & Woods, Inc. ("Keefe") was informed by AFB,
and assumed for purposes of its opinion, that the Merger would be accounted for
as a pooling-of-interests under generally accepted accounting principles.
Keefe as part of its investment banking business is continually engaged in
the valuation of banking businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements
and valuations for estate, corporate and other purposes. As specialists in the
securities of banking companies we have experience in, and knowledge of, the
valuation of banking enterprises. In the ordinary course of our business as a
broker-dealer, we may, from time to time, purchase securities from, and sell
securities to, AFB and CCBF and as a market maker in securities we may from time
to time have a long or short position in, and buy or sell, debt or equity
securities of AFB and CCBF for our own account and for the accounts of our
customers. To the extent we have any such position as of the date of this
opinion it has been disclosed to AFB. We have acted as a financial advisor to
the Board of Directors of AFB in rendering this fairness opinion and will
receive a fee from AFB for our services.
In connection with this opinion, we have reviewed, among other things, the
Agreement; the Registration Statement on Form S-4, Annual Reports to
Stockholders of CCBF and AFB for the three years ended December 31, 1995;
certain interim reports to stockholders and Quarterly Reports on Form 10-Q of
AFB and CCBF, and certain internal financial analyses and forecasts for AFB and
CCBF prepared by management. We also have held discussions with members of the
senior management of AFB and CCBF regarding the past and current business
operations, regulatory relationships, financial condition and future prospects
of their respective companies. In addition, we have compared certain financial
and stock market information for AFB and CCBF with similar information for
certain other companies the securities of which are publicly traded, reviewed
the financial terms of certain recent business combinations in the banking
industry and performed such other studies and analyses as we considered
appropriate.
In conducting our review and arriving at our opinion, we have relied upon
and assumed the accuracy and completeness of all of the financial and other
information provided to us or publicly available and we have not assumed any
responsibility for independently verifying any of such information. We have
relied upon the management of AFB and CCBF as to the reasonableness and
achievability of the financial and operating forecasts and projections (and the
assumptions and bases therefor) provided to us, and we have assumed that such
forecasts and projections reflect the best currently available estimates and
judgments of CCBF and that such forecasts and projections will be realized in
the amounts and in the time periods currently estimated by such management. We
have also assumed that the aggregate allowances for loan losses for AFB and CCBF
are adequate to cover such losses. In rendering our opinion, we have not made or
obtained any evaluations or appraisals of the property of AFB or CCBF, nor have
we examined any individual credit files.
We have considered such financial and other factors as we have deemed
appropriate under the circumstances, including among others the following: (i)
the historical and current financial position and results of operations of AFB
and CCBF; (ii) the assets and liabilities of AFB and CCBF; and (iii) the nature
and terms of certain other merger transactions involving banks and bank holding
companies. We have also taken into account our assessment of general economic,
market and financial conditions and our experience in other transactions, as
well as our experience in securities valuation and our knowledge of the banking
industry generally. Our opinion is necessarily based upon conditions as they
exist and can be evaluated on the date hereof and the information made available
to us through the date hereof.
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American Federal Bank, FSB
Board of Directors
Page 2
In arriving at its opinion, Keefe was advised by Board of Directors of AFB
to take into account the Per Share Net Present Value of the Goodwill Litigation,
as determined by the Board and described under "THE MERGER -- Goodwill
Litigation." Keefe is not an expert in making legal determinations, and
accordingly has made no determinations or drawn any conclusions, legal or
otherwise, as to the merits or possible outcomes of the Goodwill Litigation, and
relied solely on the Per Share Net Present Value attributable to the Goodwill
Litigation as determined by the Board of Directors of AFB. Keefe did not review
(i) the merits (and probability of success) of AFB's position with respect to
the liability of the United States government in the Goodwill Litigation, (ii)
the theories that may be applied in awarding damages to AFB in the event AFB
prevails in its position with respect to the liability of the United States
government in the Goodwill Litigation, (iii) the assumptions underlying the
analysis prepared by FFA in applying to AFB the various damage theories being
proposed by plaintiffs in the Goodwill Cases, or (iv) the reasonableness of the
time frame selected by the Board of Directors of AFB as the most likely time
frame for an award of damages to be made to AFB in the event AFB prevails in its
position with respect to the liability of the United States government in the
Goodwill Litigation. In evaluating the fairness of the Exchange Ratio, Keefe
did, however, take into account the Per Share Net Present Value of the Goodwill
Cases, as determined by the Board of Directors of AFB. For information with
respect to the methodology utilized by the Board of Directors of AFB in valuing
the Goodwill Litigation and arriving at the Per Share Net Present Value
attributable to the Goodwill Litigation, see "THE MERGER -- Goodwill
Litigation."
Based upon and subject to the foregoing, it is our opinion that, as of the
date hereof, the exchange ratio in the Merger is fair, from a financial point of
view, to the Common Stockholders of AFB.
Very truly yours,
KEEFE, BRUYETTE & WOODS, INC.
C-2
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APPENDIX D
<PAGE>
APPENDIX D
June , 1997
Board of Directors
CCB Financial Corporation
111 Corcoran Street
Durham, NC 27701
MEMBERS OF THE BOARD:
We understand that CCB Financial Corporation ("CCB") and American Federal
Bank, FSB ("American") have entered into an Agreement and Plan of Merger (the
"Agreement") dated February 17, 1997, pursuant to which American will be merged
with and into CCB in a transaction (the "Merger") in which each outstanding
share of American's common stock, par value $1.00 per share (the "American
Shares"), will be converted into the right to receive 0.445 shares (the
"Exchange Ratio") of the common stock, par value $5.00 per share, of CCB (the
"CCB Shares"), all as set forth more fully in the Agreement. In connection with
the Merger, the parties have also entered into an agreement, dated February 17,
1997, (the "Option Agreement") pursuant to which American will grant to CCB an
option to acquire, under certain circumstances, 19.9% of its outstanding common
shares, all as set forth more fully in the Option Agreement.
You have asked us whether, in our opinion, the proposed Exchange Ratio in
the Merger is fair to CCB from a financial point of view.
In arriving at the opinion set forth below, we have, among other things:
(1) reviewed certain publicly available business and financial information
relating to CCB and American which we deemed to be relevant;
(2) reviewed certain information, including financial forecasts, relating
to the business, earnings, cash flow, assets, liabilities and prospects
of CCB and American, as well as the amount and timing of the cost
savings and related expenses and revenue enhancements expected to
result from the Merger (the "Expected Synergies") furnished to us by
senior management of American and CCB;
(3) conducted discussions with members of senior management of American and
CCB concerning their respective financial condition, businesses,
earnings, cash flow, assets, liabilities, operations, regulatory
condition, financial forecasts, contingencies and prospects before and
after giving effect to the Merger and the Expected Synergies;
(4) reviewed the market prices and valuation multiples for the CCB Shares
and the American Shares and compared them with that of certain publicly
traded companies which we deemed to be relevant;
(5) reviewed the results of operations of American and CCB and compared
them with those of certain publicly traded companies which we deemed to
be relevant;
(6) reviewed the proposed financial terms of the Merger with the financial
terms of certain other transactions which we deemed to be relevant;
(7) reviewed the pro forma impact of the Merger;
(8) reviewed the Agreement and Option Agreement; and
(9) reviewed such other financial studies and analyses and took into
account such other matters as we deemed necessary, including our
assessment of general economic, market and monetary conditions.
In preparing our opinion, with your consent we have assumed and relied on
the accuracy and completeness of all information supplied or otherwise made
available to us, discussed with or reviewed by or for us, or publicly available,
and we have not assumed responsibility for independently verifying such
information or undertaken an independent evaluation or appraisal of the assets
or liabilities, contingent or otherwise, of American or CCB or any of their
subsidiaries, nor have we been furnished any such evaluation or appraisal. We
are not experts in the evaluation of allowances for loan losses and, with your
consent, we have not made an independent evaluation of the adequacy of the
allowance for loan losses of American or CCB, nor have we reviewed any
individual credit files relating to CCB or American and, with your consent, we
have assumed that the aggregate allowance for loan losses for both CCB and
American is adequate to cover such losses and will be adequate on a pro forma
basis for the combined entity. In addition, we have not assumed any obligation
to conduct any physical inspection of the properties or facilities of American
or CCB. With your consent, we have also assumed and relied
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upon the managements of American and CCB as to the reasonableness and
achievability of the financial forecasts (and the assumptions and bases
therefor) provided to, and discussed with, us. In that regard, we have assumed
and relied with your consent that such forecasts, including without limitation,
financial forecasts, evaluations of contingencies, Expected Synergies and
projections regarding underperforming and non-performing assets, net
charge-offs, adequacy of reserves, future economic conditions and results of
operations reflect the best currently available estimates, allocations and
judgments of such respective managements as to the future financial performance
of American, CCB or the combined entity, as the case may be. We express no
opinion as to such financial forecast information or the Expected Synergies or
the assumptions on which they were based. Our opinion is predicated on the
Merger receiving the tax and accounting treatment contemplated in the Agreement.
Our opinion is necessarily based on economic, market and other conditions as in
effect on, and the information made available to us as of, the date hereof.
Our opinion is necessarily based upon market, economic and other conditions
as in effect on, and the information made available to us as of, the date
hereof. For purposes of rendering this opinion we have assumed, in all respects
material to our analysis, that the representations and warranties of each party
in the Agreement and all related documents and instruments (collectively, the
"Documents") contained therein are true and correct, that each party to the
Documents will perform all of the covenants and agreements required to be
performed by such party under such Documents, and that all conditions to the
consummation of the Merger will be satisfied without waiver thereof. We have
also assumed that in the course of obtaining the necessary regulatory or other
consents or approvals (contractual or otherwise) for the Merger, no
restrictions, including any divestiture requirements or amendments or
modifications, will be imposed that will have a material adverse effect on the
contemplated benefits of the Merger.
We are acting as financial advisor to CCB in connection with the Merger and
will receive a fee for our services, a significant portion of which is
contingent upon the consummation of the Merger. In addition, CCB has agreed to
indemnify us for certain liabilities arising out of our engagement. We may have,
in the past, provided financial advisory and financing services to CCB and
received customary fees for the rendering of such services. In addition, in the
ordinary course of our securities business, we may actively trade debt and/or
equity securities of American and CCB and their respective affiliates for our
own account and the accounts of our customers, and we therefore may from time to
time hold a long or short position in such securities.
Our opinion is directed to the Board of Directors of CCB and is not
intended to be and does not constitute a recommendation to any shareholder of
CCB as to how such shareholder should vote at any shareholder meeting of CCB
held in connection with the Merger.
We are not expressing any opinion herein as to the prices at which the CCB
Shares will trade following the announcement or consummation of the Merger.
On the basis of, and subject to the foregoing, we are of the opinion that
the proposed Exchange Ratio in the Merger is fair to CCB from a financial point
of view.
Very truly yours,
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By
Director
Investment Banking Group
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[Directional map to Omni Durham Hotel appears here]
DIRECTIONS TO OMNI DURHAM HOTEL, 201 FOSTER ST., DURHAM, NC
FROM I-85 NORTH:
(Bullet) Take Gregson Street exit, follow Gregson to Main Street, turn left
on Main.
(Bullet) Bear left on Chapel Hill Street.
(Bullet) Travel one block to Foster, turn left.
(Bullet) Omni entrance is immediately on left. There is complimentary
parking at garage across Morgan Street under People's Security
building.
FROM I-40 EAST:
(Bullet) I-40 East and I-85 North merge in Greensboro.
(Bullet) When highways divide again near Hillsborough, take I-85 North.
(Bullet) Follow directions for I-85 North as listed.
FROM HIGHWAY 15-501 NORTH:
(Bullet) Take 15-501 Bypass North to I-85 North.
(Bullet) Follow directions for I-85 North as listed.
FROM HIGHWAY 70 WEST BYPASS:
(Bullet) Take Hwy. 70 West Bypass, which merges with I-85 South.
(Bullet) Follow directions for I-85 North as listed.
FROM I-40 WEST:
(Bullet) Follow I-40 West to the Durham Fry, Exit #279-B.
(Bullet) Continue on Durham Freeway (hwy 147 North) for approximately 4
miles.
(Bullet) Exit at Roxboro Street/Mangum Street (Exit #12-B).
(Bullet) At the bottom of the exit ramp turn right onto Roxboro Street,
following signs for Downtown.
(Bullet) At the 3rd light bear left onto the Downtown Loop (Morgan Street).
(Bullet) Follow Morgan Street to 3rd light.
(Bullet) Omni entrance immediately on right. There is complimentary parking
in garage on Morgan Street under People's Security building.
<PAGE>
<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 STATEMENTS
The following exhibits and financial statement schedules are filed as part
of this Registration Statement or incorporated herein by reference:
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT NUMBER
PURSUANT TO
ITEM 601 OF
REGULATION S-K DESCRIPTION OF EXHIBIT
<S> <C>
2 Agreement and Plan of Reorganization between CCB Financial Corporation, and American Federal Bank, FSB
(included as and incorporated from Appendix A of the Prospectus/Joint Proxy Statement filed as a part of
this Registration Statement).
2.1 Stock Option Agreement, dated February 17, 1997, between CCB Financial Corporation and American Federal
Bank, FSB (previously filed).
5 Opinion and Consent of Brooks, Pierce, McLendon, Humphrey & Leonard, L.L.P. as to legality of shares being
registered (previously filed).
5.1 Opinion and Consent of Brooks, Pierce, McLendon, Humphrey & Leonard, L.L.P. as to qualification of merger
as a statutory merger.
8 Opinion of KPMG Peat Marwick LLP as to tax matters.
10.1 Employment Agreement between William L. Abercrombie, Jr. and CCB Financial Corporation.
10.2 Employment Agreement between Michael A. Trimble and CCB Financial Corporation.
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,
1996).
