UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the period ended June 30, 1999
Commission File Number: 0-12358
CCB FINANCIAL CORPORATION
(Exact name of issuer as specified in charter)
North Carolina 56-1347849
(State or other jurisdiction (I.R.S. Employer
of incorporation) Identification No.)
111 Corcoran Street, Post Office Box 931, Durham, NC 27702
(Address of principal executive offices)
Registrant's telephone number, including area code (919) 683-7777
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Yes [ X ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's clas
ses of
common stock, as of the latest practicable date.
Common Stock, $5 Par value 39,699,268
(Class of Stock) (Shares outstanding as
of August 9, 1999)
CCB FINANCIAL CORPORATION
FORM 10-Q
INDEX
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets
June 30, 1999, December 31, 1998 and June 30, 1998 3
Consolidated Statements of Income
Three and Six Months Ended June 30, 1999 and 1998 4
Consolidated Statements of Shareholders' Equity and
Comprehensive Income
Six Months Ended June 30, 1999 and 1998 5
Consolidated Statements of Cash Flows
Six Months Ended June 30, 1999 and 1998 6
Notes to Consolidated Financial Statements
Six Months Ended June 30, 1999 and 1998 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 11
Item 3. Quantitative and Qualitative Disclosures
About Market Risk 21
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K 22
Signatures 23
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
CCB Financial Corporation and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(Unaudited) (Unaudited)
June December June
30, 31, 30,
1999 1998 1998
--------- -------- -------
(In Thousands Except Share Data)
Assets:
Cash and due from banks $ 235,174 250,922 226,419
Time deposits in other banks 22,218 59,529 55,699
Federal funds sold and other
short-term investments 220,194 430,000 307,000
Investment securities:
Available for sale (amortized
costs of $1,524,962,
$1,262,476 and $1,297,411) 1,524,871 1,284,198 1,315,158
Held to maturity (market values
of $77,691, $85,277 and $85,115) 74,795 80,189 80,562
Loans and lease financing (notes
2 and 4) 5,492,776 5,487,337 5,217,204
Less reserve for loan and
lease losses (notes 2 and 3) 72,813 73,182 69,645
---------- --------- ----------
Net loans and lease financing 5,419,963 5,414,155 5,147,559
Premises and equipment 94,607 92,770 87,668
Goodwill 24,432 26,241 27,945
Other assets (note 4) 129,440 102,349 102,324
---------- --------- ----------
Total assets $ 7,745,694 7,740,353 7,350,334
=========== ========= ==========
Liabilities:
Deposits:
Demand (noninterest-bearing) $ 882,155 854,938 823,645
Savings and NOW accounts 799,014 863,920 754,044
Money market accounts 1,868,415 1,784,091 1,724,431
Jumbo time deposits 364,717 452,808 418,954
Consumer time deposits 2,589,711 2,504,007 2,447,245
---------- --------- ----------
Total deposits 6,504,012 6,459,764 6,168,319
Short-term borrowed funds 263,562 288,256 256,215
Long-term debt 166,538 216,695 176,372
Other liabilities 105,325 87,744 89,154
---------- --------- ----------
Total liabilities 7,039,437 7,052,459 6,690,060
---------- --------- ----------
Shareholders' equity (note 5):
Serial preferred stock. Authorized
10,000,000 shares; none issued -- -- --
Common stock of $5 par value.
Authorized 100,000,000 shares;
39,798,903, 40,345,214
and 40,589,696 shares issued 198,994 201,726 202,948
Additional paid-in capital 43,253 73,771 88,145
Retained earnings 464,091 399,066 358,220
Accumulated other comprehensive
income (loss) (81) 13,331 10,961
---------- --------- ----------
Total shareholders' equity 706,257 687,894 660,274
---------- --------- ----------
Total liabilities and
shareholders' equity $ 7,745,694 7,740,353 7,350,334
========== ========= ==========
See accompanying notes to consolidated financial statements.
CCB Financial Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months
Ended June 30,
1999 1998
----- -----
(In Thousands
Except Per Share Data)
Interest income:
Interest and fees on loans
and lease financing $ 118,496 117,097
Interest and dividends on
investment securities:
U.S. Treasury 5,766 7,206
U.S. Government agencies
and corporations 15,362 13,440
States and political subdivisions
(primarily tax-exempt) 1,076 1,187
Equity and other securities 776 783
Interest on time deposits in other banks 401 401
Interest on federal funds sold
and other short-term investments 3,919 4,452
------- -------
Total interest income 145,796 144,566
------- -------
Interest expense:
Deposits 56,269 58,526
Short-term borrowed funds 2,683 3,021
Long-term debt 3,119 2,687
------- -------
Total interest expense 62,071 64,234
------- -------
Net interest income 83,725 80,332
Provision for loan and lease ------- -------
losses (note 3) 5,676 3,646
Net interest income after provision ------- -------
for loan and lease losses 78,049 76,686
------- -------
Other income:
Service charges on deposit accounts 15,289 13,745
Trust and custodian fees 3,163 2,792
Sales and insurance commissions 3,430 3,059
Merchant discount 3,240 2,135
Other service charges and fees 1,587 1,225
Secondary marketing and servicing - mortgages 2,893 4,303
Other operating income 2,541 1,884
Gain on sale of credit card receivables (note 2) 32,837 -
Investment securities gains 408 361
Investment securities losses - -
------- -------
Total other income 65,388 29,504
------- -------
Other expenses:
Personnel expense 34,408 32,111
Net occupancy expense 4,298 3,899
Equipment expense 4,090 3,379
Other operating expense 18,800 19,529
------ ------
Total other expenses 61,596 58,918
------- -------
Income before income taxes 81,841 47,272
Income taxes 29,756 17,296
------- -------
Net income $ 52,085 29,976
======= ========
Earnings per common share (note 5):
Basic $ 1.30 .73
Diluted 1.29 .72
Weighted average shares
outstanding (note 5):
Basic 39,953 40,952
Diluted 40,349 41,498
CCB Financial Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME, continued
(Unaudited)
Six Months Ended
June 30,
1999 1998
------ ------
(In Thousands
Except Per
Share Data)
Interest income:
Interest and fees on loans
and lease financing 234,167 232,208
Interest and dividends on
investment securities:
U.S. Treasury 11,759 14,633
U.S. Government agencies
and corporations 28,813 27,403
States and political subdivisions
(primarily tax-exempt) 2,213 2,382
Equity and other securities 1,559 1,544
Interest on time deposits in other banks 905 805
Interest on federal funds sold
and other short-term investments 9,353 7,231
------- -------
Total interest income 288,769 286,206
------- -------
Interest expense:
Deposits 112,505 116,446
Short-term borrowed funds 5,232 6,070
Long-term debt 6,449 4,686
------- -------
Total interest expense 124,186 127,202
------- -------
Net interest income 164,583 159,004
Provision for loan and lease
losses (note 3) 7,487 6,786
Net interest income after provision ------- -------
for loan and lease losses 157,096 152,218
------- -------
Other income:
Service charges on deposit accounts 29,520 25,830
Trust and custodian fees 6,159 5,063
Sales and insurance commissions 6,172 5,574
Merchant discount 5,816 4,143
Other service charges and fees 3,093 2,455
Secondary marketing and servicing - mortgages 7,302 6,232
Other operating income 6,001 3,958
Gain on sale of credit card receivables (note 2) 32,837 -
Investment securities gains 532 1,010
Investment securities losses (3) (27)
------- -------
Total other income 97,429 54,238
------- -------
Other expenses:
Personnel expense 67,297 62,554
Net occupancy expense 8,391 7,646
Equipment expense 8,180 6,728
Other operating expense 36,950 36,082
------- -------
Total other expenses 120,818 113,010
------- -------
Income before income taxes 133,707 93,446
Income taxes 47,869 34,186
------- -------
Net income 85,838 59,260
======= ========
Earnings per common share (note 5):
Basic 2.14 1.43
Diluted 2.12 1.42
Weighted average shares
outstanding (note 5):
Basic 40,094 41,244
Diluted 40,501 41,805
See accompanying notes to consolidated financial statements.