23.1 Consents of Brooks, Pierce, McLendon, Humphrey & Leonard, L.L.P. (contained in Exhibits 5 and 5.1 above).
23.2 Consent of KPMG Peat Marwick LLP.
23.3 Consent of KPMG Peat Marwick LLP.
23.4 Consent of KPMG Peat Marwick LLP.
23.5 Consent of Merrill Lynch, Pierce, Fenner & Smith Incorporated.
23.6 Consent of Wheat, First Securities, Inc.
23.7 Consent of Keefe, Bruyette & Woods, Inc.
24 Powers of Attorney (previously filed).
99.1 Form of appointment by proxy to be used in connection with the Special Meeting of Shareholders of American
Federal Bank, FSB.
99.2 Form of appointment of proxy to be used in connection with the Special Meeting of Shareholders of CCBF
Financial Corporation.
</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 Merrill Lynch, Pierce, Fenner & Smith Incorporated to the Board of
Directors of the Registrant is included as Appendix D, and the opinions of
Wheat, First Securities, Inc. and Keefe, Bruyette & Woods, Inc. to the Board of
Directors of American Federal Bank, FSB are included as Appendices B and C, of
the Prospectus/Joint Proxy Statement filed as a part of this Registration
Statement.
II-2
<PAGE>
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/Joint Proxy
Statement 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 when it became effective.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
had duly caused this Pre-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 June 6, 1997.
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
Pre-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
<C> <S> <C>
/s/ ERNEST C. ROESSLER Vice Chairman, President, Chief Executive June 6, 1997
Officer and Director (principal executive
ERNEST C. ROESSLER officer)
/s/ ROBERT L. SAVAGE, JR. Senior Vice President and Chief Financial June 6, 1997
Officer (principal financial officer)
ROBERT L. SAVAGE, JR.
/s/ W. HAROLD PARKER, JR. Senior Vice President and Controller (principal June 6, 1997
accounting officer)
W. HAROLD PARKER, JR.
/s/ W. L. BURNS, JR. Chairman of the Board of Directors June 6, 1997
W. L. BURNS, JR.
/s/ JOHN M. BARNHARDT Director June 6, 1997
JOHN M. BARNHARDT
/s/ J. HARPER BEALL, III Director June 6, 1997
J. HARPER BEALL, III
/s/ JAMES B. BRAME, JR. Director June 6, 1997
JAMES B. BRAME, JR.
/s/ TIMOTHY B. BURNETT Director June 6, 1997
TIMOTHY B. BURNETT
/s/ EDWARD S. HOLMES Director June 6, 1997
EDWARD S. HOLMES
/s/ BONNIE MCELVEEN-HUNTER Director June 6, 1997
BONNIE MCELVEEN-HUNTER
/s/ DAVID B. JORDAN Vice Chairman and Director June 6, 1997
DAVID B. JORDAN
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<C> <S> <C>
/s/ OWEN G. KENAN Director June 6, 1997
OWEN G. KENAN
/s/ Director June 6, 1997
EUGENE J. MCDONALD
/s/ HAMILTON W. MCKAY, JR., M.D. Director June 6, 1997
HAMILTON W. MCKAY, JR., M.D.
/s/ Director June 6, 1997
GEORGE J. MORROW
/s/ ERIC B. MUNSON Director June 6, 1997
ERIC B. MUNSON
/s/ MILES J. SMITH, JR. Director June 6, 1997
MILES J. SMITH, JR.
/s/ JIMMY K. STEGALL Director June 6, 1997
JIMMY K. STEGALL
/s/ Director June 6, 1997
H. ALLEN TATE
/s/ JAMES L. WILLIAMSON Director June 6, 1997
JAMES L. WILLIAMSON
/s/ DR. PHAIL WYNN, JR. Director June 6, 1997
DR. PHAIL WYNN, JR.
*By: /s/ W. HAROLD PARKER, JR.
W. HAROLD PARKER, JR.
ATTORNEY-IN-FACT
</TABLE>
II-5
<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 Agreement and Plan of Reorganization between CCB Financial Corporation, and American Federal Bank,
FSB (included as and incorporated from Appendix A of the Prospectus/Joint Proxy Statement filed as a
part of this Registration Statement).
2.1 Stock Option Agreement, dated February 17, 1997, between CCB Financial Corporation and American
Federal Bank, FSB (previously filed).
5 Opinion and Consent of Brooks, Pierce, McLendon, Humphrey & Leonard, L.L.P. as to legality of shares
being registered (previously filed).
5.1 Opinion and Consent of Brooks, Pierce, McLendon, Humphrey & Leonard, L.L.P. as to qualification of
merger as a statutory merger.
8 Opinion of KPMG Peat Marwick LLP as to tax matters.
10.1 Employment Agreement between William L. Abercrombie, Jr. and CCB Financial Corporation.
10.2 Employment Agreement between Michael A. Trimble and CCB Financial Corporation.
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, 1996).
23.1 Consents of Brooks, Pierce, McLendon, Humphrey & Leonard, L.L.P. (contained in Exhibits 5 and 5.1
above).
23.2 Consent of KPMG Peat Marwick LLP.
23.3 Consent of KPMG Peat Marwick LLP.
23.4 Consent of KPMG Peat Marwick LLP.
23.5 Consent of Merrill Lynch, Pierce, Fenner & Smith Incorporated.
23.6 Consent of Wheat, First Securities, Inc.
23.7 Consent of Keefe, Bruyette & Woods, Inc.
24 Powers of Attorney (previously filed).
99.1 Form of appointment by proxy to be used in connection with the Special Meeting of Shareholders of
American Federal Bank, FSB.
99.2 Form of appointment of proxy to be used in connection with the Special Meeting of Shareholders of
CCBF Financial Corporation.
</TABLE>
BROOKS, PIERCE, MCLENDON, HUMPHREY & LEONARD, L.L.P.
ATTORNEYS AND COUNSELLORS AT LAW
2000 RENAISSANCE PLAZA
POST OFFICE BOX 26000
GREENSBORO, NORTH CAROLINA 27420
TELEPHONE: (910) 373-8850
TELEX: 574301
FACSIMILE: (910) 378-1001
June 4, 1997
CCB Financial Corporation
111 Corcoran Street
Durham, North Carolina 27702
Gentlemen:
We have acted as counsel to CCB Financial Corporation, a North Carolina
bank holding company ("CCBF"), in connection with the Agreement and Plan of
Reorganization, dated February 17, 1997, between CCBF and American Federal Bank,
FSB ("AFB") and the related Plan of Merger and Combination (collectively, the
"Merger Agreement"). As such counsel, we have reviewed such certificates of
government officials, certificates and written statements of officers and such
documents and records of CCBF as we have deemed necessary as a basis for the
opinions expressed herein. Capitalized terms appearing herein and not otherwise
defined are used as defined in the Merger Agreement.
In giving certain of the opinions set forth below, we have relied
solely upon certifications and letters provided to us by public officials and
governmental authorities. As to matters of fact set forth below, and matters of
fact which form the basis for any opinion set forth below, we have relied solely
upon: (i) certificates and statements of officers, employees and accountants of
CCBF; (ii) the representations and warranties of CCBF set forth in the Merger
Agreement; (iii) documents previously filed by CCBF with the Office of Thrift
Supervision ("OTS"), the Board of Governors of the Federal Reserve ("Federal
Reserve"), the Federal Deposit Insurance Corporation (the "FDIC") and/or the
Securities and Exchange Commission ("SEC"); and (iv) the federal governmental
approvals obtained by CCBF and AFB. Except as expressly stated herein, we have
not independently verified any factual matters in connection with the giving of
our opinions set forth below.
In addition, in giving our opinions set forth below, we have assumed,
without independent verification, that the following is true:
a. Based on certificates from officers of AFB and opinions of
counsel to AFB, AFB is a federal savings bank that is duly
organized and chartered, validly existing and in good standing
under the laws of the United States. AFB and CCBF have the
full power and authority to consummate the Merger as set forth
in the Merger Agreement
<PAGE>
CCB Financial Corporation
June 4, 1997
Page 2
and all other transactions described in the Prospectus/Joint
Proxy Statement. All documents and instruments executed by AFB
and CCBF in connection therewith have been duly executed and
delivered on behalf of, and are enforceable in accordance with
their terms against AFB and CCBF.
b. The signatures of all persons signing any document or
instrument delivered in connection with the Merger Agreement
or the consummation of the Merger are genuine and all such
persons executing such documents, have been duly authorized to
execute and deliver such documents and instruments.
c. All natural persons executing any document or instrument
delivered in connection with the Merger Agreement or the
consummation of the Merger have legal competency to do so, all
documents submitted to us as originals are authentic and all
documents submitted to us as certified or photostatic copies
conform to the original documents, which are themselves
authentic.
d. Other than the receipt of all approvals of the Regulatory
Authorities and the approval of the shareholders of AFB and
CCBF, no event will take place subsequent to the date hereof
which would cause any act taken in connection with the Merger
to fail to comply with any law, rule, regulation, order,
judgment, decree or duty.
e. AFB and CCBF have complied or will comply with all conditions
of all approvals of the Regulatory Authorities.
f. The corporate minute books and related records of CCBF
presented to us for examination are accurate and complete.
On the bases of such assumptions, and subject to the qualifications and
limitations set forth herein, we are of the opinion that, except as disclosed in
the Prospectus/Joint Proxy Statement, the Merger Agreement or the CCB Disclosure
Memorandum:
1. Subject to receipt of all approvals of the Regulatory
Authorities and the approval of the shareholders of CCBF and
AFB and the consummation of the Merger in accordance with the
terms of the Merger Agreement, the Merger will qualify as a
statutory merger effected pursuant to the Home Owners' Loan
Act and the applicable regulations of the OTS.
<PAGE>
CCB Financial Corporation
June 4, 1997
Page 3
All opinions and statements set forth in this letter are expressly
limited and qualified as follows:
a. The opinions expressed herein are limited to matters of North
Carolina law and the federal laws of the United States of
America. No opinion is expressed as to any matter which is
governed by the laws of any other jurisdiction.
b. Our opinions are limited to the matters expressly stated
herein, and no opinion may be inferred or implied beyond the
matters expressly stated.
c. The enforceability of all or various provisions of the Merger
Agreement may be limited by the effect of applicable
bankruptcy, insolvency, reorganization, moratorium,
arrangement or other similar laws now or hereafter in effect
relating to or limiting the enforcement of such rights
generally and general principles of equity governing and
limiting the availability of specific performance, injunctive
relief and other equitable remedies (regardless of whether
such enforceability is considered in a proceeding in equity or
at law) and may be further limited by federal or state banking
laws and regulations and the application of principles of
public policy underlying such laws and regulations. Further,
the provisions of the Merger Agreement respecting
indemnification may be limited or void as against public
policy pursuant to applicable laws and regulations.
d. These opinions are delivered to you pursuant to the comments
of the staff of the SEC dated May 28, 1997, on the Form S-4
filed April 23, 1997 of which the Prospectus/Joint Proxy
Statement is a part. We consent to inclusion of this letter
and our opinions herein as an exhibit to the Registration
Statement, as amended.
e. Our opinions herein are limited to facts and matters in
existence as to the date hereof, and we undertake no
responsibility to revise or supplement this letter or our
opinions herein to reflect any change in the law or facts.
Very truly yours,
BROOKS, PIERCE, McLENDON,
HUMPHREY & LEONARD, L.L.P.
By: /s/ Robert A. Singer
Robert A. Singer
<PAGE>
<PAGE>
EXHIBIT 8
June 4, 1997
Board of Directors
American Federal Bank, FSB
300 East McBee Avenue
Greenville, South Carolina 29601
Board of Directors
CCB Financial Corporation
111 Corcoran Street
Durham, North Carolina 27701
Gentlemen:
You have requested the opinion of KPMG Peat Marwick LLP ("KPMG") regarding
certain federal and South Carolina income tax consequences resulting from a plan
pursuant to which American Federal Interim Savings Bank, FSB ("Interim FSB"), a
wholly-owned subsidiary of CCB Financial Corporation ("CCBF") established solely
to effect the acquisition of American Federal Bank, FSB ("AFB") by CCBF, will be
merged with and into AFB, whereupon the separate existence of Interim FSB will
cease (the "Merger"). Pursuant to the Merger, each outstanding share of AFB
stock held by AFB shareholders will be converted into newly issued shares of
CCBF common stock.
You have submitted for our consideration certain representations as to the
proposed transaction, a copy of the Agreement and Plan of Reorganization, dated
as of February 17, 1997 and the related Plan of Merger and Combination
(collectively, the "Merger Agreement"), a copy of the Form S-4 Registration
Statement filed with the Securities and Exchange Commission ("SEC") on April 23,
1997, and a copy of Pre-Effective Amendment No. 1 to the Form S-4 to be filed
with the SEC on or about June 4, 1997. We have not reviewed the legal documents
necessary to effectuate the steps to be undertaken and we assume that all steps
will be effectuated under state and federal law and will be consistent with the
legal documentation and with the description of the steps submitted to us.
FACTS AND REPRESENTATIONS
CCBF is a registered bank holding company organized under the laws of the
State of North Carolina. CCBF's authorized capital stock consists of two
classes, represented by 50,000,000 shares of common stock, $5.00 par value,
having one vote per share, ("CCBF Stock") of which 15,082,128 shares were issued
and outstanding at December 31, 1996 and 5,000,000 shares of serial preferred
stock, no par value, none of which was issued and outstanding at December 31,
1996. Interim FSB, a proposed interim federal savings bank, will be formed as a
wholly-owned subsidiary of CCBF for the sole purpose of facilitating the
combination of CCBF and AFB through the Merger and will not conduct any
business. CCBF also owns 100 percent of the sole class of outstanding stock of
CCB Bank, a North Carolina banking corporation.
Pursuant to a plan (the "Rights Plan") evidenced by a Rights Agreement
dated as of February 26, 1990, one CCBF Right, as defined in the Rights Plan,
was distributed during 1990 to CCBF1s shareholders for each share of CCBF Stock.
The Rights Plan also authorized the issuance of additional CCBF Rights for
shares of CCBF Stock issued after the date of the initial rights distribution.
The CCBF Rights expire on February 26, 2000, and may be redeemed by CCBF at a
price of $.01 per CCBF Right at any time prior to an acquisition by a person or
group of 15 percent or more of the outstanding CCBF Stock. The objective of the
Rights Plan is to discourage an attempt by a third party to acquire control of
CCBF without approval of the Board of Directors of CCBF. The Rights Agreement
provides that the rights are not to interfere with any merger or business
combination approved by the Board of Directors and shareholders.
AFB is a federally-chartered stock savings bank organized under the Home
Owners1 Loan Act of 1934, as amended ("HOLA"). AFB's authorized capital stock
consists of two classes, represented by 50,000,000 shares of common stock, $1.00
par value, ("AFB Stock") of which 10,975,535 shares were issued and outstanding
at December 31, 1996 and 10,000,000 shares of serial preferred stock, no par
value, none of which will be issued and outstanding immediately prior to the
Merger.
For valid corporate business purposes, pursuant to the Merger Agreement,
Interim FSB will be merged with and into AFB pursuant to HOLA and the
regulations of the Office of Thrift Supervision ("OTS"), with AFB as the
surviving entity. Upon consummation of the Merger, each share of AFB Stock will
be converted into, and thereafter may be exchanged for, .445 of a share of CCBF
Stock. In the event that the average of the closing prices for CCBF Stock on the
New York Stock Exchange ("NYSE") for the thirty (30) consecutive trading days
ending on the date of the approval of the Merger (the "Determination Date") by
the Board of Governors of the Federal Reserve System (the "Federal Reserve")
(the "Average
<PAGE>
<PAGE>
Closing Price") is (a) less than $51.50 (the "Absolute Price") or (b) is (i)
less than $53.25 and (ii) less than eighty-three (83%) of the weighted average
of the closing prices as of February 14, 1997 of an index composed of a
designated group of bank holding companies (the "Index Price"), then AFB may
give notice to CCBF of its refusal to consummate the Merger. If AFB1s notice is
based upon a failure to satisfy the Index Price standard, then CCBF may elect to
increase the Exchange Ratio from .445 to the lesser of (x) the fraction computed
by dividing the product $53.25 multiplied by .445 by the Average Closing Price,
and (y) the fraction computed by dividing the product of the Index Price
multiplied by .445 by the quotient obtained by dividing the Average Closing
Price by $68.00. If AFB1s notice is based upon a failure to satisfy the Absolute
Price standard, then CCBF may elect to increase the Exchange Ratio from .445 to
the fraction computed by dividing the product of $51.50 multiplied by .445 by
the Average Closing Price. Each share of CCBF Stock issued will include a CCBF
Right. As used herein, the term CCBF Stock will refer to the common stock of
CCBF, inclusive of the CCBF Right.
No fractional shares of CCBF Stock will be issued in connection with the
Merger. Instead, each AFB shareholder who otherwise would be entitled to receive
a fraction of a share of CCBF Stock shall receive cash (without interest) in an
amount equal to that fraction multiplied by the "Market Value" of one whole
share of CCBF Stock. Market Value shall be equal to the closing price of a share
of CCBF Stock at the Effective Time, as defined in the Merger Agreement. No AFB
shareholder will be entitled to any dividend or other distribution or any voting
or other rights as a shareholder with respect to any fractional share of CCBF
Stock.
The Merger has been approved by the Boards of Directors of CCBF and AFB and
is subject to the receipt of regulatory approval from appropriate parties,
including the Federal Reserve and the OTS.
In addition to the foregoing statement of facts, the following
representations have been made by CCBF and/or AFB, as applicable, to KPMG in
connection with the Merger. KPMG has not independently verified the completeness
and accuracy of any of the following representations. KPMG is relying on these
representations in rendering the opinion contained herein.
(a) The fair market value of the CCBF Stock received by each
shareholder of AFB will be approximately equal to the fair market value of
the AFB Stock surrendered in the Merger.
(b) There is no plan or intention by the shareholders of AFB to sell,
exchange or otherwise dispose of any of the CCBF Stock received in the
Merger.
(c) Following the Merger, AFB will hold at least 90 percent of the
fair market value of its net assets and at least 70 percent of the fair
market value of its gross assets and at least 90 percent of the fair market
value of Interim FSB1s net assets and at least 70 percent of the fair
market value of Interim FSB1s gross assets held immediately prior to the
Merger. For purposes of this representation, amounts used by AFB or Interim
FSB to pay its reorganization expenses, all redemptions and distributions
(except for regular, normal dividends) made by AFB or Interim FSB
immediately preceding, or as part of a plan that includes, the Merger will
be included as assets of AFB or Interim FSB, respectively.
(d) Prior to the Merger, CCBF will be in control of Interim FSB within
the meaning of SECTION 368(C) of the Internal Revenue Code of 1986, as
amended (the "Code").
(e) Following the Merger, AFB will not issue additional shares of its
stock that would result in CCBF losing control of AFB within the meaning of
SECTION 368(C).
(f) Neither CCBF nor a CCBF affiliate has a plan or intention to
reacquire any of the CCBF Stock issued in the Merger.
(g) CCBF has no plan or intention to liquidate AFB; to merge AFB with
and into another corporation; to sell or otherwise dispose of the stock of
AFB; or to cause AFB to sell or otherwise dispose of any of the assets of
AFB acquired in the Merger, except for dispositions made in the ordinary
course of business or transfers described in SECTION 368(A)(2)(C).
(h) Interim FSB will have no liabilities assumed by AFB, and will not
transfer to AFB any assets subject to liabilities, in the Merger.
(i) Following the Merger, AFB will continue its historical business or
use a significant portion of its historic business assets in a business.
(j) CCBF, Interim FSB, AFB and the shareholders of AFB will pay their
respective expenses, if any, incurred in connection with the Merger.
2
<PAGE>
<PAGE>
(k) There is no intercorporate indebtedness existing between CCBF and
AFB, Interim FSB and AFB or a CCBF affiliate and AFB that was issued,
acquired, or will be settled at a discount.
(l) In the Merger, shares of AFB Stock representing control of AFB, as
defined in SECTION 368(C) will be exchanged solely for voting stock of
CCBF. For purposes of this representation, shares of AFB Stock exchanged
for cash or other property originating with CCBF will be treated as
outstanding AFB Stock on the date of the Merger.
(m) At the time of the Merger, AFB will not have outstanding any
warrants, options, convertible securities, or any other type of right
pursuant to which any person could acquire stock in AFB that, if exercised
or converted, would affect CCBF1s acquisition or retention of control of
AFB, as defined in SECTION 368(C).
(n) CCBF does not own, nor has it owned during the past five years,
any shares of AFB Stock.
(o) No two parties to the transaction are investment companies as
defined in SECTION 368(A)(2)(F)(III) AND (IV).
(p) On the date of the Merger, the fair market value of the assets of
AFB will exceed the sum of its liabilities, plus the amount of liabilities,
if any, to which the assets are subject.
(q) AFB is not under the jurisdiction of a court in a Title 11 or
similar case within the meaning of SECTION 368(A)(3)(A).
(r) The payment of cash in lieu of fractional shares of CCBF Stock is
not separately bargained for consideration, rather the purpose of the
payment is merely to save the expense and inconvenience to CCBF of issuing
and transferring fractional share interests. The total cash consideration
that will be paid in lieu of fractional shares will be less than one
percent of the total consideration paid in the Merger to AFB shareholders
and no AFB shareholder will receive cash for more than .9999 of a share of
CCBF Stock.
(s) None of the compensation received by any shareholder-employees of
AFB will be separate consideration for, or allocable to, any of their
shares of AFB Stock; none of the shares of CCBF Stock received by any
shareholder-employees of AFB will be separate consideration for, or
allocable to, any employment agreement; and the compensation to be paid to
any shareholder-employees of AFB will be for services actually rendered and
will be commensurate with amounts paid to third parties bargaining at arm1s
length for similar services
(t) The CCBF Rights cannot be traded separately and are not divisible
from the CCBF Stock prior to the occurrence of certain triggering events
specified in the Rights Plan. At the time the CCBF Stock is issued to the
AFB shareholders in the Merger, the likelihood that the CCBF Rights would,
at any time, be exercised will be both remote and uncertain.
LEGAL OPINION
CCBF has received an opinion of counsel (the "Legal Opinion"), dated as of
June 4, 1997, which concludes that, subject to the receipt of all regulatory
approvals, the approval of the shareholders of CCBF and AFB and the consummation
of the Merger in accordance with the terms of the Merger Agreement, the merger
of Interim FSB with and into AFB, as contemplated by the Merger Agreement, will
qualify as a statutory merger effected pursuant to HOLA and the regulations of
the OTS.
OPINION
Based solely on the above FACTS AND REPRESENTATIONS and the above LEGAL
OPINION and subject to the SCOPE OF THE OPINION below, it is the opinion of KPMG
that:
Federal Income Tax Consequences:
(1) The Merger will constitute a reorganization within the meaning of
SECTION 368(A)(1)(A) and SECTION 368(A(2)(E).
(2) AFB, Interim FSB and CCBF will each be a party to the reorganization
within the meaning of SECTION 368(B).
(3) No gain or loss will be recognized by CCBF, AFB or Interim FSB by
reason of the Merger. SECTION 1032; TREAS. REG. SECTION 1.1032-2.
(4) No gain or loss will be recognized by the shareholders of AFB upon the
receipt of solely CCBF Stock (including any fractional share interests
to which they may be entitled) in exchange for their shares of AFB
Stock. SECTION 354(A)(1).
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(5) The basis of the CCBF Stock received by the shareholders of AFB
(including any fractional share interests to which they may be
entitled) will be the same as the basis of the AFB Stock surrendered in
exchange therefor. SECTION 358(A)(1).
(6) The holding period of the CCBF Stock received by the shareholders of
AFB (including any fractional share interests to which they may be
entitled) will include the shareholders1 holding period of the AFB
Stock surrendered in exchange therefor, provided that the AFB Stock is
held as a capital asset in the hands of the shareholders of AFB on the
date of the Merger. SECTION 1223(1).
(7) The payment of cash in lieu of fractional share interests of CCBF Stock
will be treated as if the fractional shares of CCBF Stock were
distributed as part of the Merger to the AFB shareholders and then
redeemed by CCBF. The cash payments will be treated as having been
received as distributions in full payment for the stock redeemed as
provided in SECTION 302(A). REV. RUL. 66-365, 1966-2 C.B. 116 AND REV.
PROC. 77-41, 1977-2 C.B. 574.
South Carolina Income Tax Consequences:
(1) The State of South Carolina will, for South Carolina income tax
purposes, treat the Merger in an identical manner as it is treated by
the Internal Revenue Service for federal income tax purposes. S.C. CODE
12-7-20 (11).
SCOPE OF THE OPINION
The opinion contained herein is based upon the facts and representations
set forth in this letter, as well as the information contained in the Merger
Agreement. If any fact or representation is not entirely complete or accurate,
it is imperative that we be informed immediately in writing because the
incompleteness or inaccuracy could cause us to change our opinion.
The opinion contained herein is rendered only with respect to the
enumerated holdings set forth herein under the heading OPINION, and KPMG
expresses no opinion with respect to any other legal, federal, state, or local
tax aspect of the Merger.
This opinion is not binding upon any tax authority or any court and no
assurance can be given that a position contrary to that expressed herein will
not be asserted by a tax authority and ultimately sustained by a court. In
rendering our opinion, we are relying upon the relevant provisions of the
Internal Revenue Code of 1986, as amended, the South Carolina Code, the
regulations thereunder, and judicial and administrative interpretations thereof,
which are subject to change or modification by subsequent legislative,
regulatory, administrative, or judicial decisions. Any such changes, which can
be retroactive in effect, could also have an effect on the validity of our
opinion. We assume no duty to inform you of any changes in our opinion due to
changes in law that occur subsequent to the issuance of this letter.
Sincerely,
KPMG PEAT MARWICK LLP
Sheldon M. Fox
PARTNER
SMF:jr
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EXHIBIT 10.1
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into this
day of , 1997 by and between CCB Financial Corporation, a
North Carolina corporation (hereinafter, "CCB"), and William L. Abercrombie, Jr.
(hereinafter, "Executive").
BACKGROUND
Executive is the Chief Executive Officer of American Federal Bank, FSB, a
federal stock savings bank ("American Federal"), which was acquired by CCB on
the date hereof pursuant to an Agreement and Plan of Reorganization, dated as of
February 17, 1997 (the "Merger Agreement") (the "Merger").
CCB desires to employ Executive in accordance with the terms of this
Agreement. Executive is willing to serve as an employee of CCB in accordance
with the terms and conditions of this Agreement.
NOW THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements set forth herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
1. EFFECTIVE DATE. The effective date of this Agreement (the "Effective
Date") is the date on which the effective time of the Merger occurred.
2. EMPLOYMENT.
(a) OFFICER POSITIONS. Executive will be employed as a Vice Chairman
of the Board of Directors of CCB and as the President and Chief Executive
Officer of CCB's principal banking subsidiary located in South Carolina
(the "Bank"). Executive's responsibilities under this Agreement shall be in
accordance with the policies and objectives established by the Board of
Directors of CCB, and shall be consistent with the responsibilities of
similarly situated executives of comparable banks and bank holding
companies. In any such capacity, Executive will report directly to the
Chief Executive Officer of CCB.
(b) DIRECTOR POSITION. Subject to all legal limitations and conditions
applicable to service as a director of CCB, (i) the Board of Directors of
CCB shall nominate and use its best efforts to secure the election of
Executive as a director of CCB during the term of this Agreement, and (ii)
if so elected, Executive shall serve as member of Executive Committee of
the Board of Directors of CCB.