CCB Financial Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
AND COMPREHENSIVE INCOME
Six Months Ended June 30, 1999 and 1998
(Unaudited)
<TABLE>
Accumulated
Other Total
Additional Compre- Management Share-
Common Paid-In Retained hensive Recognition holders'
Stock Capital Earnings Income Plans Equity
------- -------- -------- -------- ---------- --------
(In Thousands)
<C> <S> <S> <S> <S> <S> <S>
Balance December 31, 1997,
as originally reported $ 103,882 143,784 419,746 13,980 32 681,424
Common stock issued in 1998 in
two-for-one stock split 103,882 - (103,882) - - -
Balance December 31, 1997, ------- ------- ------- ------- ------- -------
as restated 207,764 143,784 315,864 13,980 32 681,424
Net income - - 59,260 - - 59,260
Other comprehensive income -
Unrealized losses on securit-
ies, net of deferred tax bene-
fit of $1,965 and reclassifi-
cation adjustment (note 1) - - - (3,019) - (3,019)
Total comprehensive income 56,241
Stock options exercised, net of
shares tendered 594 1,090 (297) - - 1,387
Tax benefit from stock options
exercised - 444 - - - 444
Transactions pursuant to
restricted stock (4) 36 2 - - 34
Shares repurchased and retired (5,404) (57,200) 2,702 - - (59,902)
Earned portion of management
recognition plans - - - - (32) (32)
Cash dividends ($.47 per share) - - (19,312) - - (19,312)
Other transactions, net (2) (9) 1 - - (10)
-------- -------- -------- -------- -------- --------
Balance June 30, 1998 $ 202,948 88,145 358,220 10,961 - 660,274
======== ======== ======== ======== ======== ========
Balance December 31, 1998 $ 201,726 73,771 399,066 13,331 - 687,894
Net income - - 85,838 - - 85,838
Other comprehensive income -
Unrealized losses on secur-
ities, net of deferred tax
benefit of $8,398 and reclass-
ification adjustment (note 1) - - - (13,412) - (13,412)
Total comprehensive income 72,426
Stock options exercised, net of
shares tendered 331 (266) - - - 65
Transactions pursuant to
restricted stock (1) (1) - - - (2)
Shares repurchased and retired (3,062) (30,249) - - - (33,311)
Cash dividends ($.52 per share) - - (20,813) - - (20,813)
Other transactions, net - (2) - - - (2)
------- ------- ------- ------- ------- -------
Balance June 30, 1999 $ 198,994 43,253 464,091 (81) - 706,257
======== ======== ======== ======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
CCB Financial Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended June 30, 1999 and 1998
(Unaudited)
1999 1998
----- -----
(In Thousands)
Operating activities:
Net income $ 85,838 59,260
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation, amortization and accretion, net 11,099 10,130
Provision for loan and lease losses 7,487 6,786
Net gain on sales of investment securities (529) (983)
Sale of mortgage loans 199,343 -
Sale of credit card receivables 184,179 -
Sales of loans held for sale 347,153 273,297
Origination of loans held for sale (388,172) (291,696)
Changes in:
Accrued interest receivable (2,132) 662
Accrued interest payable (787) (287)
Other assets (14,391) 19,879
Other liabilities 27,608 (5,296)
Other operating activities, net (5,684) (9,685)
---------- ----------
Net cash provided by operating activities 451,012 62,067
---------- ----------
Investing activities:
Proceeds from:
Maturities and issuer calls of investment securities
held to maturity 5,463 1,045
Sales of investment securities available for sale 5,148 31,399
Maturities and issuer calls of investment securities
available for sale 397,348 214,476
Purchases of:
Investment securities available for sale (667,943) (186,037)
Premises and equipment (8,023) (6,923)
Net originations of loans and leases receivable (361,594) (107,603)
Net cash paid in branch dispositions (12,200) -
---------- ----------
Net cash used by investing activities (641,801) (53,643)
---------- ----------
Financing activities:
Net increase in deposit accounts 56,836 183,722
Net decrease in short-term borrowed funds (24,694) (20,221)
Proceeds from issuance of long-term debt - 76,140
Repayments of long-term debt (50,157) (454)
Issuances of common stock from exercise of
stock options, net 65 1,387
Purchase and retirement of common stock (33,311) (59,902)
Other equity transactions, net (2) (10)
Cash dividends paid (20,813) (19,312)
---------- ----------
Net cash provided (used) by financing activities (72,076) 161,350
---------- ----------
Net increase (decrease) in cash and cash equivalents (262,865) 169,774
Cash and cash equivalents at beginning of year 740,451 419,344
---------- ----------
Cash and cash equivalents at end of period $ 477,586 589,118
========== ==========
Supplemental disclosures of cash flow information:
Interest paid during the period $ 124,973 127,488
========== ==========
Income taxes paid during the period $ 16,674 36,297
========== ==========
Supplemental disclosures of noncash investing and
financing activities:
Change in market value of securities available
for sale, net of deferred tax benefit of
$8,398 and $1,965, respectively $ (13,412) (3,019)
Transactions pursuant to restricted stock, net of
deferred tax expense of $484 in 1998 $ (2) 34
========== ==========
See accompanying notes to consolidated financial statements.
CCB Financial Corporation and Subsidiaries
Notes to Consolidated Financial Statements
Six Months Ended June 30, 1999 and 1998
(Unaudited)
(1) Consolidation and Presentation
The accompanying unaudited consolidated financial statements of CCB
Financial Corporation (the "Corporation") have been prepared in
accordance with the rules and regulations of the Securities and
Exchange Commission. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of
Management, the statements reflect all adjustments necessary for a
fair presentation of the financial position, results of operations and
cash flows of the Corporation on a consolidated basis, and all such
adjustments are of a normal recurring nature. These financial
statements and the notes thereto should be read in conjunction with
the Corporation's Annual Report on Form 10-K for the year ended
December 31, 1998. Operating results for the six month period ended
June 30, 1999 are not necessarily indicative of the results that may
be expected for the year ending December 31, 1999.
Certain amounts for 1998 have been reclassified to conform to the 1999
presentation. These reclassifications have no effect on shareholders'
equity or net income as previously reported.
Consolidation
The consolidated financial statements include the accounts and results
of operations of the Corporation and its wholly-owned subsidiaries,
Central Carolina Bank and Trust Company ("CCB"), American Federal
Bank, FSB ("AmFed") and Central Carolina Bank - Georgia (collectively
the "Subsidiary Banks"). The consolidated financial statements also
include the accounts and results of operations of the wholly-owned
subsidiaries of CCB (CCB Investment and Insurance Service Corporation;
Salem Trust Company; CCBDE, Inc.; Southland Associates, Inc. and
Corcoran Holdings, Inc. and its subsidiary, Watts Properties, Inc.)
and AmFed (American Service Corporation of S.C.; Mortgage North;
AMFEDDE, Inc.; Finance South, Inc. and McBee Holdings, Inc. and its
subsidiary, Greenville Participations, Inc.). All significant
intercompany accounts are eliminated in consolidation. The
Corporation operates as one business segment.
Earnings Per Share
Basic earnings per share ("EPS") excludes dilution and is computed by
dividing income available to common shareholders by the weighted
average number of common shares outstanding during each period.
Diluted EPS reflects the potential dilution that would have occurred
if securities or other contracts to issue common stock were exercised
or converted into common stock. Diluted EPS is computed by dividing
income available to common shareholders by the weighted average number
of common shares outstanding plus dilutive stock options (as computed
under the treasury stock method) assumed to have been exercised during
each period.
Comprehensive Income
Comprehensive income is the change in the Corporation's equity during
the period from transactions and other events and circumstances from
non-owner sources. Total comprehensive income is comprised of net
income and other comprehensive income.
CCB Financial Corporation and Subsidiaries
Notes to Consolidated Financial Statements
(1) Consolidation and Presentation - Continued
The Corporation's "other comprehensive income" for the six months
ended June 30, 1999 and 1998 and "accumulated other comprehensive
income" as of June 30, 1999 and 1998 are comprised solely of
unrealized gains and losses on certain investments in debt and equity
securities. Other comprehensive income for the six months ended June
30, 1999 and 1998 follows (in thousands):
1999 1998
----- -----
Unrealized holding losses arising
during period, net of taxes $ (13,095) (2,429)
Less reclassification adjustment for
realized gains, net of taxes 317 590
------- -------
Unrealized losses on securities, net
of taxes $ (13,412) (3,019)
======= =======
(2) Loans and Lease Financing
A summary of loans and lease financing at June 30, 1999 and 1998
follows (in thousands):
1999 1998
---- ----
Commercial, financial and agricultural $ 726,430 668,698
Real estate-construction 1,027,927 784,036
Real estate-mortgage 3,111,909 3,023,743
Instalment loans to individuals 511,814 492,012
Revolving credit 56,221 206,215
Lease financing 66,908 48,916
--------- ----------
Gross loans and lease financing 5,501,209 5,223,620
Less unearned income 8,433 6,416
--------- ---------
Total loans and lease financing $ 5,492,776 5,217,204
========== ==========
During the second quarter of 1999, the Subsidiary Banks sold
$151,342,000 of consumer credit card receivables to MBNA, a large
credit card issuer. As a result of the sale, the Subsidiary Banks
recognized a gain of $32,837,000, net of various contractual exit
fees. The gain on sale increased basic and diluted earnings per share
by $.50 and $.49, respectively. Under an agent bank arrangement, the
Subsidiary Banks will continue to offer consumer credit card products
through MBNA. The Subsidiary Banks retained the commercial credit
card portfolio.
Mortgage loans held for sale totaled $42,751,000 and $46,287,000 at
June 30, 1999 and 1998, respectively, and are reported at the lower of
cost or market. At June 30, 1999, impaired loans amounted to
$15,235,000 compared to $15,766,000 at December 31, 1998 and
$14,799,000 at June 30, 1998. The related reserve for loan and lease
losses on these loans amounted to $2,638,000 at June 30, 1999,
$2,574,000 at December 31, 1998 and $2,573,000 at June 30, 1998.
During the six months ended June 30, 1999 and 1998, loans totaling
$1,200,000 and $1,234,000, respectively, were transferred to "other
assets" due to loan foreclosure.
CCB Financial Corporation and Subsidiaries
Notes to Consolidated Financial Statements
(3) Reserve for Loan and Lease Losses
Following is a summary of the reserve for loan and lease losses for
the six months ended June 30, 1999 and 1998 (in thousands):
1999 1998
----- -----
Balance at beginning of year $73,182 67,594
Provision charged to operations 7,487 6,786
Decrease from sale of credit card
receivables (1,967) -
Recoveries of loans and leases
previously charged-off 1,460 1,308
Loan and lease losses charged to reserve (7,349) (6,043)
------ ------
Balance at end of period $72,813 69,645
====== ======
Net charge-offs to average loans (annualized):
Total .22% .18
Excluding revolving credit .12 .08
Reserve for loan and lease losses to
period-end loans and leases 1.33 1.33
Reserve for loan and lease losses to
total risk assets 3.19x 3.56
(4) Risk Assets
Following is a summary of risk assets at June 30, 1999, December 31,
1998, and June 30, 1998 (in thousands):
June 30, December 31, June 30,
1999 1998 1998
----- ---------- ------
Nonaccrual loans and lease financing $16,535 16,761 14,976
Other real estate acquired through
loan foreclosures 952 791 1,000
Restructured loans and lease financing 725 739 769
Accruing loans and lease financing
90 days or more past due 4,582 5,889 2,795
------ ------- ------
Total risk assets $22,794 24,180 19,540
======= ====== ======
CCB Financial Corporation and Subsidiaries
Notes to Consolidated Financial Statements
(5) Share and Per Share Data
The following schedule reconciles the numerators and denominators of
the basic and diluted EPS computations for the six months ended June
30, 1999 and 1998 (in thousands except for per share data):
1999 1998
---- ----
Basic:
Average common shares outstanding 40,094 41,244
Net income $ 85,838 59,260
Earnings per share $ 2.14 1.43
Diluted:
Average common shares outstanding 40,094 41,244
Dilutive effect of stock options 407 561
------ ------
Total average common shares 40,501 41,805
Net income $ 85,838 59,260
Earnings per share $ 2.12 1.42
(6) Contingencies
Certain legal claims have arisen in the normal course of business,
which, in the opinion of Management and counsel, will have no material
adverse effect on the financial position of the Corporation or its
subsidiaries.