3. EMPLOYMENT PERIOD. Unless earlier terminated in accordance with Section
6 hereof, Executive's employment shall be for a five-year term (the "Employment
Period"), beginning on the Effective Date. The Employment Period shall, without
further action by Executive or CCB, be extended for an additional one-year
period on each anniversary of the Effective Date; provided, however, that either
party may, by notice to the other, cause the Employment Period to cease to
extend automatically. Upon such notice, the Employment Period shall terminate
upon the expiration of the then-current term, including any prior extensions.
4. EXTENT OF SERVICE. During the Employment Period, and excluding any
periods of vacation and sick leave to which Executive is entitled, Executive
agrees to devote his business time, attention, skill and efforts to the faithful
performance of his duties hereunder; provided, however, that with the approval
of the Board of Directors of CCB, Executive may serve, or continue to serve, on
the boards of directors of, and hold any other offices or positions in, such
companies or organizations, which, in such Board's judgment, will not present
any material conflict of interest with CCB or any of its subsidiaries or
affiliates or divisions, or unfavorably affect the performance of Executive's
duties pursuant to this Agreement, or will not violate any applicable statute or
regulation. During the Employment Period it shall not be a violation of this
Agreement for Executive to (i) devote reasonable periods of time to charitable
and community activities, and/or (ii) manage personal business interests and
investments, so long as such activities do not interfere with the performance of
Executive's responsibilities under this Agreement. It is expressly understood
and agreed that to the extent that any such activities have been conducted by
Executive prior to the date of this Agreement (as to which activities Executive
shall have given written notice to CCB on or before June 1, 1997), the continued
conduct of such activities (or the conduct of activities similar in nature and
scope thereto) subsequent to the Effective Date shall not thereafter be deemed
to interfere with the performance of Executive's responsibilities hereunder.
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5. COMPENSATION AND BENEFITS.
(a) BASE SALARY. During the Employment Period, CCB will pay to
Executive a base salary in the amount of $300,000 per year ("Base Salary"),
less normal withholdings, payable in equal monthly or more frequent
installments as are customary under CCB's payroll practices from time to
time. The Compensation Committee of the Board of Directors of CCB shall
review Executive's Base Salary annually and in its sole discretion, subject
to approval of the Board of Directors of CCB, may adjust Executive's Base
Salary from year to year, but during the Employment Period the Board may
not decrease Executive's Base Salary below $300,000, and periodic
increases, once granted, shall not be subject to revocation. The annual
review of Executive's salary by the Board will consider, among other
things, Executive's own performance and CCB's performance.
(b) INCENTIVE, SAVINGS AND RETIREMENT PLANS. During the Employment
Period, Executive shall be entitled to participate in all incentive,
savings and retirement plans, practices, policies and programs applicable
generally to senior executive officers of CCB and its affiliated companies,
and on the same basis as such other senior executive officers, with full
credit given for Executive's total accumulated years of service at American
Federal for purposes of determining vesting and eligibility. Without
limiting the foregoing, the following shall apply:
(i) Executive's incentive bonus under CCB's regular incentive plan
for 1997 shall be on the basis of a full year of service (I.E., not
prorated as of the Effective Date).
(ii) In addition to any bonus earned by Executive pursuant to CCB's
regular incentive plans, CCB shall pay to Executive a monthly bonus for
each of the 24 months immediately following the Effective Date in the
amount of $24,300 (the "Signing Bonus"). If Executive's employment is
terminated for Cause under Section 6(b) (ii) or (iii) of this Agreement,
then CCB's obligation to pay the Signing Bonus shall cease as of the
date of termination; otherwise such obligation shall continue for the
full 24 month period, regardless of Executive's employment status.
(iii) Each year during the term of this Agreement CCB will make
stock options grants to Executive at the same level as made to Executive
Vice Presidents of CCB, which grant in 1997 shall be the same percentage
of the base salary of the other Executive Vice Presidents of CCB for
1997, less the value of any options granted in 1997 to Executive by
American Federal prior to the Effective Date.
(iv) CCB shall, if so requested by Executive, assume and maintain
on behalf of Executive that certain Supplemental Retirement Benefit
Agreement, dated as of December 19, 1994, between Executive and American
Federal.
(c) WELFARE BENEFIT PLANS. During the Employment Period, Executive
and/or Executive's family, as the case may be, shall be eligible for
participation in and shall receive all benefits under welfare benefit
plans, practices, policies and programs provided by CCB and its affiliated
companies (including, without limitation, medical, prescription, dental,
disability, employee life, group life, accidental death and travel accident
insurance plans and programs) to the extent applicable generally to senior
executive officers of CCB and its affiliated companies, with full credit
given for Executive's total accumulated years of service at American
Federal for purposes of determining vesting and eligibility (other than
under CCB's retiree medical plan). Without limiting the foregoing, (i) CCB
shall assume and maintain on behalf of Executive that certain life
insurance policy identified on Exhibit A hereto, and (ii) for one year
after Executive's death, CCB shall pay any premium required for any
"qualified beneficiary" to continue his or her health care coverage in
accordance with Title I, Part 6 of the Employee Retirement Security Act of
1974.
(d) EXPENSES. During the Employment Period, Executive shall be
entitled to receive prompt reimbursement for all reasonable expenses
incurred by Executive in accordance with the policies, practices and
procedures of CCB and its affiliated companies to the extent applicable
generally to other senior executive officers of CCB and its affiliated
companies.
(e) FRINGE BENEFITS. During the Employment Period, Executive shall be
entitled to fringe benefits in accordance with the plans, practices,
programs and policies of CCB and its affiliated companies in effect for
senior executive officers of CCB and its affiliated companies.
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6. TERMINATION OF EMPLOYMENT.
(a) DEATH OR DISABILITY. Executive's employment shall terminate
automatically upon Executive's death during the Employment Period. If CCB
determines in good faith that the Disability of Executive has occurred
during the Employment Period (pursuant to the definition of Disability set
forth below), it may give to Executive written notice in accordance with
Section 13(g) of this Agreement of its intention to terminate Executive's
employment. In such event, Executive's employment with CCB shall terminate
effective on the 60th day after receipt of such written notice by Executive
(the "Disability Effective Date"), provided that, within the 60 days after
such receipt, Executive shall not have returned to full-time performance of
Executive's duties for a period of at least 30 days. For purposes of this
Agreement, "Disability" shall mean the absence of Executive from
Executive's duties with CCB on a full-time basis for 180 consecutive days
as a result of incapacity due to mental or physical illness which is
determined to be total and permanent by a physician selected by CCB or its
insurers and acceptable to Executive or Executive's legal representative,
which acceptance shall not be unreasonably withheld.
(b) CAUSE. CCB may terminate Executive's employment during the
Employ-ment Period for Cause. For purposes of this Agreement, "Cause" shall
mean:
(i) the willful and continued failure of Executive to perform
Executive's duties with CCB or one of its affiliates (other than any
such failure resulting from incapacity due to physical or mental
illness), after a written demand for performance is delivered to
Executive by the Board or the Chief Executive Officer of CCB which
specifically identifies the manner in which the Board or Chief Executive
Officer believes that Executive has not performed Executive's duties;
(ii) Executive's personal dishonesty, willful misconduct, or breach
of a fiduciary duty from which he derives a personal profit;
(iii) Executive's willful violation of any law, rule or regulation
(other than traffic violations or similar offenses) or final cease and
desist order; or
(iv) Executive's willful breach of any material term or condition
of this Agreement.
For purposes of this provision, no act or failure to act, on the part of
Executive, shall be considered "willful" or a breach of fiduciary duty
unless it is done, or omitted to be done, by Executive in bad faith or
without reasonable belief that Executive's action or omission was in the
best interests of CCB. Any act, or failure to act, based upon authority
given pursuant to a resolution duly adopted by the Board or upon the
instructions of the Chief Executive Officer of CCB or based upon the advice
of counsel for CCB after consultation with the Chief Executive Officer
about such advice shall be conclusively presumed to be done, or omitted to
be done, by Executive in good faith and in the best interests of CCB. The
cessation of employment of Executive shall not be deemed to be for Cause
unless and until there shall have been delivered to Executive a copy of a
resolution duly adopted by the affirmative vote of not less than
three-quarters of the entire membership of the Board at a meeting of the
Board called and held for such purpose (after reasonable notice is provided
to Executive and Executive is given an opportunity, together with counsel,
to be heard before the Board), finding that, in the good faith opinion of
the Board, Executive is guilty of the conduct described in subparagraph
(i), (ii), (iii) or (iv) above, and specifying the particulars thereof in
detail. For purposes of this Section 6(b), any such finding by
three-quarters of the Board shall be conclusive.
(c) GOOD REASON. Executive's employment may be terminated by Executive
for Good Reason. For purposes of this Agreement, "Good Reason" shall mean:
(i) the assignment to Executive of any duties materially
inconsistent with Executive's position (including status, offices,
titles and reporting requirements), authority, duties or
responsibilities as contemplated by Section 2(a) of this Agreement, or
any other action by CCB which results in a material diminution in such
position, authority, duties or responsibilities, excluding for this
purpose an isolated, insubstantial and inadvertent action not taken in
bad faith and which is remedied by CCB promptly after receipt of notice
thereof given by Executive;
(ii) any failure by CCB to comply with any of the provisions of
Section 5 of this Agreement, other than an isolated, insubstantial and
inadvertent failure not occurring in bad faith and which is remedied by
CCB promptly after receipt of written notice thereof given by Executive;
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(iii) any relocation, to which Executive has not agreed, to an
office of CCB or the Bank more than 35 miles (by most direct highway
route) from the location of his office as of the Effective Date or any
increase in Executive's required business travel, to which Executive has
not agreed, amounting to a constructive relocation; provided, however,
that Executive agrees that travel reasonably required in the ordinary
course of business to CCB's headquarters in Durham, North Carolina, or
between CCB's or its subsidiaries' banking offices in South Carolina
will not constitute a constructive relocation.
(iv) any purported termination by CCB of Executive's employment
otherwise than as expressly permitted by this Agreement; or
(v) any failure by CCB to comply with and satisfy Section 12(b) of
this Agreement.
For purposes of this Section 6(c), any good faith determination of "Good
Reason" made by Executive shall be conclusive.
(d) SIX-MONTH WINDOW PERIOD. Anything in this Agreement to the
contrary notwithstanding, either party may terminate Executive's employment
hereunder for any reason or no reason during the six-month period
immediately following the second anniversary of the Effective Date. Such
termination shall have the consequences set forth in Section 7(a) for a
termination for Good Reason, except that the Remaining Employment Period
(as defined in Section 7(a)(i)(B)) shall be deemed to be lesser of three
years or the number of days then remaining in the Employment Period.
(e) NOTICE OF TERMINATION. Any termination by CCB for Cause, or by
Executive for Good Reason, shall be communicated by Notice of Termination
to the other party hereto given in accordance with Section 13(g) of this
Agreement. For purposes of this Agreement, a "Notice of Termination" means
a written notice which (i) indicates the specific termination provision in
this Agreement relied upon, (ii) to the extent applicable, sets forth in
reasonable detail the facts and circumstances claimed to provide a basis
for termination of Executive's employment under the provision so indicated
and (iii) if the Date of Termination (as defined below) is other than the
date of receipt of such notice, specifies the termination date (which date
shall be not more than 30 days after the giving of such notice). The
failure by Executive or CCB to set forth in the Notice of Termination any
fact or circumstance which contributes to a showing of Good Reason or Cause
shall not waive any right of Executive or CCB, respectively, hereunder or
preclude Executive or CCB, respectively, from asserting such fact or
circumstance in enforcing Executive's or CCB's rights hereunder.
(f) DATE OF TERMINATION. "Date of Termination" means (i) if
Executive's employment is terminated by CCB for Cause, or by Executive for
Good Reason, the date of receipt of the Notice of Termination or any later
date specified therein, as the case may be, (ii) if Executive's employment
is terminated by CCB other than for Cause or Disability, the Date of
Termination shall be the date on which CCB notifies Executive of such
termination, and (iii) if Executive's employment is terminated by reason of
death or Disability, the Date of Termination shall be the date of death of
Executive or the Disability Effective Date, as the case may be.