(7) Pending Acquisition
On April 14, 1999, the Corporation announced that it signed a
definitive agreement to acquire Stone Street Bancorp, Inc., which is
headquartered in Mocksville, North Carolina. Stone Street Bancorp
operates two branches and had $127 million in assets as of December
31, 1998. The transaction is valued at approximately $35 million and
will be accounted for as a purchase. The acquisition is subject to
approval by regulators and the shareholders of Stone Street Bancorp
and is tentatively scheduled to be completed early in the fourth
quarter of 1999.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
The purpose of this discussion and analysis is to aid in the
understanding and evaluation of financial conditions and changes
therein and results of operations of CCB Financial Corporation (the
"Corporation") and its wholly-owned subsidiaries, Central Carolina
Bank and Trust Company ("CCB"), American Federal Bank, FSB ("AmFed")
and Central Carolina Bank-Georgia ("CCB-Ga.") (collectively the
"Subsidiary Banks") for the six months ended June 30, 1999 and 1998.
The consolidated financial statements also include the accounts and
results of operations of CCB's wholly-owned subsidiaries: CCB
Investment and Insurance Service Corporation ("CCBIISC"); Salem Trust
Company; CCBDE, Inc.; Southland Associates, Inc. and Corcoran
Holdings, Inc. and its subsidiary, Watts Properties, Inc. AmFed's
wholly-owned subsidiaries are also included in the consolidated
financial statements: American Service Corporation of S.C.; AMFEDDE,
Inc.; Mortgage North; Finance South, Inc. and McBee Holdings, Inc. and
its wholly-owned subsidiary, Greenville Participations, Inc. This
discussion and analysis is intended to complement the unaudited
financial statements and footnotes and the supplemental financial data
appearing elsewhere in this Form 10-Q, and should be read in
conjunction therewith.
This report contains certain forward-looking statements (as defined in
the Private Securities Litigation Reform Act of 1995) related to
anticipated future operating and financial performance, growth
opportunities and growth rates, Year 2000 compliance and other similar
forecasts and statements of expectations. Words such as "expects",
"plans", "estimates", "projects", "objectives" and "goals" and similar
expressions are intended to identify these forward-looking statements.
These forward-looking statements are based on estimates, beliefs and
assumptions made by Management and are not guarantees of future
performance.
Factors that may cause actual results to differ from those expressed
or implied include, but are not limited to, changes in political and
economic conditions, interest rate movements, competitive product and
pricing pressures within the Corporation's markets, success and timing
of business initiatives, technological change, and changes in legal,
regulatory and tax policies.
Readers should also consider information on risks and uncertainties
contained in the discussions of competition, interstate banking and
branching, and supervision and regulation in the Corporation's most
recent report on Form 10-K.
Results of Operations - Three Months Ended June 30, 1999 and 1998
Net income in the second quarter of 1999 amounted to $52.1 million
compared to 1998's $30 million. Basic earnings per share totaled
$1.30 in 1999 compared to $.73 in the second quarter of 1998.
Included in 1999's income was an after-tax gain of $19.9 million or
$.50 per share from the sale of credit card receivables (the "credit
card gain"). Excluding the credit card gain, basic earnings per share
increased 10% over 1998's level. Excluding the credit card gain,
returns on average assets and shareholders' equity in 1999 were 1.67%
and 18.64%, respectively, compared to 1998's 1.65% and 17.92%.
In the past several years, the credit card industry has experienced
rapid consolidation resulting in the evolution of large, specialized
credit card companies that are able to provide superior levels of
service and diverse product offerings. While the Subsidiary Banks'
credit card products have been very competitive in the marketplace,
they only comprised approximately 3% of the total loan and lease
portfolio and have not kept pace with the growth levels experienced in
the other segments of the portfolio. In addition, this segment of the
portfolio has historically experienced the highest levels of charge-
offs. Consequently, Management determined that it was prudent to sell
its consumer credit card receivables to MBNA effective June 30, 1999.
The sale freed up capital which can be redeployed in other growth
initiatives, will improve the Corporation's overall credit quality and
will allow Management to focus on businesses that will create more
value for customers and shareholders. Under an agent bank
arrangement, the Subsidiary Banks will continue to offer customers
credit card products, using the CCB name, through MBNA. CCB will
continue to offer business credit cards in its markets and will retain
its existing portfolio of business credit card receivables.
Net Interest Income
Average Balance Sheets and Net Interest Income Analyses on a taxable
equivalent basis for each of the periods are included in Table 1.
Interest-earning assets increased by $416.7 million or 6% in the 1999
period. The overall yield on earning assets decreased 31 basis points
to 8.15% from 1998's 8.46% due to decreased loan and investment
yields. However, overall decreases in rates earned on assets were
offset by increases in volume; consequently, interest income increased
$3 million. The cost of interest-bearing funds decreased by 39 basis
points in the 1999 period to 4.08% due primarily to the lower rates
paid for savings and time deposits, 4.01% in 1999 versus 4.40% in
1998. Decreases in interest-bearing liabilities costs due to lower
interest rates paid offset increased volume to result in a $2.2
million decrease in interest costs. The net interest margin increased
1 basis point from second-quarter 1998 and on a linked-quarter basis
with the first quarter of 1999, increased 8 basis points. Net
interest income on a taxable equivalent basis increased $5.2 million
or 6% over 1998.
With the Federal Reserves' 25 basis point increase in the federal
funds rate at the end of the second quarter and its return to a
"neutral bias" on interest rates, the market will return to watching
for any inflationary pressure that could result in additional interest
rate increases. The U.S. economy continues to grow at a robust pace
with full employment, high consumer confidence and spending, rising
commodity prices and record low consumer saving rates. Management
anticipates continued upward pressure on interest rates during the
remainder of 1999.
Provision for Loan and Lease Losses
The provision for loan and lease losses for the second quarter of 1999
was $5.7 million compared to $3.6 million in 1998. The increase was
necessary to keep pace with loan growth; the reserve for loan and
lease losses was equal to 1.33% of loans and leases outstanding at
both June 30, 1999 and 1998. Annualized net charge-offs as a
percentage of average loans were .22% in 1999 and .19% in 1998.
Excluding revolving credit net charge-offs, the ratios drop to .13%
and .09%, respectively. Annualized revolving credit net charge-offs
during the second quarter of 1999 were 2.54% compared to 2.59%
experienced in 1998.
Noninterest Income and Expense
Other income, excluding the credit card gain and investment securities
transactions, increased $3 million in the second quarter of 1999 to
$32.1 million. The Subsidiary Banks realized a $1.5 million increase
in service charges on deposit accounts from increased deposit volumes
and higher revenues from commercial services. Merchant discount
increased $1.1 million from 1998 due to increased volume of business
and changes in the pricing structure. Income from secondary marketing
and servicing of mortgage loans dropped $1.4 million from June 1998's
level due to less originations and refinances in second quarter 1999's
higher interest rate environment.
Table 1
CCB FINANCIAL CORPORATION
Average Balances and Net Interest Income Analysis
Three Months Ended June 30, 1999 and 1998
(Taxable Equivalent Basis-In Thousands) (1)
1999
Interest Average
Average Income/ Yield/
Balance Expense Rate
Earning assets: -------- -------- --------
Loans and lease financing (2) $ 5,521,156 120,239 8.73 %
U.S. Treasury and agency obligations (3) 1,365,211 22,584 6.62
States and political subdivision
obligations 75,232 1,616 8.59
Equity securities and other securities (3) 46,441 921 7.94
Federal funds sold and other short-term
investments 333,415 4,110 4.94
Time deposits in other banks 31,150 401 5.16
-------- -------- --------
Total earning assets (3) 7,372,605 149,871 8.15
-------- --------
Non-earning assets:
Cash and due from banks 207,916
Premises and equipment 94,919
All other assets, net 61,542
--------
Total assets $ 7,736,982
Interest-bearing liabilities:
Savings and time deposits $ 5,633,951 56,269 4.01 %
Other short-term borrowed funds 253,345 2,683 4.25
Long-term debt 214,911 3,119 5.82
-------- -------- --------
Total interest-bearing liabilities 6,102,207 62,071 4.08
-------- --------
Other liabilities and shareholders'
equity:
Demand deposits 845,563
Other liabilities 97,472
Shareholders' equity 691,740
Total liabilities and shareholders' --------
equity $ 7,736,982
=========
Net interest income and net interest
margin (4) $ 87,800 4.77 %
======== =======
Interest rate spread (5) 4.07 %
=======
CCB FINANCIAL CORPORATION
Average Balances and Net Interest Income Analysis, continued
Three Months Ended June 30, 1999 and 1998
(Taxable Equivalent Basis-In Thousands) (1)
1998
Interest Average
Average Income/ Yield/
Balance Expense Rate
Earning assets: --------- --------- -------
Loans and lease financing (2) $ 5,205,732 117,155 9.02 %
U.S. Treasury and agency obligations (3) 1,260,137 22,053 7.00
States and political subdivision
obligations 80,882 1,776 8.79
Equity securities and other securities (3) 46,980 928 7.90
Federal funds sold and other short-term
investments 325,336 4,562 5.62
Time deposits in other banks 36,846 405 4.37
--------- --------- -------
Total earning assets (3) 6,955,913 146,879 8.46
--------- -------
Non-earning assets:
Cash and due from banks 200,518
Premises and equipment 87,468
All other assets, net 54,210
---------
Total assets $ 7,298,109
=========
Interest-bearing liabilities:
Savings and time deposits $ 5,338,386 58,526 4.40 %
Other short-term borrowed funds 247,858 3,021 4.89
Long-term debt 176,023 2,687 6.12
--------- --------- --------
Total interest-bearing liabilities 5,762,267 64,234 4.47
--------- --------
Other liabilities and shareholders'
equity:
Demand deposits 766,378
Other liabilities 98,516
Shareholders' equity 670,948
Total liabilities and shareholders' ---------
equity $ 7,298,109
=========
Net interest income and net interest
margin (4) 82,645 4.76 %
========= =======
Interest rate spread (5) 3.99 %
=======
(1) The taxable equivalent basis is computed using 35% federal and
applicable state tax rates in 1999 and 1998.
(2) The average loan and lease financing balances include non-accruing
loans and lease financing. Loan fees of $4,703,000 and $4,318,000 for
1999 and 1998, respectively, are included in interest income.
(3) The average balances for debt and equity securities exclude the
effect of their mark-to-market adjustment, if any.
(4) Net interest margin is computed by dividing net interest income by
total earning assets.
(5) Interest rate spread equals the earning asset yield minus the
interest-bearing liability rate.
Other expenses increased in the 1999 period by $2.7 million or 5%.
This is partially explained by a $2.3 million increase in personnel
expense from 1998's level due to general salary increases and a larger
workforce. Average assets per employee increased from $2.70 million
in June 1998 to $2.75 million in June 1999. Occupancy and equipment
increased $1.1 million due to growth of the Subsidiary Banks'
operations and improvement in infrastructure. Other operating
expenses decreased $729,000 due to declines in advertising expense,
printing and office supplies and professional services.
As a result of the aforementioned changes, net overhead (noninterest
expense less noninterest income, excluding the credit card gain) as a
percentage of average assets decreased to 1.49% for the three months
ended June 30, 1999 from 1.61% for the same period in 1998. The
Corporation's efficiency ratio (noninterest expense as a percentage of
taxable equivalent net interest income and other income, excluding the
credit card gain) improved from 52.54% for the three months ended June
30, 1998 to 51.18% for the same period in 1999. The improvement in
these ratios indicates that the Corporation's revenues are increasing
faster than its expenses.
The following schedule presents noninterest income and expense as a
percentage of average assets for the three months ended June 30, 1999
and 1998.
1999 1998
---- ----
Noninterest income 1.69 % 1.62
---- ----
Personnel expense 1.78 1.76
Occupancy and equipment expense .43 .40
Other operating expense .97 1.07
---- ----
Noninterest expense 3.18 3.23
---- ----
Net overhead 1.49 % 1.61
==== ====
The effective income tax rate was 36.4% in 1999 compared to 36.6% in
the same period of 1998.
Results of Operations - Six Months Ended June 30, 1999 and 1998
Net income for the six months ended June 30, 1999 amounted to $85.8
million which resulted in basic earnings per share of $2.14 in 1999
compared to 1998's $59.3 million or $1.43 basic earnings per share.
Included in net income is the previously discussed $19.9 million
(after-tax) credit card gain. Excluding the credit card gain, basic
earnings per share were $1.64 which was a $.21 or 15% increase over
the 1998 six-month period. Excluding the credit card gain, returns on
average assets and shareholders' equity in 1999 were 1.72% and 19.25%,
respectively, compared to 1.65% and 17.66%, respectively, in the 1998
period. Computed on net income, returns on average assets and
shareholders' equity in 1999 were 2.25% and 25.07%, respectively.
Net Interest Income
Average Balance Sheets and Net Interest Income Analyses on a taxable
equivalent basis for each of the periods are included in Table 2.
Interest-earning assets increased by $459.9 million or 7% in the 1999
period. The overall yield on earning assets decreased to 8.14% from
1998's 8.51% due to the lower interest rate environment experienced
during most of the first six months of 1999. The cost of interest-
bearing funds decreased by 37 basis points in the 1999 period to 4.12%
from 4.49% in 1998. Despite the drop in the cost of funds, the net
interest margin decreased 6 basis points from 1998. The interest rate
spread remained constant at 4.02%. Net interest income on a taxable
equivalent basis increased by $9 million or 6%.
Provision for Loan and Lease Losses
The provision for loan and lease losses for the first six months of
1999 was $7.5 million compared to $6.8 million in 1998. Annualized
net charge-offs as a percentage of average loans were .22% in 1999 and
.18% in 1998. Excluding revolving credit net charge-offs, the ratios
drop to .12% and .08%, respectively. Annualized revolving credit net
charge-offs during the first six months of 1999 were 2.78% compared to
the 2.60% experienced in 1998. Credit card loans had a significantly
higher net charge-off rate than other loan types and it is anticipated
that net charge-offs will decline in future quarters.
Noninterest Income and Expense
Other income, excluding investment securities transactions, the
previously discussed credit card gain and a $1.1 million first quarter
1999 branch sale gain, increased $9.7 million or 18% in the first six
months of 1999. The increase was due primarily to a $3.7 million
increase in service charges on deposit accounts from increased deposit
volume. Other increases over 1998's levels included trust and
custodian fees ($1.1 million) due to increased volume of trust assets
managed, merchant discount ($1.7 million) and secondary marketing and
servicing of mortgages ($1.1 million).
Other expenses increased in the 1999 period by $7.8 million or 7%.
This is partially explained by the increase in personnel expense which
increased $4.7 million from 1998's level. The increase was due to
general salary increases and a larger workforce with corresponding
increases in employee benefits and payroll taxes. Additional smaller
increases were recognized for professional services fees, data
processing and printing and office supplies.
As a result of the aforementioned changes, net overhead as a
percentage of average assets, excluding the impact of the credit card
gain, improved to 1.47% for the six months ended June 30, 1999 from
1.64% for the same period in 1998. The Corporation's efficiency
ratio, excluding the impact of the credit card gain, improved from
51.87% for the six months ended June 30, 1998 to 50.92% for the same
period in 1999. The improvement in both of these ratios indicates
that the Corporation's revenues are increasing faster than its
expenses.
The following schedule presents noninterest income and expense as a
percentage of average assets, excluding the credit card gain, for the
six months ended June 30, 1999 and 1998.
1999 1998
---- ----
Noninterest income 1.69 % 1.51
---- ----
Personnel expense 1.76 1.74
Occupancy and equipment expense .43 .40
Other operating expense .97 1.01
---- ----
Noninterest expense 3.16 3.15
---- ----
Net overhead 1.47 % 1.64
The effective income tax rate was 35.8% in 1999 compared to 36.6%
in the same period of 1998.
Table 2
CCB FINANCIAL CORPORATION
Average Balances and Net Interest Income Analysis
Six Months Ended June 30, 1999 and 1998
(Taxable Equivalent Basis-In Thousands) (1)
1999
Interest Average
Average Income/ Yield/
Balance Expense Rate
Earning assets: -------- -------- --------
Loans and lease financing (2) $ 5,472,855 237,658 8.74 %
U.S. Treasury and agency obligations (3) 1,299,204 43,354 6.67
States and political subdivision
obligations 76,764 3,319 8.65
Equity securities and other securities (3) 46,798 1,850 7.91
Federal funds sold and other short-term
investments 402,670 9,733 4.87
Time deposits in other banks 36,238 905 5.04
-------- -------- --------
Total earning assets (3) 7,334,529 296,819 8.14
-------- --------
Non-earning assets:
Cash and due from banks 212,248
Premises and equipment 94,379
All other assets, net 65,486
--------
Total assets $ 7,706,642
=========
Interest-bearing liabilities:
Savings and time deposits $ 5,616,170 112,505 4.04 %
Other short-term borrowed funds 249,132 5,232 4.24
Long-term debt 215,760 6,449 6.02
-------- -------- --------
Total interest-bearing liabilities 6,081,062 124,186 4.12
-------- --------
Other liabilities and shareholders'
equity:
Demand deposits 837,738
Other liabilities 97,315
Shareholders' equity 690,527
--------
Total liabilities and shareholders'
equity $ 7,706,642
========
Net interest income and net interest
margin (4) $ 172,633 4.72 %
======== ========
Interest rate spread (5) 4.02 %
========
CCB FINANCIAL CORPORATION
Average Balances and Net Interest Income Analysis, continued
Six Months Ended June 30, 1999 and 1998
(Taxable Equivalent Basis-In Thousands) (1)
1998
Interest Average
Average Income/ Yield/
Balance Expense Rate
Earning assets: --------- --------- -------
Loans and lease financing (2) $ 5,169,357 232,327 9.05 %
U.S. Treasury and agency obligations (3) 1,276,477 44,872 7.04
States and political subdivision
obligations 81,025 3,563 8.80
Equity securities and other securities (3) 46,526 1,826 7.85
Federal funds sold and other short-term
investments 265,830 7,439 5.64
Time deposits in other banks 35,428 805 4.58
--------- --------- -------
Total earning assets (3) 6,874,643 290,832 8.51
--------- -------
Non-earning assets:
Cash and due from banks 203,958
Premises and equipment 87,076
All other assets, net 65,972
---------
Total assets $ 7,231,649
=========
Interest-bearing liabilities:
Savings and time deposits $ 5,311,457 116,446 4.42 %
Other short-term borrowed funds 249,628 6,070 4.91
Long-term debt 153,270 4,686 6.16
--------- --------- -------
Total interest-bearing liabilities 5,714,355 127,202 4.49
--------- -------
Other liabilities and shareholders'
equity:
Demand deposits 741,333
Other liabilities 99,128
Shareholders' equity 676,833
Total liabilities and shareholders' ---------
equity $ 7,231,649
=========
Net interest income and net interest
margin (4) 163,630 4.78 %
========= =======
Interest rate spread (5) 4.02 %
=======
(1) The taxable equivalent basis is computed using 35% federal and
applicable state tax rates in 1999 and 1998.
(2) The average loan and lease financing balances include non-accruing
loans and lease financing. Loan fees of $9,239,000 and $7,924,000 for
1999 and 1998, respectively, are included in interest income.
(3) The average balances for debt and equity securities exclude the
effect of their mark-to-market adjustment, if any.
(4) Net interest margin is computed by dividing net interest income by
total earning assets.
(5) Interest rate spread equals the earning asset yield minus the
interest-bearing liability rate.