7. OBLIGATIONS OF CCB UPON TERMINATION.
(a) GOOD REASON; OTHER THAN FOR CAUSE, DEATH OR DISABILITY. If, during
the Employment Period, CCB shall terminate Executive's employment other
than for Cause, death or Disability, or Executive shall terminate
employment for Good Reason, then in consideration of Executive's services
rendered prior to such termination and as reasonable compensation for his
compliance with the restrictive covenants set forth in Section 11 of this
Agreement:
(i) CCB shall pay to Executive in a lump sum in cash within 30 days
after the Date of Termination the aggregate of the following amounts:
A. the sum of (1) Executive's Base Salary through the Date of
Termination to the extent not theretofore paid, (2) the product of (x)
Executive's cash incentive bonus for the last completed fiscal year
("Most Recent Annual Bonus"), and (y) a fraction, the numerator of
which is the number of days in the current fiscal year through the
Date of Termination, and the denominator of which is 365, and (3) any
compensation previously deferred by Executive (together with any
accrued interest or earnings thereon) and any accrued vacation pay, in
each case to the extent not theretofore paid (the sum of the amounts
described in clauses (1), (2), and (3) shall be hereinafter referred
to as the "Accrued Obligations"); and
B. the amount equal to the product of (1) the number of days
remaining in the Employment Period from and after the Date of
Termination (the "Remaining Employment Period"), and (2) Executive's
Base Salary divided by 365; and
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C. the amount equal to the product of (1) the number of days in
the Remaining Employment Period, and (2) Executive's Most Recent
Annual Bonus divided by 365; and
D. any remaining installments of the Signing Bonus; and
E. an amount equal to the excess of (a) the actuarial equivalent
of the benefit under CCB's qualified defined benefit retirement plan
(the "Retirement Plan") (utilizing actuarial assumptions no less
favorable to Executive than those in effect under CCB's Retirement
Plan on the Date of Termination), and any excess or supplemental
retirement plans in which Executive participates (together, the
"SERP") which Executive would receive if Executive's employment
continued throughout the Remaining Employment Period, assuming for
this purpose that all accrued benefits are fully vested, and, assuming
that Executive's compensation in each remaining year of the Employment
Period is the Base Salary plus the Most Recent Annual Bonus, over (b)
the actuarial equivalent of Executive's actual benefit (paid or
payable), if any, under the Retirement Plan and the SERP as of the
Date of Termination;
(ii) for the Remaining Employment Period, or such longer period as
may be provided by the terms of the appropriate plan, program, practice
or policy, CCB shall continue benefits to Executive and/or Executive's
family at least equal to those which would have been provided to them in
accordance with the plans, programs, practices and policies described in
Section 5(c) of this Agreement if Executive's employment had not been
terminated, provided, however, that if Executive becomes re-employed
with another employer and is eligible to receive medical or other
welfare benefits under another employer provided plan, the medical and
other welfare benefits described herein shall be secondary to those
provided under such other plan during such applicable period of
eligibility. For purposes of determining eligibility and
years-of-service credit (but not the time of commencement of benefits)
of Executive for retiree benefits pursuant to such plans, practices,
programs and policies, Executive shall be considered to have remained
employed throughout the Remaining Employment Period and to have retired
on the last day of such period;
(iii) to the extent not theretofore paid or provided, CCB shall
timely pay or provide to Executive any other amounts or benefits
required to be paid or provided or which Executive is eligible to
receive under any plan, program, policy or practice or contract or
agreement of CCB and its affiliated companies (such other amounts and
benefits shall be hereinafter referred to as the "Other Benefits"); and
(iv) notwithstanding any provision of this Agreement to the
contrary, Executive shall forfeit his right to receive, or, to the
extent such amounts have previously been paid to Executive, shall repay
in full to CCB with interest at 8% per annum within thirty (30) days of
a final determination of Executive's liability therefor as set forth
below, the amount described in Sections 7(a)(i)(B) and (C) of this
Agreement if at any time during the Employment Period or the Remaining
Employment Period (the "Restricted Period") he violates the restrictive
covenants set forth in Section 11 of this Agreement. Any determination
of whether Executive has violated such covenants shall be made by
arbitration in Greenville, South Carolina under the Rules of Commercial
Arbitration (the "Rules") of the American Arbitration Association, which
Rules are deemed to be incorporated by reference herein; provided,
however, that either party may seek equitable remedies in court.
(b) DEATH. If Executive's employment is terminated by reason of
Executive's death during the Employment Period, this Agreement shall
terminate without further obligations to Executive's legal representatives
under this Agreement, other than for payment of Accrued Obligations and the
timely payment or provision of Other Benefits. Accrued Obligations shall be
paid to Executive's estate or beneficiary, as applicable, in a lump sum in
cash within 30 days of the Date of Termination. With respect to the
provision of Other Benefits, the term Other Benefits as utilized in this
Section 7(b) shall include, without limitation, and Executive's estate
and/or beneficiaries shall be entitled to receive, (i) benefits under such
plans, programs, practices and policies relating to death benefits, if any,
as applicable generally to senior executive officers of CCB and its
affiliated companies and their beneficiaries, and on the same basis as such
senior executive officers and their beneficiaries, with full credit given
for Executive's total accumulated years of service at American Federal for
purposes of determining vesting and eligibility, (ii) the death benefits
under the life insurance policy identified on Exhibit A hereto, (iii) the
beneficiary health care coverage referred to in Section 5(c) of this
Agreement, and (iv) any remaining installments of the Signing Bonus.
(c) DISABILITY. If Executive's employment is terminated by reason of
Executive's Disability during the Employment Period, this Agreement shall
terminate without further obligations to Executive, other than for payment
of Accrued Obligations and the timely payment or provision of Other
Benefits. Accrued Obligations shall be paid to Executive in a
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lump sum in cash within 30 days of the Date of Termination. With respect to
the provision of Other Benefits, the term Other Benefits as utilized in
this Section 7(c) shall include, without limitation, and Executive shall be
entitled after the Disability Effective Date to receive, (i) disability and
other benefits under such plans, programs, practices and policies relating
to disability, if any, as applicable generally to senior executive officers
of CCB and its affiliated companies and their families, and on the same
basis as such senior executive officers and their families, with full
credit given for Executive's total accumulated years of service at American
Federal for purposes of determining vesting and eligibility, and (ii) any
remaining installments of the Signing Bonus.
(d) CAUSE; OTHER THAN FOR GOOD REASON. If Executive's employment shall
be terminated for Cause during the Employment Period, this Agreement shall
terminate without further obligations to Executive other than the
obligation to pay to Executive (x) his Base Salary through the Date of
Termination, (y) the amount of any compensation previously deferred by
Executive, and (z) Other Benefits, in each case to the extent theretofore
unpaid. If Executive voluntarily terminates employment during the
Employment Period, excluding a termination for Good Reason, this Agreement
shall terminate without further obligations to Executive, other than for
Accrued Obligations and the timely payment or provision of Other Benefits.
In such case, all Accrued Obligations shall be paid to Executive in a lump
sum in cash within 30 days of the Date of Termination. With respect to the
provision of Other Benefits, unless the termination of Executive's
Employment was for Cause as defined in clause (ii) or (iii) of Section
6(b), the term Other Benefits as utilized in this Section 7(d) shall
include, without limitation, any remaining installments of the Signing
Bonus.
8. MANDATORY REDUCTION OF PAYMENTS IN CERTAIN EVENTS.
(a) Anything in this Agreement to the contrary notwithstanding, in the
event it shall be determined that any payment or distribution by the
Company to or for the benefit of the Executive (whether paid or payable or
distributed or distributable pursuant to the terms of this Agreement or
otherwise) (a "Payment") would be subject to the excise tax imposed by
Section 4999 of the Code (the "Excise Tax"), then, prior to the making of
any Payment to the Executive, a calculation shall be made comparing (i) the
net benefit to the Executive of the Payment after payment of the Excise
Tax, to (ii) the net benefit to the Executive if the Payment had been
limited to the extent necessary to avoid being subject to the Excise Tax.
If the amount calculated under (i) above is less than the amount calculated
under (ii) above, then the Payment shall be limited to the extent necessary
to avoid being subject to the Excise Tax.
(b) The determination of whether an Excise Tax would be imposed, the
amount of such Excise Tax, and the calculation of the amounts referred to
Section 8(a) (i) and (ii) above shall be made by the Company's regular
independent accounting firm at the expense of the Company or, at the
election and expense of the Executive, another nationally recognized
independent accounting firm (the "Accounting Firm") which shall provide
detailed supporting calculations. Any determination by the Accounting Firm
shall be binding upon the Company and the Executive. As a result of the
uncertainty in the application of Section 4999 of the Code at the time of
the initial determination by the Accounting Firm hereunder, it is possible
that Payments which the Executive was entitled to, but did not receive
pursuant to Section 8(a), could have been made without the imposition of
the Excise Tax ("Underpayment"). In such event, the Accounting Firm shall
determine the amount of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Company to or for the benefit of
the Executive.
9. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall prevent or
limit Executive's continuing or future participation in any plan, program,
policy or practice provided by CCB or any of its affiliated companies and for
which Executive may qualify, nor, subject to Section 13(e), shall anything
herein limit or otherwise affect such rights as Executive may have under any
contract or agreement with CCB or any of its affiliated companies. Amounts which
are vested benefits or which Executive is otherwise entitled to receive under
any plan, policy, practice or program of or any contract or agreement with CCB
or any of its affiliated companies at or subsequent to the Date of Termination
shall be payable in accordance with such plan, policy, practice or program or
contract or agreement except as explicitly modified by this Agreement.
10. FULL SETTLEMENT. CCB's obligation to make the payments provided for in
this Agreement and otherwise to perform its obligations hereunder shall not be
affected by any set-off, counterclaim, recoupment, defense or other claim, right
or action which CCB may have against Executive or others. In no event shall
Executive be obligated to seek other employment or take any other action by way
of mitigation of the amounts payable to Executive under any of the provisions of
this Agreement and such amounts shall not be reduced whether or not Executive
obtains other employment. CCB agrees to pay as incurred, to the full extent
permitted by law, all legal fees and expenses which Executive may reasonably
incur as a result of any contest (to the extent that Executive is successful, in
whole or in part, in such contest) by CCB, Executive or others of the validity
or enforceability of, or liability under, any provision of this Agreement or any
guarantee of performance thereof (including as a result of any contest by
Executive about the amount of any payment pursuant to this Agreement), plus in
each case interest on
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any delayed payment at the applicable federal rate provided for in Section
7872(f)(2)(A) of the Internal Revenue Code of 1986, as amended (the "Code").
11. COVENANTS.
(a) COVENANT NOT TO COMPETE. During the Restricted Period (as defined
in Section 7(a) (iv) of this Agreement), Executive shall not, within the
States of South Carolina and North Carolina, directly or indirectly, in any
capacity, render his services, or engage or have a financial interest in,
any business that shall be competitive with any of those business
activities in which CCB or its subsidiaries are engaged as of the date of
Executive's termination of employment, which business activities include
the provision of banking and related financial services (collectively, the
"Business"); provided, however, that Executive's beneficial ownership of 3%
or less of any class of securities listed for trading on a national
securities exchange or traded on the Nasdaq National Market or in the
over-the-counter market and reported by Nasdaq shall not constitute a
"financial interest" in violation of this covenant. If a court determines
that the foregoing restrictions are too broad or otherwise unreasonable
under applicable law, including with respect to time or territory, the
court is hereby requested and authorized by the parties hereto to revise
the foregoing restriction to include the maximum restrictions allowable
under applicable law.
(b) COVENANT NOT TO SOLICIT CUSTOMERS. During the Restricted Period,
Executive shall not, directly or indirectly, individually or on behalf of
any other person, partnership, limited liability company, corporation or
other entity ("Person") (other than CCB or an affiliate), solicit the
provision of services included in the Business to any Person who is or was
(i) a customer of CCB or any of its affiliates for whom CCB or any of its
affiliates provided services included in the Business during any part of
the 12-month period immediately prior to the date of Executive's
termination as an employee of CCB or the Bank, or (ii) a potential customer
of CCB or any of its affiliates to whom CCB or any of its affiliates
solicited the provision of services included in the Business during any
part of the 12-month period immediately prior to the date of Executive's
termination as an employee of CCB or the Bank.
(c) COVENANT NOT TO SOLICIT EMPLOYEES. During the Restricted Period,
Executive shall not, directly or indirectly, individually or on behalf of
any other Person, solicit, recruit or entice, directly or indirectly, any
employee of CCB or its affiliates to leave the employment of CCB or such
affiliate to work with Executive or with any Person with which Executive is
or becomes affiliated or associated.
(d) REASONABLENESS OF SCOPE AND DURATION. The parties hereto agree
that the covenants and agreements contained in this Section 11 are
reasonable in their scope and duration, and they intend that they be
enforced, and no party shall raise any issue of the reasonableness of the
scope or duration of any such covenants in any proceeding to enforce any
such covenants.
(e) ENFORCEABILITY. Executive agrees that monetary damages would not
be a sufficient remedy for any breach or threatened breach of the
provisions of this Section 11, and that in addition to all other rights and
remedies available to CCB, CCB shall be entitled to specific performance
and injunctive or other equitable relief as a remedy for any such breach or
threatened breach.
(f) SEPARATE COVENANTS AND SEVERABILITY. The covenants and agreements
contained in this Section 11 shall be construed as separate and independent
covenants. Should any part or provision of any such covenant or agreement
be held invalid, void or unenforceable in any court of competent
jurisdiction, no other part or provision of this Agreement shall be
rendered invalid, void or unenforceable as a result. If any portion of the
foregoing provisions is found to be invalid or unenforceable by a court of
competent jurisdiction unless modified, it is the intent of the parties
that the otherwise invalid or unreasonable term shall be reformed, or a new
enforceable term provided, so as to most closely effectuate the provisions
as is validly possible.
12. ASSIGNMENT AND SUCCESSORS.
(a) EXECUTIVE. This Agreement is personal to Executive and without the
prior written consent of CCB shall not be assignable by Executive otherwise
than by will or the laws of descent and distribution. This Agreement shall
inure to the benefit of and be enforceable by Executive's legal
representatives.
(b) CCB. This Agreement shall inure to the benefit of and be binding
upon CCB and its successors and assigns. CCB will require any successor
(whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of CCB
to assume expressly and agree to perform this Agreement in the same manner
and to the same extent that CCB would be required to perform it if no such
succession had taken place. As
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used in this Agreement, "CCB" shall mean CCB as hereinbefore defined and
any successor to its business and/or assets as aforesaid which assumes and
agrees to perform this Agreement by operation of law or otherwise.
13. MISCELLANEOUS.
(a) NO MITIGATION. Executive shall not be required to mitigate the
amount of any payment provided for in this Agreement by seeking other
employment or otherwise and no such payment shall be offset or reduced by
the amount of any compensation or benefits provided to Executive in any
subsequent employment.
(b) WAIVER. Failure of either party to insist, in one or more
instances, on performance by the other in strict accordance with the terms
and conditions of this Agreement shall not be deemed a waiver or
relinquishment of any right granted in this Agreement or of the future
performance of any such term or condition or of any other term or condition
of this Agreement, unless such waiver is contained in a writing signed by
the party making the waiver.
(c) SEVERABILITY. If any provision or covenant, or any part thereof,
of this Agreement should be held by any court to be invalid, illegal or
unenforceable, either in whole or in part, such invalidity, illegality or
unenforceability shall not affect the validity, legality or enforceability
of the remaining provisions or covenants, or any part thereof, of this
Agreement, all of which shall remain in full force and effect.
(d) OTHER AGENTS. Nothing in this Agreement is to be interpreted as
limiting CCB from employing other personnel on such terms and conditions as
may be satisfactory to it.
(e) ENTIRE AGREEMENT. On the date hereof, Executive and American
Federal have entered into a separate Employment Agreement (the "AFB
Agreement"), which relates specifically to Executive's employment as the
President and Chief Executive Officer of American Federal and contains
certain bank regulatory limitations imposed by the Office of Thrift
Supervision and the Federal Deposit Insurance Corporation. Except as
provided herein or in the AFB Agreement, this Agreement contains the entire
agreement between CCB and Executive with respect to the subject matter
hereof and that it supersedes and invalidates any previous agreements or
contracts including employment agreements (other than the AFB Agreement),
including, without limitation, that certain Amended and Restated Employment
Agreement, dated September 1, 1993, as further amended and restated as of
March 20, 1997, by and between American Federal and Executive. No
representations, inducements, promises or agreements, oral or otherwise,
which are not embodied herein or in the AFB Agreement, shall be of any
force or effect.
(f) GOVERNING LAW. Except to the extent preempted by federal law, the
laws of the State of North Carolina shall govern this Agreement in all
respects, whether as to its validity, construction, capacity, performance
or otherwise.
(g) NOTICES. All notices, requests, demands and other communications
required or permitted hereunder shall be in writing and shall be deemed to
have been duly given if delivered or seven days after mailing if mailed,
first class, certified mail, postage prepaid:
<TABLE>
<S> <C> <C> <C>
To CCB: CCB Financial Corporation
111 Corcoran Street
Durham, North Carolina 27702-0931
Facsimile No. (919) 683-6881
Attention: Chief Executive Officer
To Executive: William L. Abercrombie, Jr.
300 East McBee Avenue
Greenville, South Carolina 29601
Facsimile No. (864) 255-7504
</TABLE>
Any party may change the address to which notices, requests, demands and
other communications shall be delivered or mailed by giving notice thereof
to the other party in the same manner provided herein.
(h) AMENDMENTS AND MODIFICATIONS. This Agreement may be amended or
modified only by a writing signed by both parties hereto, which makes
specific reference to this Agreement.
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IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Employment Agreement as of the date first above written.
CCB FINANCIAL CORPORATION
By:
Title:
ABERCROMBIE:
WILLIAM L. ABERCROMBIE, JR.
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EXHIBIT 10.2
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into this
day of , 1997 by and between CCB Financial Corporation, a
North Carolina corporation (hereinafter, "CCB"), and Michael A. Trimble
(hereinafter, "Executive").
BACKGROUND
Executive is the Chief Financial and Chief Operating Officer of American
Federal Bank, FSB, a federal stock savings bank ("American Federal"), which was
acquired by CCB on the date hereof pursuant to an Agreement and Plan of
Reorganization, dated as of February 17, 1997 (the "Merger Agreement") (the
"Merger").
CCB desires to employ Executive in accordance with the terms of this
Agreement. Executive is willing to serve as an employee of CCB or its subsidiary
in accordance with the terms and conditions of this Agreement.
NOW THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements set forth herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
1. EFFECTIVE DATE. The effective date of this Agreement (the "Effective
Date") is the date on which the effective time of the Merger occurred.
2. EMPLOYMENT. Executive will be employed as the Executive Vice President
and Chief Operating Officer of CCB's principal banking subsidiary located in
South Carolina (the "Bank"). Executive's responsibilities under this Agreement
shall be in accordance with the policies and objectives established by the
Boards of Directors of CCB and the Bank, and shall be consistent with the
responsibilities of similarly situated executives of comparable banks. In any
such capacity, Executive will report directly to the Chief Executive Officer of
the Bank.
3. EMPLOYMENT PERIOD. Unless earlier terminated in accordance with Section
6 hereof, Executive's employment shall be for a period of two years beginning on
the Effective Date (the "Employment Period").
4. EXTENT OF SERVICE. During the Employment Period, and excluding any
periods of vacation and sick leave to which Executive is entitled, Executive
agrees to devote his business time, attention, skill and efforts to the faithful
performance of his duties hereunder; provided, however, that with the approval
of the Board of Directors of CCB, Executive may serve, or continue to serve, on
the boards of directors of, and hold any other offices or positions in, such
companies or organizations, which, in such Board's judgment, will not present
any material conflict of interest with CCB or any of its subsidiaries or
affiliates or divisions, or unfavorably affect the performance of Executive's
duties pursuant to this Agreement, or will not violate any applicable statute or
regulation. During the Employment Period it shall not be a violation of this
Agreement for Executive to (i) devote reasonable periods of time to charitable
and community activities, and/or (ii) manage personal business interests and
investments, so long as such activities do not interfere with the performance of
Executive's responsibilities under this Agreement. It is expressly understood
and agreed that to the extent that any such activities have been conducted by
Executive prior to the date of this Agreement (as to which activities Executive
shall have given written notice to CCB on or before June 1, 1997), the continued
conduct of such activities (or the conduct of activities similar in nature and
scope thereto) subsequent to the Effective Date shall not thereafter be deemed
to interfere with the performance of Executive's responsibilities hereunder.
5. COMPENSATION AND BENEFITS.
(a) BASE SALARY. During the Employment Period, CCB will pay to
Executive a base salary in the amount of $193,000 per year ("Base Salary"),
less normal withholdings, payable in equal monthly or more frequent
installments as are customary under CCB's payroll practices from time to
time. The Compensation Committee of the Board of Directors of CCB shall
review Executive's Base Salary annually and in its sole discretion, subject
to approval of the Board of Directors of CCB, may adjust Executive's Base
Salary from year to year, but during the Employment Period the Board may
not decrease Executive's Base Salary below $193,000, and periodic
increases, once granted, shall not be subject to revocation. The annual
review of Executive's salary by the Board will consider, among other
things, Executive's own performance and CCB's performance.
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(b) INCENTIVE, SAVINGS AND RETIREMENT PLANS. During the Employment
Period, Executive shall be entitled to participate in all incentive,
savings and retirement plans, practices, policies and programs applicable
generally to senior executive officers of CCB and its affiliated companies,
and on the same basis as such other senior executive officers, with full
credit given for Executive's total accumulated years of service at American
Federal for purposes of determining vesting and eligibility. Without
limiting the foregoing, the following shall apply.
(i) Executive's incentive bonus under CCB's regular incentive plan
for 1997 shall be on the basis of a full year of service (I.E., not
prorated as of the Effective Date).
(ii) In addition to any bonus earned by Executive pursuant to CCB's
regular incentive plans, CCB shall pay to Executive a monthly bonus for
each of the 24 months immediately following the Effective Date in the
amount of $15,800 (the "Signing Bonus"); provided that in the event the
employment of Executive is terminated (other than a termination for
Cause under Section 6(b) (ii) or (iii) of this Agreement), CCB shall pay
to Executive, at the time of his termination of employment, a lump sum
equal to the sum of the monthly payments of the Signing Bonus that
remain unpaid at the time of Executive's termination of employment. If
Executive's employment is terminated for Cause under Section 6(b) (ii)
or (iii) of this Agreement, then CCB's obligation to pay the Signing
Bonus shall cease as of the date of termination; otherwise such
obligation shall continue on the basis set forth above, regardless of
Executive's employment status.
(iii) Executive's retirement shall be under the terms of the
regular CCB retirement plan(s) then in effect, but with the benefits
provided under the American Federal [Retirement Plan].
(iv) Beginning January 1, 1998, Executive may terminate his
employment hereunder for any reason or no reason. Upon such termination,
and contingent upon his compliance with the covenant-not-to-compete
contained in Section 11(a) of this Agreement, CCB shall pay to
Executive, for the month during which the Executive's termination of
employment occurs if such termination occurs on or before the 15th of
such month (or for the first full month following Executive's
termination of employment if such termination occurs after the 15th of
such month) and for each month thereafter until January 1, 2002 (the
"Covenant Months"), in addition to any retirement or other benefits to
which he may be entitled, a monthly payment for each of the Covenant
Months in the amount of $9,500 (the "Covenant Payment"). During the
period Covenant Payments are made, Executive and/or his dependents will
be entitled to participate in CCB's medical plans at his expense as
though he were an employee of CCB.
(c) WELFARE BENEFIT PLANS. During the Employment Period, Executive
and/or Executive's family, as the case may be, shall be eligible for
participation in and shall receive all benefits under welfare benefit
plans, practices, policies and programs provided by CCB and its affiliated
companies (including, without limitation, medical, prescription, dental,
disability, employee life, group life, accidental death and travel accident
insurance plans and programs) to the extent applicable generally to senior
executive officers of CCB and its affiliated companies, with full credit
given for Executive's total accumulated years of service at American
Federal for purposes of determining vesting and eligibility (other than
under CCB's retiree medical plan).
(d) EXPENSES. During the Employment Period, Executive shall be
entitled to receive prompt reimbursement for all reasonable expenses
incurred by Executive in accordance with the policies, practices and
procedures of CCB and its affiliated companies to the extent applicable
generally to other senior executive officers of CCB and its affiliated
companies.
(e) Fringe Benefits. During the Employment Period, Executive shall be
entitled to fringe benefits in accordance with the plans, practices,
programs and policies of CCB and its affiliated companies in effect for
senior executive officers of CCB and its affiliated companies.
6. TERMINATION OF EMPLOYMENT.
(a) DEATH OR DISABILITY. Executive's employment shall terminate
automatically upon Executive's death during the Employment Period. If CCB
determines in good faith that the Disability of Executive has occurred
during the Employment Period (pursuant to the definition of Disability set
forth below), it may give to Executive written notice in accordance with
Section 13(g) of this Agreement of its intention to terminate Executive's
employment. In such event, Executive's employment shall terminate effective
on the 60th day after receipt of such written notice by Executive (the
"Disability Effective Date"), provided that, within the 60 days after such
receipt, Executive shall not have returned to full-time performance of
Executive's duties for a period of at least 30 days. For purposes of this
Agreement, "Disability" shall mean the absence of Executive from
Executive's duties with CCB on a full-time basis for 180 consecutive days
as
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a result of incapacity due to mental or physical illness which is
determined to be total and permanent by a physician selected by CCB or its
insurers and acceptable to Executive or Executive's legal representative,
which acceptance shall not be unreasonably withheld.
(b) CAUSE. CCB may terminate Executive's employment during the
Employment Period for Cause. For purposes of this Agreement, "Cause" shall
mean:
(i) the willful and continued failure of Executive to perform
Executive's duties with CCB or one of its affiliates (other than any
such failure resulting from incapacity due to physical or mental
illness), after a written demand for performance is delivered to
Executive by the Board or the Chief Executive Officer of CCB which
specifically identifies the manner in which the Board or Chief Executive
Officer believes that Executive has not performed Executive's duties;
(ii) Executive's personal dishonesty, willful misconduct, or breach
of a fiduciary duty from which he derives a personal profit;
(iii) Executive's willful violation of any law, rule or regulation
(other than traffic violations or similar offenses) or final cease and
desist order; or
(iv) Executive's willful breach of any material term or condition
of this Agreement.
For purposes of this provision, no act or failure to act, on the part of
Executive, shall be considered "willful" or a breach of fiduciary duty
unless it is done, or omitted to be done, by Executive in bad faith or
without reasonable belief that Executive's action or omission was in the
best interests of CCB. Any act, or failure to act, based upon authority
given pursuant to a resolution duly adopted by the Board or upon the
instructions of the Chief Executive Officer of CCB or based upon the advice
of counsel for CCB after consultation with the Chief Executive Officer
about such advice shall be conclusively presumed to be done, or omitted to
be done, by Executive in good faith and in the best interests of CCB. The
cessation of employment of Executive shall not be deemed to be for Cause
unless and until there shall have been delivered to Executive a copy of a
resolution duly adopted by the affirmative vote of not less than
three-quarters of the entire membership of the Board at a meeting of the
Board called and held for such purpose (after reasonable notice is provided
to Executive and Executive is given an opportunity, together with counsel,
to be heard before the Board), finding that, in the good faith opinion of
the Board, Executive is guilty of the conduct described in subparagraph
(i), (ii), (iii) or (iv) above, and specifying the particulars thereof in
detail. For purposes of this Section 6(b), any such finding by
three-quarters of the Board shall be conclusive.
(c) GOOD REASON. Executive's employment may be terminated by Executive
for Good Reason. For purposes of this Agreement, "Good Reason" shall mean:
(i) the assignment to Executive of any duties materially
inconsistent with Executive's position (including status, offices,
titles and reporting requirements), authority, duties or
responsibilities as contemplated by Section 2(a) of this Agreement, or
any other action by CCB which results in a material diminution in such
position, authority, duties or responsibilities, excluding for this
purpose an isolated, insubstantial and inadvertent action not taken in
bad faith and which is remedied by CCB promptly after receipt of notice
thereof given by Executive;
(ii) any failure by CCB to comply with any of the provisions of
Section 5 of this Agreement, other than an isolated, insubstantial and
inadvertent failure not occurring in bad faith and which is remedied by
CCB promptly after receipt of written notice thereof given by Executive;
(iii) any relocation, to which Executive has not agreed, to an
office of CCB or the Bank more than 35 miles (by most direct highway
route) from the location of his office as of the Effective Date or any
increase in Executive's required business travel, to which Executive has
not agreed, amounting to a constructive relocation; provided, however,
that Executive agrees that travel reasonably required in the ordinary
course of business to CCB's headquarters in Durham, North Carolina, or
between CCB's or its subsidiaries' banking offices in South Carolina
will not constitute a constructive relocation.
(iv) any purported termination by CCB of Executive's employment
otherwise than as expressly permitted by this Agreement; or
(v) any failure by CCB to comply with and satisfy Section 12(b) of
this Agreement; or
(vi) beginning January 1, 1998, any reason or no reason.