Financial Condition
Total assets have increased $395.4 million or 5% since June 30, 1998
with the majority of the increase occurring in interest-earning
assets. Average assets have increased from $7.3 billion for the
quarter ended June 30, 1998 to $7.7 billion for the quarter ended June
30, 1999 and compared to $7.5 billion for the three months ended
December 31, 1998.
In addition to recurring sales of all fixed-rate mortgage production,
during the first quarter of 1999 the Corporation sold approximately
$200 million in mortgage loans into the secondary market. Adjusting
for the first quarter loan sale, average loans and leases grew 10% in
the second quarter of 1999 over the year-ago quarter. Average
deposits grew 6% to $6.5 billion during the second quarter of 1999
over the comparable quarter in 1998.
At June 30, 1999, risk assets (consisting of nonaccrual loans and
lease financing, foreclosed real estate, restructured loans and lease
financing and accruing loans 90 days or more past due) amounted to
$22.8 million or .41% of outstanding loans and lease financing and
foreclosed real estate. This compares to $19.5 million or .37% at
June 30, 1998. The levels of nonaccrual loans grew $1.6 million and
loans 90 days past due grew $1.8 million. The reserve for loan and
lease losses to risk assets was 3.19x at June 30, 1999 compared to
3.03x at December 31, 1998 and 3.56x at June 30, 1998.
The Corporation's capital position has historically been strong as
evidenced by the Corporation's ratio of average shareholders' equity
to average total assets of 8.94% and 9.19% for the three months ended
June 30, 1999 and 1998, respectively. Under a previously announced
stock repurchase plan, the Corporation has repurchased and retired
612,434 shares of its common stock during 1999 and 1,391,300 shares
during the year ended December 31, 1998. The average cost of the
shares repurchased was $54.39 and $55.06 per share for 1999 and 1998,
respectively. There are approximately 219,000 shares remaining to be
repurchased under the current authorized plan. Book value per share
increased from $16.27 at June 30, 1998 to $17.75 at June 30, 1999, a
9% increase.
Due to generally higher interest rates in 1999, unrealized gains on
investment securities available for sale, net of applicable taxes,
decreased $13.4 million from December 31, 1998. As of June 30, 1999,
unrealized losses on investment securities available for sale, net of
applicable taxes, totaled $81,000 compared to June 30, 1998's $11
million net unrealized gains.
On July 20, 1999, the Board of Directors of the Corporation declared a
quarterly cash dividend on common stock of $.29 per share payable
October 1, 1999 to shareholders of record as of September 15, 1999.
The 12% dividend increase is the Corporation's 35th consecutive year
of annual cash dividend increases.
Bank holding companies are required to comply with the Federal Reserve
Board's risk-based capital guidelines that require a minimum ratio of
total capital to risk-weighted assets of 8%. At least half of the
total capital is required to be "Tier 1" capital, principally
consisting of common shareholders' equity, noncumulative perpetual
preferred stock, and a limited amount of cumulative perpetual
preferred stock less certain goodwill items. The remainder, "Tier 2
capital", may consist of a limited amount of subordinated debt,
certain hybrid capital instruments and other debt securities,
perpetual preferred stock, and a limited amount of the general reserve
for loan and lease losses. In addition to the risk-based capital
guidelines, the Federal Reserve has adopted a minimum leverage capital
ratio under which a bank holding company must maintain a minimum level
of Tier 1 capital to average total consolidated assets of at least 3%
in the case of a bank holding company which has the highest regulatory
examination rating and is not contemplating significant growth or
expansion. All other bank holding companies are expected to maintain
a leverage capital ratio of at least 1% to 2% above the stated
minimum.
The Corporation and the Subsidiary Banks continue to maintain higher
capital ratios than required under regulatory guidelines at June 30,
1999 as indicated below. CCB-Ga.'s capital ratios are significantly
higher at June 30, 1999 due to the sale of the majority of its assets
(credit card receivables) without returning excess capital to the
Parent Company.
June 30, Regulatory
Ratio 1999 1998 Minimums
----- ---- ---- ----------
Tier 1 Capital 4.00%
Corporation 11.94% 11.40
CCB 11.41 11.04
AmFed 13.83 14.44
CCB-Ga. 175.12 16.60
-------------------------------------------------
Total Capital 8.00
Corporation 13.66 13.26
CCB 12.59 12.22
AmFed 15.13 15.69
CCB-Ga. 176.57 17.89
-------------------------------------------------
Leverage 4.00
Corporation 8.83 8.50
CCB 8.57 8.21
AmFed 8.96 10.11
CCB-Ga. 23.80 12.60
-------------------------------------------------
Year 2000 Issue
The Corporation has completed its project to assess and correct the
impact of the "Year 2000 Issue" and is now in the Clean Management
Phase to ensure Year 2000 compliant systems remain compliant. The
Year 2000 Issue resulted from many computer programs having been
written using two digit dates rather than four to define the
applicable year. Historically, the first two digits were eliminated
to save memory. Since in such systems there is no accommodation for
the full four-digit year, a serious problem may occur when "00" is
used to identify the Year 2000. For these systems, it is not only
impossible to distinguish 2000 from 1900 but it also becomes difficult
to calculate the passage of time between preceding or succeeding years
and the Year 2000. This error could result in system failure or
miscalculations causing disruption of operations, including, among
other things, an inability to process customer transactions, properly
accrue interest income and expense or engage in normal business
activities. In addition, non-information technology ("non-IT")
systems such as security alarms, elevators, telephones, etc. may be
subject to a Year 2000 malfunction due to their dependence upon
computer technology for proper operation. As described, the Year 2000
Issue presents a number of challenges to financial institutions'
management; correction of Year 2000 Issues has been and will continue
to be costly and complex for the entire industry.
The Corporation began discussing the Year 2000 Issue more than two
years ago and adopted a Year 2000 Strategic Project Plan to address
the issue. The Corporation's Year 2000 plan follows guidelines
outlined by the Federal Financial Institutions Examination Council
("FFIEC"). The FFIEC requires all financial institutions to develop
plans with five critical phases: awareness, assessment, renovation,
validation and implementation.
* The awareness phase defined the Year 2000 Issue and the potential
challenges associated with the date change.
* The assessment phase consisted of an evaluation of the size and
complexity of ensuring that the Corporation will be ready for the Year
2000. During the assessment phase, the Corporation determined that it
would be required to modify a significant portion of its software and
replace certain software and hardware so that its computer systems
will properly utilize dates beyond December 31, 1999.
* During the renovation phase, system upgrades were implemented and
applicable hardware was replaced. The renovation of all major
software applications was completed in early September 1998. A new
Year 2000-ready mainframe computer was put into production during mid-
January 1999.
* The validation phase involved testing all computer systems. Even
if software had been tested by the vendor and certified Year 2000-
ready, the Corporation's Year 2000 project team re-tested and
validated all software to ensure compatibility with the Corporation's
information systems environment. Testing of mission critical systems
was completed in March 1999. This consisted of performing tests on
the mainframe hardware, operating system, and application software; PC
and server hardware and software; data and telecommunications systems;
and non-IT systems. All non-mission critical testing and replacement
of non-mission critical personal computers was completed by June 1999.
Further testing of hardware and software acquired or modified since
initial testing was completed will be done in the remainder of 1999 as
part of Clean Management.
* Finally, the implementation phase involved incorporating Year
2000-ready systems into the day-to-day operations of the Corporation.
This phase was completed by June 1999. During the third quarter of
1999, the Year 2000 project team will continue to monitor Year 2000-
ready tested systems and ensure Year 2000-readiness is maintained.
From October 1999 through January 2000, only production critical or
regulatory required programming changes will be allowed by Management.
These changes will be tested for Year 2000 compliance before being put
into production.
In addition to ensuring the proper operation of its systems, the
Corporation is also monitoring the remediation efforts of third-party
entities whose own Year 2000 disruptions would impact the
Corporation's operations. The costs to assess the impact of third
parties' remediation efforts are included in the Corporation's total
Year 2000 project costs and estimates. The project team identified
the vendors whose operations were deemed mission critical to the
Corporation's operations and contacted those vendors regarding their
progress in correcting their Year 2000 Issues. In addition, the
project team initiated communication with its major customers to
determine the extent of their Year 2000 preparedness. As most
corporate customers depend on computer systems for normal operations,
a disruption in their business could result in potentially significant
financial difficulties. In the loan and deposit areas, major
customers of $1 million or more have been identified. As of June 30,
1999, the project team had contacted substantially all major customers
and evaluated the risk to the Corporation based upon the results of
the customer communication. Also, the project team reviewed certain
issuers of debt securities held in the investment securities portfolio
as well as federal funds counter-parties. In the Trust area, the
project team reviewed certain issuers of debt and equity securities
held as managed investment assets. Finally, financial institutions
such as the Subsidiary Banks exchange large volumes of date-sensitive
data electronically between other financial institutions, clearing
houses, customers and regulatory agencies. Testing and due diligence
of mission critical third-party entities was completed in March 1999
and testing and due diligence of non-mission critical third parties
was completed in June 1999. Based on these reviews of critical
vendors, major customers and other major counter-parties, at present
Management feels that there is not an inordinate amount of risk that
would require the establishment of any special reserves for the Year
2000 Issue. However, there can be no guarantee that the systems of
other companies on which the Corporation's systems rely will be timely
converted, or that a failure to convert by another company, or a
conversion that is incompatible with the Corporation's systems, will
not have an adverse effect on the Corporation's results of operations.
The Corporation has a contingency plan that outlines emergency
response procedures that meet regulatory guidelines. The goal of the
contingency plan is to facilitate the resumption of business in the
event there is a disruption of critical systems necessary to operate.
Contingency plans include alternative power sources, off-site
processing, etc. The FFIEC's contingency planning guidelines required
the completion of organizational planning guidelines and business
impact analysis by March 31, 1999. The Corporation completed its
organizational planning guidelines and business impact analysis in
October 1998. FFIEC guidelines further require that the development
and validation of the business resumption contingency plans be
completed by June 30, 1999. The Corporation's contingency plans
include consideration of the most reasonably likely worst-case
scenario. Development and validation of the contingency plans and
independent review and verification of the contingency plans by
the Corporation's internal auditors were completed in February 1999.