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For purposes of this Section 6(c), any good faith determination of "Good
Reason" made by Executive shall be conclusive.
(d) NOTICE OF TERMINATION. Any termination by CCB for Cause, or by
Executive for Good Reason, shall be communicated by Notice of Termination
to the other party hereto given in accordance with Section 13(g) of this
Agreement. For purposes of this Agreement, a "Notice of Termination" means
a written notice which (i) indicates the specific termination provision in
this Agreement relied upon, (ii) to the extent applicable, sets forth in
reasonable detail the facts and circumstances claimed to provide a basis
for termination of Executive's employment under the provision so indicated
and (iii) if the Date of Termination (as defined below) is other than the
date of receipt of such notice, specifies the termination date (which date
shall be not more than 30 days after the giving of such notice). The
failure by Executive or CCB to set forth in the Notice of Termination any
fact or circumstance which contributes to a showing of Good Reason or Cause
shall not waive any right of Executive or CCB, respectively, hereunder or
preclude Executive or CCB, respectively, from asserting such fact or
circumstance in enforcing Executive's or CCB's rights hereunder.
(e) Date of Termination. "Date of Termination" means (i) if
Executive's employment is terminated by CCB for Cause, or by Executive for
Good Reason, the date of receipt of the Notice of Termination or any later
date specified therein, as the case may be, (ii) if Executive's employment
is terminated by CCB other than for Cause or Disability, the Date of
Termination shall be the date on which CCB notifies Executive of such
termination, and (iii) if Executive's employment is terminated by reason of
death or Disability, the Date of Termination shall be the date of death of
Executive or the Disability Effective Date, as the case may be.
7. OBLIGATIONS OF CCB UPON TERMINATION.
(a) GOOD REASON; OTHER THAN FOR CAUSE, DEATH OR DISABILITY. If, during
the Employment Period, CCB shall terminate Executive's employment other
than for Cause, death or Disability, or Executive shall terminate
employment for Good Reason, then in consideration of Executive's services
rendered prior to such termination and as reasonable compensation for his
compliance with the restrictive covenants set forth in Section 11 of this
Agreement:
(i) CCB shall pay to Executive, in a lump sum in cash within 30
days after the Date of Termination, the aggregate of the following
amounts:
A. the sum of (1) Executive's Base Salary through the Date of
Termination to the extent not theretofore paid, (2) the product of (x)
Executive's cash incentive bonus for the last completed fiscal year
("Most Recent Annual Bonus"), and (y) a fraction, the numerator of
which is the number of days in the current fiscal year through the
Date of Termination, and the denominator of which is 365, and (3) any
compensation previously deferred by Executive (together with any
accrued interest or earnings thereon) and any accrued vacation pay, in
each case to the extent not theretofore paid (the sum of the amounts
described in clauses (1), (2), and (3) shall be hereinafter referred
to as the "Accrued Obligations"); and
B. the amount equal to the product of (1) the number of days
remaining after the Date of Termination until January 1, 1998 (the
"Remaining Employment Period"), and (2) Executive's Base Salary
divided by 365; and
C. the amount equal to the product of (1) the number of days in
the Remaining Employment Period, and (2) Executive's Most Recent
Annual Bonus divided by 365; and
D. any remaining installments of the Signing Bonus; and
E. an amount equal to the excess of (a) the actuarial equivalent
of the benefit under CCB's qualified defined benefit retirement plan
(the "Retirement Plan") (utilizing actuarial assumptions no less
favorable to Executive than those in effect under CCB's Retirement
Plan on the Date of Termination), and any excess or supplemental
retirement plans in which Executive participates (together, the
"SERP") which Executive would receive if Executive's employment
continued throughout the Remaining Employment Period, assuming for
this purpose that all accrued benefits are fully vested, and, assuming
that Executive's compensation in each remaining year of the Employment
Period is the Base Salary plus the Most Recent Annual Bonus, over (b)
the actuarial equivalent of Executive's actual benefit (paid or
payable), if any, under the Retirement Plan and the SERP as of the
Date of Termination;
(ii) CCB shall pay to Executive the Covenant Payment as provided in
Section 5(b) (iv) of this Agreement;
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(iii) for the Remaining Employment Period, or such longer period as
may be provided by the terms of the appropriate plan, program, practice
or policy, CCB shall continue benefits to Executive and/or Executive's
family at least equal to those which would have been provided to them in
accordance with the plans, programs, practices and policies described in
Section 5(c) of this Agreement if Executive's employment had not been
terminated, provided, however, that if Executive becomes re-employed
with another employer and is eligible to receive medical or other
welfare benefits under another employer provided plan, the medical and
other welfare benefits described herein shall be secondary to those
provided under such other plan during such applicable period of
eligibility. For purposes of determining eligibility and
years-of-service credit (but not the time of commencement of benefits)
of Executive for retiree benefits pursuant to such plans, practices,
programs and policies, Executive shall be considered to have remained
employed throughout the Remaining Employment Period and to have retired
on the last day of such period;
(iv) to the extent not theretofore paid or provided, CCB shall
timely pay or provide to Executive any other amounts or benefits
required to be paid or provided or which Executive is eligible to
receive under any plan, program, policy or practice or contract or
agreement of CCB and its affiliated companies (such other amounts and
benefits shall be hereinafter referred to as the "Other Benefits"); and
(v) notwithstanding any provision of this Agreement to the
contrary, Executive shall forfeit his right to receive, or, to the
extent such amounts have previously been paid to Executive, shall repay
in full to CCB with interest at 8% per annum within thirty (30) days of
a final determination of Executive's liability therefor as set forth
below, the amount described in Sections 7(a)(i)(B) and (C) and Section
7(a) (ii) of this Agreement if at any time during the period Covenant
Payments are made (the "Restricted Period") he violates the restrictive
covenants set forth in Section 11 of this Agreement. Any determination
of whether Executive has violated such covenants shall be made by
arbitration in Greenville, South Carolina under the Rules of Commercial
Arbitration (the "Rules") of the American Arbitration Association, which
Rules are deemed to be incorporated by reference herein; provided,
however, that either party may seek equitable remedies in court.
(b) DEATH. If Executive's employment is terminated by reason of
Executive's death during the Employment Period, this Agreement shall
terminate without further obligations to Executive's legal representatives
under this Agreement, other than for payment of Accrued Obligations and the
timely payment or provision of Other Benefits. Accrued Obligations shall be
paid to Executive's estate or beneficiary, as applicable, in a lump sum in
cash within 30 days of the Date of Termination. With respect to the
provision of Other Benefits, the term Other Benefits as utilized in this
Section 7(b) shall include, without limitation, and Executive's estate
and/or beneficiaries shall be entitled to receive, (i) benefits under such
plans, programs, practices and policies relating to death benefits, if any,
as applicable generally to senior executive officers of CCB and its
affiliated companies and their beneficiaries, and on the same basis as such
senior executive officers and their beneficiaries, with full credit given
for Executive's total accumulated years of service at American Federal for
purposes of determining vesting and eligibility, and (ii) any remaining
installments of the Signing Bonus.
(c) DISABILITY. If Executive's employment is terminated by reason of
Executive's Disability during the Employment Period, this Agreement shall
terminate without further obligations to Executive, other than for payment
of Accrued Obligations and the timely payment or provision of Other
Benefits. Accrued Obligations shall be paid to Executive in a lump sum in
cash within 30 days of the Date of Termination. With respect to the
provision of Other Benefits, the term Other Benefits as utilized in this
Section 7(c) shall include, without limitation, and Executive shall be
entitled after the Disability Effective Date to receive, (i) disability and
other benefits under such plans, programs, practices and policies relating
to disability, if any, as applicable generally to senior executive officers
of CCB and its affiliated companies and their families, and on the same
basis as such senior executive officers and their families, with full
credit given for Executive's total accumulated years of service at American
Federal for purposes of determining vesting and eligibility, and (ii) any
remaining installments of the Signing Bonus.
(d) CAUSE; OTHER THAN FOR GOOD REASON. If Executive's employment shall
be terminated for Cause during the Employment Period, this Agreement shall
terminate without further obligations to Executive other than the
obligation to pay to Executive (x) his Base Salary through the Date of
Termination, (y) the amount of any compensation previously deferred by
Executive, and (z) Other Benefits, in each case to the extent theretofore
unpaid. If Executive voluntarily terminates employment before January 1,
1998, excluding a termination for Good Reason, this Agreement shall
terminate without further obligations to Executive, other than for Accrued
Obligations and the timely payment or provision of Other Benefits. In such
case, all Accrued Obligations shall be paid to Executive in a lump sum in
cash within 30 days of
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the Date of Termination. With respect to the provision of Other Benefits,
unless the termination of Executive's Employment was for Cause as defined
in clause (ii) or (iii) of Section 6(b), the term Other Benefits as
utilized in this Section 7(d) shall include, without limitation, the
Signing Bonus.
8. MANDATORY REDUCTION OF PAYMENTS IN CERTAIN EVENTS.
(a) Anything in this Agreement to the contrary notwithstanding, in the
event it shall be determined that any payment or distribution by the
Company to or for the benefit of the Executive (whether paid or payable or
distributed or distributable pursuant to the terms of this Agreement or
otherwise) (a "Payment") would be subject to the excise tax imposed by
Section 4999 of the Code (the "Excise Tax"), then, prior to the making of
any Payment to the Executive, a calculation shall be made comparing (i) the
net benefit to the Executive of the Payment after payment of the Excise
Tax, to (ii) the net benefit to the Executive if the Payment had been
limited to the extent necessary to avoid being subject to the Excise Tax.
If the amount calculated under (i) above is less than the amount calculated
under (ii) above, then the Payment shall be limited to the extent necessary
to avoid being subject to the Excise Tax.
(b) The determination of whether an Excise Tax would be imposed, the
amount of such Excise Tax, and the calculation of the amounts referred to
Section 8(a) (i) and (ii) above shall be made by the Company's regular
independent accounting firm at the expense of the Company or, at the
election and expense of the Executive, another nationally recognized
independent accounting firm (the "Accounting Firm") which shall provide
detailed supporting calculations. Any determination by the Accounting Firm
shall be binding upon the Company and the Executive. As a result of the
uncertainty in the application of Section 4999 of the Code at the time of
the initial determination by the Accounting Firm hereunder, it is possible
that Payments which the Executive was entitled to, but did not receive
pursuant to Section 8(a), could have been made without the imposition of
the Excise Tax ("Underpayment"). In such event, the Accounting Firm shall
determine the amount of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Company to or for the benefit of
the Executive.
9. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall prevent or
limit Executive's continuing or future participation in any plan, program,
policy or practice provided by CCB or any of its affiliated companies and for
which Executive may qualify, nor, subject to Section 13(e), shall anything
herein limit or otherwise affect such rights as Executive may have under any
contract or agreement with CCB or any of its affiliated companies. Amounts which
are vested benefits or which Executive is otherwise entitled to receive under
any plan, policy, practice or program of or any contract or agreement with CCB
or any of its affiliated companies at or subsequent to the Date of Termination
shall be payable in accordance with such plan, policy, practice or program or
contract or agreement except as explicitly modified by this Agreement.
10. FULL SETTLEMENT. CCB's obligation to make the payments provided for in
this Agreement and otherwise to perform its obligations hereunder shall not be
affected by any set-off, counterclaim, recoupment, defense or other claim, right
or action which CCB may have against Executive or others. In no event shall
Executive be obligated to seek other employment or take any other action by way
of mitigation of the amounts payable to Executive under any of the provisions of
this Agreement and such amounts shall not be reduced whether or not Executive
obtains other employment. CCB agrees to pay as incurred, to the full extent
permitted by law, all legal fees and expenses which Executive may reasonably
incur as a result of any contest (to the extent that Executive is successful, in
whole or in part, in such contest) by CCB, Executive or others of the validity
or enforceability of, or liability under, any provision of this Agreement or any
guarantee of performance thereof (including as a result of any contest by
Executive about the amount of any payment pursuant to this Agreement), plus in
each case interest on any delayed payment at the applicable federal rate
provided for in Section 7872(f)(2)(A) of the Internal Revenue Code of 1986, as
amended (the "Code").
11. COVENANTS.
(a) COVENANT NOT TO COMPETE. During the Restricted Period (as defined
in Section 7(a) (iv) of this Agreement), Executive shall not, within the
States of South Carolina and North Carolina, directly or indirectly, in any
capacity, render his services, or engage or have a financial interest in,
any business that shall be competitive with any of those business
activities in which CCB or its subsidiaries are engaged as of the date of
Executive's termination of employment, which business activities include
the provision of banking and related financial services (collectively, the
"Business"); provided, however, that Executive's beneficial ownership of 3%
or less of any class of securities listed for trading on a national
securities exchange or traded on the Nasdaq National Market or in the
over-the-counter market and reported by Nasdaq shall not constitute a
"financial interest" in violation of this covenant. If a court determines
that the foregoing restrictions are too broad or otherwise unreasonable
under applicable law, including with respect to time or
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territory, the court is hereby requested and authorized by the parties
hereto to revise the foregoing restriction to include the maximum
restrictions allowable under applicable law.
(b) COVENANT NOT TO SOLICIT CUSTOMERS. During the Restricted Period,
Executive shall not, directly or indirectly, individually or on behalf of
any other person, partnership, limited liability company, corporation or
other entity ("Person") (other than CCB or an affiliate), solicit the
provision of services included in the Business to any Person who is or was
(i) a customer of CCB or any of its affiliates for whom CCB or any of its
affiliates provided services included in the Business during any part of
the 12-month period immediately prior to the date of Executive's
termination as an employee of CCB or the Bank, or (ii) a potential customer
of CCB or any of its affiliates to whom CCB or any of its affiliates
solicited the provision of services included in the Business during any
part of the 12-month period immediately prior to the date of Executive's
termination as an employee of CCB or the Bank.
(c) COVENANT NOT TO SOLICIT EMPLOYEES. During the Restricted Period,
Executive shall not, directly or indirectly, individually or on behalf of
any other Person, solicit, recruit or entice, directly or indirectly, any
employee of CCB or its affiliates to leave the employment of CCB or such
affiliate to work with Executive or with any Person with which Executive is
or becomes affiliated or associated.
(d) REASONABLENESS OF SCOPE AND DURATION. The parties hereto agree
that the covenants and agreements contained in this Section 11 are
reasonable in their scope and duration, and they intend that they be
enforced, and no party shall raise any issue of the reasonableness of the
scope or duration of any such covenants in any proceeding to enforce any
such covenants.
(e) ENFORCEABILITY. Executive agrees that monetary damages would not
be a sufficient remedy for any breach or threatened breach of the
provisions of this Section 11, and that in addition to all other rights and
remedies available to CCB, CCB shall be entitled to specific performance
and injunctive or other equitable relief as a remedy for any such breach or
threatened breach.
(f) SEPARATE COVENANTS AND SEVERABILITY. The covenants and agreements
contained in this Section 11 shall be construed as separate and independent
covenants. Should any part or provision of any such covenant or agreement
be held invalid, void or unenforceable in any court of competent
jurisdiction, no other part or provision of this Agreement shall be
rendered invalid, void or unenforceable as a result. If any portion of the
foregoing provisions is found to be invalid or unenforceable by a court of
competent jurisdiction unless modified, it is the intent of the parties
that the otherwise invalid or unreasonable term shall be reformed, or a new
enforceable term provided, so as to most closely effectuate the provisions
as is validly possible.
12. ASSIGNMENT AND SUCCESSORS.
(a) EXECUTIVE. This Agreement is personal to Executive and without the
prior written consent of CCB shall not be assignable by Executive otherwise
than by will or the laws of descent and distribution. This Agreement shall
inure to the benefit of and be enforceable by Executive's legal
representatives.
(b) CCB. This Agreement shall inure to the benefit of and be binding
upon CCB and its successors and assigns. CCB will require any successor
(whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of CCB
to assume expressly and agree to perform this Agreement in the same manner
and to the same extent that CCB would be required to perform it if no such
succession had taken place. As used in this Agreement, "CCB" shall mean CCB
as hereinbefore defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by operation
of law or otherwise.
13. MISCELLANEOUS.
(a) NO MITIGATION. Executive shall not be required to mitigate the
amount of any payment provided for in this Agreement by seeking other
employment or otherwise and no such payment shall be offset or reduced by
the amount of any compensation or benefits provided to Executive in any
subsequent employment.
(b) WAIVER. Failure of either party to insist, in one or more
instances, on performance by the other in strict accordance with the terms
and conditions of this Agreement shall not be deemed a waiver or
relinquishment of any right granted in this Agreement or of the future
performance of any such term or condition or of any other term or condition
of this Agreement, unless such waiver is contained in a writing signed by
the party making the waiver.
(c) SEVERABILITY. If any provision or covenant, or any part thereof,
of this Agreement should be held by any court to be invalid, illegal or
unenforceable, either in whole or in part, such invalidity, illegality or
unenforceability shall not
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affect the validity, legality or enforceability of the remaining provisions
or covenants, or any part thereof, of this Agreement, all of which shall
remain in full force and effect.
(d) OTHER AGENTS. Nothing in this Agreement is to be interpreted as
limiting CCB from employing other personnel on such terms and conditions as
may be satisfactory to it.
(e) ENTIRE AGREEMENT. On the date hereof, Executive and American
Federal have entered into a separate Employment Agreement which relates
specifically to Executive's employment as the Executive Vice President and
Chief Operating Officer of American Federal and contains certain bank
regulatory limitations imposed by the Office of Thrift Supervision and the
Federal Deposit Insurance Corporation (the "AFB Agreement"). Except as
provided herein or in the AFB Agreement, this Agreement contains the entire
agreement between CCB and Executive with respect to the subject matter
hereof and that it supersedes and invalidates any previous agreements or
contracts including employment agreements (other than the AFB Agreement),
including, without limitation, that certain Amended and Restated Employment
Agreement, dated September 1, 1993, as further amended and restated as of
March 20, 1997, by and between American Federal and Executive. No
representations, inducements, promises or agreements, oral or otherwise,
which are not embodied herein or in the AFB Agreement, shall be of any
force or effect.
(f) GOVERNING LAW. Except to the extent preempted by federal law, the
laws of the State of North Carolina shall govern this Agreement in all
respects, whether as to its validity, construction, capacity, performance
or otherwise.
(g) NOTICES. All notices, requests, demands and other communications
required or permitted hereunder shall be in writing and shall be deemed to
have been duly given if delivered or seven days after mailing if mailed,
first class, certified mail, postage prepaid:
To CCB: CCB Financial Corporation
111 Corcoran Street
Durham, North Carolina 27702-0931
Facsimile No. (919) 683-6881
Attention: Chief Executive Officer
To Executive: Michael A. Trimble
300 East McBee Avenue
Greenville, South Carolina 29601
Facsimile No. (864) 255-7504
Any party may change the address to which notices, requests, demands and
other communications shall be delivered or mailed by giving notice thereof
to the other party in the same manner provided herein.
(h) AMENDMENTS AND MODIFICATIONS. This Agreement may be amended or
modified only by a writing signed by both parties hereto, which makes
specific reference to this Agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Employment Agreement as of the date first above written.
CCB FINANCIAL CORPORATION
By:
Title:
TRIMBLE:
MICHAEL A. TRIMBLE
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EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
CCB Financial Corporation
We consent to the use of our report dated January 21, 1997 included in CCB
Financial Corporation1s Form 10-K for the year ended December 31, 1996
incorporated herein by reference and to the reference to our firm under the
heading "Experts" in the Proxy Statement/Prospectus for the acquisition of
American Federal Bank, FSB.
Our report dated January 21, 1997 refers to the fact that on January 1,
1994, CCB Financial Corporation adopted the provisions of Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in Debt and
Equity Securities."
KPMG PEAT MARWICK LLP
Raleigh, North Carolina
June 4, 1997
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EXHIBIT 23.3
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
American Federal Bank, FSB
We consent to the use of our report dated January 17, 1997 included in
American Federal Bank, FSB's Annual Report for the year ended December 31, 1996,
incorporated herein by reference and to the reference to our firm under the
heading "Experts" in the Prospectus/Joint Proxy Statement for the merger with
CCB Financial Corporation.
KPMG PEAT MARWICK LLP
Greenville, South Carolina
June 4, 1997
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EXHIBIT 23.4
TAX ADVISORS' CONSENT
Board of Directors
American Federal Bank, FSB
Board of Directors
CCB Financial Corporation
We consent to the inclusion of our tax opinion dated June 4, 1997,
regarding the federal and South Carolina income tax consequences of the Merger,
in Exhibit No. 8 of Pre-Effective Amendment No. 1 to the Form S-4 Registration
Statement to be filed with the Securities and Exchange Commission and to the
quotation or summarization of our tax opinion and the references to our firm
under the headings "SUMMARY -- Material Income Tax Consequences" and "THE
MERGER -- Material Income Tax Consequences" in the Prospectus/Proxy Statement.
KPMG PEAT MARWICK LLP
Raleigh, North Carolina
June 4, 1997
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CONSENT OF FINANCIAL ADVISOR
EXHIBIT 23.5
June 6, 1997
CCB Financial Corporation
111 Corcoran Street
Post Office Box 931
Durham, North Carolina 27702-0931
DEAR SIRS:
We hereby consent to the use of our opinion letter to the Board of
Directors of CCB Financial Corporation, included as Appendix D to the
Prospectus/Joint Proxy Statement which forms a part of the Registration
Statement on Form S-4 relating to the proposed merger of American Federal
Savings Bank, FSB with CCB Financial Corporation, and to the references to such
opinion in such Prospectus/Joint Proxy Statement under the captions
"SUMMARY -- The Merger," "THE MERGER -- Background of the Merger;
Recommendations and Reasons," and " -- Opinion of CCBF's Financial Advisor." In
giving such consent, we do not admit that we come within the category of persons
whose consent is required under Section 7 of the Securities Act of 1933, as
amended, or the rules and regulations of the Securities and Exchange Commission
thereunder, nor do we thereby admit that we are experts with respect to any part
of such Registration Statement within the meaning of the term "experts" as used
in the Securities Act of 1933, as amended, or the rules and regulations of the
Securities and Exchange Commission thereunder.
Very truly yours,
MERRILL LYNCH, PIERCE,
FENNER & SMITH
INCORPORATED
By: /s/ JOHN P. ESPOSITO
Name: John P. Esposito
Title: Vice President
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EXHIBIT 23.6
CONSENT OF FINANCIAL ADVISOR
We hereby consent to the use in this Registration Statement on Form S-4 of
our letter to the Board of Directors of American Federal Bank, F.S.B., included
as Appendix B to the Joint Proxy Statement-Prospectus that is a part of this
Registration Statement, and to the references to such letters and to our firm in
such Joint Proxy Statement-Prospectus. In giving such consent we do not thereby
admit that we come within the category of persons whose consent is required
under Section 7 of the Securities Act of 1933 or the rules and regulations of
the Securities and Exchange Commission thereunder.
WHEAT, FIRST SECURITIES, INC.
Richmond, Virginia
Date: June 6, 1996
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EXHIBIT 23.7
CONSENT OF
KEEFE, BRUYETTE & WOODS, INC.
We hereby consent to the use in this Registration Statement on Form S-4 of
our letter to the Board of Directors of American Federal Bank, FSB included as
Annex C to the Prospectus/Joint Proxy Statement forming a part of this
Registration Statement on Form S-4 and to all references to our firm in such
Prospectus/Joint Proxy Statement. In giving such consent, we do not hereby admit
that we come within the category of persons whose consent is required under
Section 7 of the Securities Act of 1933 or the rules and regulations of the
Securities and Exchange Commission thereunder, nor do we admit that we are
experts with respect to any part of such Registration Statement within the
meaning of the term "experts" as used in the Securities Act or the rules and
regulations of the Securities Act or the rules and regulations of the Securities
and Exchange Commission thereunder.
KEEFE, BRUYETTE & WOODS, INC.
By: /s/ EMMETT J. DALY
Emmett J. Daly
Senior Vice President
Dated: June 6, 1997
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EXHIBIT 99.1
AMERICAN FEDERAL BANK, FSB
300 East McBee Avenue
Greenville, South Carolina 29601
REVOCABLE APPOINTMENT OF PROXY
SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints Deborah A. Brady and Kent S. Dill (the
"Proxies"), and each 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 American Federal Bank, FSB ("American Federal") held of record
by the undersigned on June 10, 1997 at the Special Meeting of Shareholders of
American Federal (the "Special Meeting") to be held in the Board Room of the
Greater Greenville Chamber of Commerce Building located at 24 Cleveland Street,
Greenville, South Carolina, at 11:00 o'clock, a.m., E.D.S.T., on Thursday, July
31, 1997, and at any 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 Agreement and Plan of
Reorganization, dated as of February 17, 1997, between American Federal
and CCB Financial Corporation ("CCBF") and the related Plan of Merger and
Combination, and to approve the transactions described therein, including
without limitation the merger of American Federal Interim Savings Bank,
FSB, a wholly-owned subsidiary of CCBF, into American Federal, with the
result that all outstanding shares of American Federal's $1.00 par value
common stock will be converted into shares of CCBF's $5.00 par value
common stock and American Federal will become a wholly-owned subsidiary
of CCBF.
M FOR M AGAINST M ABSTAIN
2. OTHER BUSINESS. On such other matters as properly come before the 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.
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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 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 AMERICAN FEDERAL A WRITTEN INSTRUMENT REVOKING IT OR A DULY
EXECUTED APPOINTMENT OF PROXY BEARING A LATER DATE OR BY ATTENDING THE 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 Special Meeting dated June , 1997, and the accompanying
Prospectus/Joint Proxy Statement of American Federal and CCBF.
Dated: , 1997
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 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
SPECIAL MEETING IF YOU SO DESIRE.
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EXHIBIT 99.2
CCB FINANCIAL CORPORATION
111 Corcoran Street
Post Office Box 931
Durham, North Carolina 27702
REVOCABLE APPOINTMENT OF PROXY
SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints W. Harold Parker, Jr., Leo P. Pylypec and
Manuel L. Rojas (the "Proxies"), and each 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 CCB Financial Corporation ("CCBF") held
of record by the undersigned on June 10, 1997 at the Special Meeting of
Shareholders of CCBF (the "Special Meeting") to be held at the Durham Omni
Hotel, 201 Foster Street, Durham, North Carolina at 11:00 o'clock, a.m.,
E.D.S.T., on Thursday, July 31, 1997, and at any 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 Agreement and Plan of
Reorganization, dated as of February 17, 1997, between CCBF and American
Federal Bank, FSB ("AFB") and the related Plan of Merger and Combination
(collectively, the "Merger Agreement"), and to approve the transactions
described therein, including without limitation the issuance of up to a
maximum of 5,102,030 shares of CCBF's $5.00 par value common stock (each
with an attached preferred stock purchase right) in exchange for the
outstanding shares of AFB's common stock, with the result that AFB will
become a wholly-owned subsidiary of CCBF.
M FOR M AGAINST M ABSTAIN
2. OTHER BUSINESS. On such other matters as properly come before the 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.
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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 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 CCBF A WRITTEN INSTRUMENT REVOKING IT OR A DULY EXECUTED
APPOINTMENT OF PROXY BEARING A LATER DATE OR BY ATTENDING THE 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 Special Meeting dated June , 1997, and the accompanying
Prospectus/Joint Proxy Statement of CCBF and AFB.
Dated: , 1997
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 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
SPECIAL MEETING IF YOU SO DESIRE.
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