The last contingency planning requirement, developing detailed Year
2000 rollover event plans, was completed during the second quarter of 1999.
While the Corporation's project team is monitoring the progress of the
Year 2000 plan, consulting firms are also being used to keep track of
the readiness program. A Year 2000 independent consulting services
group is overseeing the Year 2000 Project Management Office on an on-
going basis. In addition, the Corporation retained the services of
another independent consulting firm to review its Year 2000 readiness
plans. As the Corporation and its Subsidiary Banks are regulated by
federal and state banking regulatory agencies, they are required to
comply with those agencies' Year 2000 modification schedules. Federal
regulatory agencies periodically review the Corporation's Year 2000
conversion efforts and the Corporation has met all Year 2000 deadlines
set by the regulators.
The total cost of the Year 2000 project is currently estimated at $5.3
million, of which $2.3 million is attributable to the purchase of
capitalizable software and hardware. During the first six months of
1999, the Corporation incurred $642,000 of non-capitalizable expense
attributable to the Year 2000 project. Total non-capitalizable
expense during 1998 was $2.2 million and total non-capitalizable
expense incurred prior to 1998 was less than $75,000. The remainder of
the cost will be expensed as incurred over the next year and is not
expected to have a material effect on the Corporation's results of
operations.
The costs of the Year 2000 project are based on Management's best
estimates, which were derived utilizing numerous assumptions of future
events including the continued availability of certain resources,
third-party modification plans and other factors. However, there can
be no guarantee that these estimates will be achieved at the cost
disclosed.
Management presently believes that with its identified modifications
to existing software and conversions to new software and hardware and
the successful completion of third-party remediation efforts, the Year
2000 Issue can be mitigated. However, if the Corporation's
modifications and conversions are not made, or are not completed on a
timely basis or if mission critical third-parties do not remediate
their own Year 2000 Issues, disruptions in operations could occur and
could have a material adverse impact on the financial position of the
Corporation.
Stone Street Bancorp Acquisition
On April 14, 1999, the Corporation announced that it signed a
definitive agreement to acquire Stone Street Bancorp, Inc., which is
headquartered in Mocksville, North Carolina. Stone Street Bancorp
operates two branches and had $127 million in assets as of December
31, 1998. The transaction is valued at approximately $35 million and
will be accounted for as a purchase. The acquisition is subject to
approval by regulators and the shareholders of Stone Street Bancorp
and is tentatively scheduled to be completed early in the fourth
quarter of 1999.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Market risk reflects the risk of economic loss resulting from adverse
changes in market price and interest rates. This risk of loss can be
reflected in diminished current market values and/or reduced potential
net interest income in future periods.
The Corporation's market risk arises primarily from interest rate risk
inherent in its lending and deposit-taking activities. The structure
of the Corporation's loan and deposit portfolios is such that a
significant increase or decline in interest rates may adversely impact
net market values and net interest income. The Corporation does not
maintain a trading account nor is the Corporation subject to currency
exchange risk or commodity price risk. Responsibility for monitoring
interest rate risk rests with the Asset/Liability Management Committee
("ALCO") which is comprised of senior management. ALCO regularly
reviews the Corporation's interest rate risk position and adopts
balance sheet strategies that are intended to optimize net interest
income while maintaining market risk within a set of Board-approved
guidelines.
As of June 30, 1999, Management believes that there have been no
significant changes in market risk as disclosed in the Corporation's
Annual Report on Form 10-K for the year ended December 31, 1998.
Management believes that it has accomplished its objective to avoid
material negative changes in net income resulting from changes in
interest rates.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a). Exhibits
Exhibit 3 Registrants' Amended and Restated Bylaws dated April
28, 1998.
Exhibit 22 Report regarding matters submitted to vote of
security holders.
Exhibit 27 Financial Data Schedule as of June 30, 1999.
(b). Reports on Form 8-K
A Current Report on Form 8-K dated April 14, 1999 was filed
under Items 5 and 7 discussing the proposed acquisition of
Stone Street Bancorp, Inc.
A Current Report on Form 8-K dated April 27, 1999 was filed
under Item 5 discussing the extension and expansion of the
Corporation's previously authorized stock repurchase plan.
A Current Report on Form 8-K dated June 28, 1999 was filed
under Items 5 and 7 discussing the Corporation's sale of
consumer credit card receivables.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
CCB FINANCIAL CORPORATION
Registrant
Date: August 11, 1999 /s/ ERNEST C. ROESSLER
Ernest C. Roessler
Chairman, President and
Chief Executive Officer
Date: August 11, 1999 /s/ SHELDON M. FOX
Sheldon M. Fox
Executive Vice President and
Chief Financial Officer
Date: August 11, 1999 /s/ W. HAROLD PARKER, JR.
W. Harold Parker, Jr.
Senior Vice President and
Controller
(Chief Accounting Officer)
16
BYLAWS
OF
CCB FINANCIAL CORPORATION
Amended and Restated April 21, 1998
Index
ARTICLE I
Offices
Section 1 Principal Office
Section 2 Registered Office
Section 3 Other Offices
ARTICLE II
Meetings of Shareholders
Section 1 Place of Meetings
Section 2 Annual Meetings
Section 3 Substitute Annual Meeting
Section 4 Special Meetings
Section 5 Notice of Meetings
Section 6 Voting Lists
Section 7 Quorum
Section 8 Proxies
Section 9 Voting of Shares
ARTICLE III
Directors
Section 1 General Powers
Section 2 Number, Term and Qualifications
Section 3 Retirement
Section 4 Election of Directors
Section 5 Removal
Section 6 Vacancies
Section 7 Chairman, Executive Vice
Chairman and Vice Chairmen of the Board
Section 8 Compensation
ARTICLE IV
Executive Committee
Section 1 Appointment
Section 2 Meetings
Section 3 General Powers
ARTICLE V
Nominating Committee
ARTICLE VI
Audit Committee and Other Committees
Section 1 Audit Committee
Section 2 Other Committees
ARTICLE VII
Meetings of Directors
Section 1 Regular Meetings
Section 2 Special Meetings
Section 3 Notice of Meetings
Section 4 Waiver of Notice
Section 5 Quorum
Section 6 Manner of Acting
Section 7 Presumption of Assent
Section 8 Informal Action by Directors
ARTICLE VIII
Officers
Section 1 Number
Section 2 Election and Term
Section 3 Removal
Section 4 Compensation
Section 5 President
Section 6 Additional Duties of President
Section 7 Duties of Executive Vice
Presidents, Senior Vice
Presidents, First Vice
Presidents, and Vice Presidents
Section 8 Secretary
Section 9 Assistant Secretaries
Section 10 Controller
Section 11 Assistant Controllers
Section 12 Duties of Other Officers
Section 13 Bonds
ARTICLE IX
Contracts, Loans, Checks and Deposits
Section 1 Contracts
Section 2 Loans
Section 3 Checks and Drafts
Section 4 Deposits
ARTICLE X
Certificates for Shares and Their Transfer
Section 1 Certificates for Shares
Section 2 Transfer of Shares
Section 3 Closing Transfer Books and Fixing Record Date
Section 4 Lost Certificates
Section 5 Holder of Record
ARTICLE XI
General Provisions
Section 1 Dividends
Section 2 Seal
Section 3 Share Certificates
Section 4 Waiver of Notice
Section 5 Amendments
Section 6 Fiscal Year
Section 7 Notification of Indemnification
Section 8 Indemnification
ARTICLE XII
Additional Constituents
BYLAWS
OF
CCB FINANCIAL CORPORATION
Amended and Restated April 21, 1998
ARTICLE I
Offices
Section 1. Principal Office: The principal office of the
corporation shall be located at 111 Corcoran Street, Durham,
North Carolina.
Section 2. Registered Office: The registered office of the
corporation required by law to be maintained in the State of
North Carolina may be, but need not be, identical with the
principal office.
Section 3. Other Offices: The Corporation may have offices
at such other places, either within or without the State of North
Carolina, as the Board of Directors from time to time may
determine, or as the affairs of the Corporation may require.
ARTICLE II
Meetings of Shareholders
Section 1. Place of Meetings: All meetings of shareholders
shall be held at the principal office of the Corporation or at
such other place, either within or without the State of North
Carolina, as shall be designated in the notice of the meeting.
Section 2. Annual Meetings: The annual meeting of
shareholders shall be determined by the Board of Directors of the
Corporation and shall be held during the first six (6) calendar
months of each year, for the purpose of electing directors of the
Corporation and for the transaction of such other business as
properly may be brought before the meeting.
Section 3. Substitute Annual Meeting: If the annual meeting
shall not be held within the period of time designated by these
Bylaws, a substitute annual meeting may be called in accordance
with the provisions of Section 4 of this Article. A meeting so
called shall be designated and treated for all purposes as the
annual meeting.
Section 4. Special Meetings: Special meetings of the
shareholders may be called at any time by the Chairman, any Vice
Chairman, President or by the Board of Directors of the
Corporation.
Section 5. Notice of Meetings: Written or printed notice
stating the time, place, day and hour of the meeting shall be
delivered not less than ten (10) nor more than fifty (50) days
before the date thereof, either personally or by mail, by or at
the direction of the Chairman, Vice Chairman, President,
Secretary or other person calling the meeting, to each
shareholder of record entitled to vote at such meeting. If
mailed, such notice shall be deemed to be delivered when
deposited in the United States mail, addressed to the shareholder
at his address as it appears on the stock transfer books of the
Corporation, with postage thereon prepaid.
In the case of an annual or substitute annual meeting, the
notice of meeting need not specifically state the business to be
transacted thereat unless such a statement is expressly required
by the provisions of the North Carolina Business Corporation Act.
In the case of a special meeting, the notice of meeting shall
specifically state the purpose or purposes for which the meeting
is called.
When a meeting is adjourned for thirty (30) days or more,
notice of the adjourned meeting shall be given as in the case of
an original meeting. When a meeting is adjourned for less than
thirty (30) days in any one adjournment, it is not necessary to
give any notice of the adjourned meeting other than by
announcement at the meeting at which the adjournment is taken.
Section 6. Voting Lists: After fixing a record date for a
meeting, the Corporation shall prepare an alphabetical list of
the names of all the shareholders who are entitled to notice of
the shareholders' meeting. The list shall be arranged by voting
group (and within each voting group by class and series of
shares) and show the address of and number of shares held by each
shareholder.
The shareholder list shall be available for inspection by any
shareholder, beginning two business days after notice of the
meeting is given for which the list was prepared and continuing
through the meeting, at the Corporation's principal office or at
a place identified in the meeting notice in the city where the
meeting will be held. A shareholder, or his agent or attorney,
is entitled to inspect and copy the list during regular business
hours and at this own expense, during the period it is available
for inspection.
The Corporation shall make the shareholders' list available at
the meeting, and any shareholder, his agent, or attorney is
entitled to inspect the list at any time during the meeting or
any adjournment thereof.
Section 7. Quorum: The holders of a majority of the
outstanding shares of the Corporation entitled to vote,
represented in person or by proxy, shall constitute a quorum at a
meeting of shareholders, except that at a substitute annual
meeting of shareholders the number of shares there represented
either in person or by proxy, even though less than a majority,
shall constitute a quorum for the purpose of such meeting.
The shareholders present at a duly organized meeting may
continue to do business until adjournment, notwithstanding the
withdrawal of enough shareholders to leave less than a quorum.
In the absence of a quorum at the opening of any meeting of
shareholders, such meeting may be adjourned from time to time by
a vote of the majority of the shares voting on the motion to
adjourn; and at any adjourned meeting at which a quorum is
present any business may be transacted which might have been
transacted at the original meeting.
Section 8. Proxies: Shares may be voted either in person or
by one or more agents authorized by a written proxy executed by
the shareholder or by his duly authorized attorney-in-fact. Such
proxy shall be filed with the Secretary of the Corporation before
or at the time of the meeting. A proxy is not valid after the
expiration of eleven (11) months from the date of its execution
unless the person executing it specifies therein the length of
time for which it is to continue in force, or limits its use to a
particular meeting, but no proxy shall be valid after ten (10)
years from the date of its execution.
Section 9. Voting of Shares: Each outstanding share having
voting rights shall be entitled to one vote on each matter
submitted to a vote at a meeting of shareholders.
Except in the election of directors as provided in Section 4
of Article III, the vote of a majority of the shares voted on any
matter at a meeting of shareholders at which a quorum is present
shall be the act of the shareholders on that matter, unless the
vote of a greater number is required by law or by the Charter or
Bylaws of this Corporation. Voting on all matters except the
election of directors shall be by voice vote or by a show of
hands unless the holders of one-tenth of the shares represented
at the meeting shall, prior to the voting on any matter, demand a
ballot vote on that particular matter.
Shares of its own stock owned indirectly by the Corporation
through a subsidiary corporation or otherwise shall not be voted
and shall not be counted in determining the total number of
shares entitled to vote, except that shares held in a fiduciary
capacity may be voted and shall be counted to the extent provided
by law.
ARTICLE III
Directors
Section 1. General Powers: The business and affairs of the
Corporation shall be managed by the Board of Directors or by such
Executive Committees as the Board may establish pursuant to these
Bylaws.
Section 2. Number, Term and Qualifications: The number of
directors constituting the Board of Directors shall be not less
than nine nor more than 23 as may be fixed or changed from time
to time, within the minimum and maximum, by the shareholders or
by the Board of Directors. Directors need not be residents of
the State of North Carolina or shareholders of the Corporation.
The directors shall be divided into three classes, as nearly
equal in number as may be, to serve in the first instance for
terms of one, two and three years, respectively, and thereafter
the successors in each class of directors shall be elected to
serve for terms of three years. In the event of any increase or
decrease in the number of directors, the additional or eliminated
directorships shall be so classified or chosen that all classes
of directors shall remain or become as nearly equal in number as
may be.
Section 3. Retirement: Each director shall retire at the
regularly scheduled meeting of shareholders following his
attainment of the age of 70 years whether or not such director's
term as a director has expired. Should a director's
responsibilities be diminished from that business or professional
position occupied at the time of the election as director, then
the retirement provision would be the same as that for reaching
the age 70. The Board can annually exempt the retirement
provision by resolution at a regularly scheduled director's
meeting prior to the Annual Shareholder's Meeting.
Section 4. Election of Directors: Except as provided in
Section 6 of this Article, the directors shall be elected at the
annual meeting of the shareholders; and those persons who receive
the highest number of votes shall be deemed to have been elected.
If any shareholder so demands, election of directors shall be by
secret ballot.
Section 5. Removal: Any director may be removed from office
with cause by a vote of shareholders holding a majority of the
shares entitled to vote at an election of directors. However,
unless the entire Board of Directors is removed, an individual
director may not be removed if the number of shares voting
against the removal would be sufficient to elect a director if
such shares were voted cumulatively at an annual election. If
any directors are so removed, new directors may be elected at the
same meeting.
Section 6. Vacancies: A vacancy occurring in the Board of
Directors, including without limitation a vacancy resulting from
an increase in the number of directors or from the failure by the
shareholders to elect the full authorized number of directors,
may be filled by the shareholders or by the Board of Directors,
whichever group shall act first. If the directors remaining in
office do not constitute a quorum, the directors may fill the
vacancy by the affirmative vote of a majority of the remaining
directors or by the sole remaining director.
Section 7. Chairman, Executive Vice Chairman and Vice
Chairmen of the Board: There may be a Chairman, an Executive
Vice Chairman and one or more Vice Chairmen of the Board of
Directors, elected by the Directors from their number at any
meeting of the Board of Directors. The Chairman shall preside at
all meetings of the Board of Directors and perform such other
duties as may be directed by the Board of Directors. The
Executive Vice Chairman and then the Vice Chairmen (in order of
their appointment) shall succeed to the rights and
responsibilities of the Chairman in the absence or inability of
the Chairman to act. The Executive Vice Chairman and the Vice
Chairmen also shall perform such other duties as may be directed
by the Chairman or the Board of Directors.
Section 8. Compensation: The Board of Directors may
compensate directors for their services as such and may provide
for the payment of all expenses incurred by directors in
attending regular and special meetings of the Board of Directors.
ARTICLE IV
Executive Committee
Section 1. Appointment: The Board of Directors, by
resolution adopted by a majority of the Board of Directors, shall
annually appoint an Executive Committee, which shall be composed
of at least three (3) of its members, who shall serve until their
successors are appointed.
Section 2. Meetings: The Executive Committee shall meet at
such intervals as shall be established by the Committee, but not
less frequently than monthly. All regular meetings shall be held
at the principal office of the Corporation, unless the Committee
shall designate another location.
Section 3. General Powers: The Executive Committee, to the
extent authorized by law, is empowered to act for and on behalf
of the Board of Directors in any and all matters in the interim
between meetings of the Board of Directors. Within the powers
conferred upon it, action by the Committee shall be as binding
upon the Corporation as if done by the full Board of Directors.
Such action is to be reported to the Board of Directors for
review at its next meeting following such action.
ARTICLE V
Nominating Committee
Only persons who are nominated in accordance with the
provisions set forth in these bylaws shall be eligible to be
elected as directors at an annual or special meeting of
shareholders. Nomination for election to the Board of Directors
shall be made by or at the direction of the Board of Directors or
a Nominating Committee appointed by the Board of Directors. Such
Nominating Committee shall meet at the request of the President
at least annually and shall include at least three (3) directors.
Nomination for election of any person to the Board of
Directors may also be made by a shareholder entitled to vote on
such election if written notice of the nomination of such person
shall have been delivered to the Secretary of the Corporation at
the principal office of the Corporation not less than 60 days nor
more than 90 days prior to any annual or special meeting called
for the purpose of electing directors; provided, however, that if
less than 70 days' notice of prior public disclosure of the date
of such meeting is given or made to shareholders, notice by the
shareholder to be timely must be so received not later than the
close of business on the tenth day following the day on which
such notice of the date of such meeting or such public disclosure
was made. Each such notice shall set forth: (a) the name and
address of the shareholder who intends to make the nomination;
(b) a representation that such shareholder is a holder of record
of shares of the Corporation entitled to vote at such meeting and
intends to appear in person or by proxy at the meeting to
nominate the person or persons specified in the notice; (c) as to
each person to be nominated (i) such person's name and address,
employment history for the past five years, affiliations, if any,
with the Corporation and other corporations, the class and number
of shares of the Corporation that are owned of record or
beneficially by such person and information concerning any
transactions in such shares within the prior 60 days, whether
such person has been convicted in a criminal proceeding
(excluding traffic violations or similar misdemeanors) within the
past five years and the details thereof, whether such person has
been a party to any proceeding or subject to any judgment, decree
or final order with respect to violations of federal or state
securities laws within the past five years and the details
thereof, and the detail of any contract, arrangement,
understanding or relationships with any person with respect to
any securities of the Corporation, (ii) such person's written
consent to being named as a nominee and to serving as a director
if elected, and (iii) a description of all arrangements or
understandings between the shareholder and each nominee and any
other person or persons (naming such person or persons) pursuant
to which the nomination or nominations are to be made by the
shareholder. The chairman of the meeting may refuse to
acknowledge the nomination of any person not made in compliance
with the forgoing procedure.
ARTICLE VI
Audit Committee and Other Committees
Section 1. Audit Committee: The Board of Directors shall
annually appoint an Audit Committee from among its members, none
of whose voting members shall be salaried officers of the
Corporation, and whose number will include at least three
directors. The Audit Committee will meet at the request of the
Chairman of the Board or the President but not less frequently
than annually. The primary functions of the Audit Committee are
to provide additional assurance regarding the integrity of the
financial information used by the Board of Directors and
distributed to the public by the Corporation and to oversee and
monitor the activities of the Corporation's internal and external
processes.
Section 2. Other Committees: To the extent permitted by law,
the Board of Directors may appoint such other committees, either
standing or special, for such purposes and with such powers as
the Board of Directors may determine.
ARTICLE VII
Meetings of Directors
Section 1. Regular Meetings: A regular meeting of the Board
of Directors shall be held immediately after, and at the same
place as, the annual meeting of shareholders. In addition, the
Board of Directors may provide, by resolution, the time and
place, either within or without the State of North Carolina, for
the holding of additional regular meetings.
Section 2. Special Meetings: Special meetings of the Board
of Directors may be called by or at the request of the Chairman,
the President or any two directors. Such meetings may be held
either within or without the State of North Carolina.
Section 3. Notice of Meetings: Regular meetings of the Board
of Directors may be held without notice. Special meetings of the
Board of Directors shall be held upon such notice sent by any
usual means of communication not less than twenty-four (24) hours
before the meeting.
Section 4. Waiver of Notice: Any director may waive notice
of any meeting. The attendance by a director at a meeting shall
constitute a waiver of notice of such meeting, except where a
director attends a meeting for the express purpose of objecting
to the transaction of any business because the meeting is not
lawfully called or convened.
Section 5. Quorum: A majority of the Board of Directors
fixed by these Bylaws shall constitute a quorum for the
transaction of business at any meeting of the Board of Directors.
Section 6. Manner of Acting: Except as otherwise provided in
the Bylaws, the act of the majority of the directors present at a
meeting at which a quorum is present shall be the act of the
Board of Directors.
Section 7. Presumption of Assent: A director of the
Corporation who is present at a meeting of the Board of Directors
at which action on any corporate matter is taken shall be
presumed to have assented to the action taken unless his contrary
vote is recorded or his dissent is otherwise entered in the
minutes of the meeting or unless he shall file his written
dissent to such action with the person acting as the Secretary of
the meeting before the adjournment thereof or shall forward such
dissent by registered mail to the Secretary of the Corporation
immediately after the adjournment of the meeting. Such right to
dissent shall not apply to a director who voted in favor of such
action.
Section 8. Informal Action by Directors: Action taken by the
directors without a meeting is nevertheless action by the Board
of Directors if written consent to the action in question is
signed by all the directors and filed with the minutes of the
proceedings of the Board of Directors, whether done before or
after the action so taken.
ARTICLE VIII
Officers
Section 1. Number: The officers of the Corporation shall
consist of a Chairman of the Board, an Executive Vice Chairman,
one or more Vice Chairmen, a President, one or more Executive
Vice Presidents, one or more Senior Vice Presidents, one or more
First Vice Presidents, and such other specifically designated
Vice Presidents or Assistant Vice Presidents as may be determined
by the Board of Directors, a Secretary and Assistant Secretaries,
a Controller and Assistant Controllers and such other titled
officers as may be deemed necessary or advisable by the Board of
Directors, each of which officers or assistant officers shall
have such powers as may be delegated to them by the Board of
Directors or by these Bylaws. Any two or more offices may be
held by the same person, except that no officers may act in more
than one capacity where action of two or more officers is
required.
Section 2. Election and Term: The officers of the
Corporation shall be elected by the Board of Directors. Such
elections may be held at any regular or special meeting of the
Board of Directors. Each officer shall hold office until his
death, resignation, retirement, removal, disqualification, or his
successor is elected and qualified, each such officer serving at
the pleasure of the Board of Directors.
Section 3. Removal: Any officer or agent elected or
appointed by the Board of Directors may be removed by the Board
with or without cause; but such removal shall be without
prejudice to the contract rights, if any, of the person so
removed.
Section 4. Compensation: The compensation of all officers of
the Corporation shall be fixed by the Board of Directors or, as
delegated by the Board, by the Compensation Committee.
Section 5. President: The President, subject to the control
of the Board of Directors, shall supervise and control the
management of the Corporation in accordance with these Bylaws.
He shall be a member of the Board of Directors.
Section 6. Additional Duties of President: The President,
subject to the control of the Board of Directors, shall sign,
with any other proper officer, certificates for shares of the
Corporation and any deeds, leases, mortgages, bonds, contracts,
or other instruments which may be lawfully executed on behalf of
the Corporation, except where required or permitted by law to be
otherwise signed and executed and except where the signing and
execution thereof shall be delegated by the Board of Directors to
some other officer or agent, and, in general, he shall perform
all duties incident to the office of President and such other
duties as may be prescribed by the Board of Directors from time
to time. The President shall sign, either manually or by
facsimile signature, all certificates of stock and shall have the
power to make any and all transfers of the securities of the
Corporation.
Section 7. Duties of Executive Vice Presidents, Senior Vice
Presidents, First Vice Presidents and Vice Presidents: The
duties of the Executive Vice Presidents, the Senior Vice
Presidents, First Vice Presidents and other Vice Presidents shall
be to perform the tasks assigned and exercise the powers of the
office given to them as directed by the President and the Board
of Directors.
Section 8. Secretary: The Secretary shall keep accurate
records of the acts and proceedings of all meetings of
shareholders and directors. He shall give all notices required
by law and by the Bylaws. He shall have general charge of the
Corporate books and records and of the Corporate seal, and he
shall affix the Corporate seal to any lawfully executed
instrument requiring it. He shall have general charge of the
stock transfer books of the Corporation and shall keep, at the
registered or principal office of the Corporation, a record of
shareholders showing the name and address of each shareholder and
the number and class of the shares held by each. He shall sign
such instruments as may require his signature, either manually or
by facsimile signature, and, in general, shall perform all duties
incident to the office of Secretary and such other duties as may
be assigned him from time to time by the President or by the
Board of Directors.
Section 9. Assistant Secretaries: In the absence of the
Secretary in the event of his death, inability or refusal to act,
the Assistant Secretaries in the order of their length of service
as Assistant Secretaries, unless otherwise determined by the
Board of Directors, shall perform the duties of the Secretary,
and when so acting shall have all the powers of and be subject to
all the restrictions upon the Secretary. They shall perform such
other duties as may be assigned to them by the Secretary, by the
President, or by the Board of Directors. Any Assistant Secretary
may sign, with the President or a Vice President certificates for
shares of the Corporation.
Section 10. Controller: The Controller shall have custody of
all funds and securities belonging to the Corporation and shall
receive, deposit or disburse the same under the direction of the
Board of Directors. He shall keep full and accurate accounts of
the finances of the Corporation in books especially provided for
that purpose; and he shall cause a true statement of its assets
and liabilities as of the close of each fiscal year and of the
results of its operations and of changes in surplus for such
fiscal year, all in reasonable detail, to be made and filed at
the registered or principal office of the Corporation within four
(4) months after the end of such fiscal year and be available for
inspection by any shareholder for a period of ten (10) years; and
the Controller shall mail or otherwise deliver a copy of the
latest such statement to any shareholder upon his written request
therefor. The Controller, in general, shall perform all duties
incident to his office and such other duties as may be assigned
to him from time to time by the President or by the Board of
Directors.
Section 11. Assistant Controllers: The Assistant Controllers
shall perform in the order of their length of services as
Assistant Controllers, in the absence or disability of the
Controller, the duties and exercise the powers of the Controller,
and they shall perform, in general, such other duties as shall be
assigned to them by the Controller or by the President or by the
Board of Directors.
Section 12. Duties of Other Officers: The duties of all
officers and employees not defined and enumerated in the Bylaws
shall be prescribed and fixed by the President and, in carrying
out the authority to do all other acts necessary to be done to
carry out the prescribed duties, unless otherwise ordered by the
Board of Directors, shall include but not be limited to the power
to sign, certify or endorse notes, certificates of indebtedness,
deeds, checks, drafts or other contracts for and on behalf of the
Corporation and/or affix the seal of the Corporation to such
documents as may require it.
Section 13. Bonds: The Board of Directors may by resolution
require any or all officers, agents and employees of the
Corporation to give bond to the Corporation, with sufficient
sureties, conditioned on the faithful performance of the duties
of their respective offices or positions, and to comply with such
other conditions as may from time to time be required by the
Board of Directors.
ARTICLE IX
Contracts, Loans, Checks and Deposits
Section 1. Contracts: The Board of Directors may authorize
any officer or officers, agent or agents, to enter into any
contract, lease, or to execute and deliver any instrument on
behalf of the Corporation, and such authority may be general or
confined to specific instances. The Board of Directors may enter
into employment contracts for any length of time it deems wise.
Section 2. Loans: No loans shall be contracted on behalf of
the Corporation and no evidences of indebtedness shall be issued
in its name unless authorized by a resolution of the Board of
Directors. Such authority may be general or specific in nature
and scope.
Section 3. Checks and Drafts: All checks, drafts or other
orders for the payment of money issued in the name of the
Corporation shall be signed by such officer or officers, agent or
agents, of the Corporation and in such manner as from time to
time shall be determined by resolution of the Board of Directors.
Section 4. Deposits: All funds of the Corporation not
otherwise employed from time to time shall be deposited to the
credit of the Corporation in such depositories as the Board of
Directors shall direct.
ARTICLE X
Certificates for Shares and Their Transfer
Section 1. Certificates for Shares: Certificates
representing shares of the Corporation shall be issued in such
form as the Board of Directors shall determine to every
shareholder for the fully paid shares owned by him. These
certificates shall be signed by the President or any Vice
President and the Secretary, an Assistant Secretary, Treasurer or
an Assistant Treasurer. They shall be consecutively numbered or
otherwise identified; and the name and address of the persons to
whom they are issued, with the number of shares and the date of
issue, shall be entered on the stock transfer books of the
Corporation.
Section 2. Transfer of Shares: Transfer of shares shall be
made on the stock transfer books of the Corporation only upon
surrender of the certificates for the shares sought to be
transferred by the record holder thereof or by his duly
authorized agent, transferee, or legal representative. All
certificates surrendered for transfer shall be canceled before
new certificates for the transferred shares shall be issued.
Section 3. Closing Transfer Books and Fixing Record Date:
For the purpose of determining shareholders entitled to notice of
or to vote at any meeting of shareholders or any adjournment
thereof, or entitled to receive payment of any dividend, or in
order to make a determination of shareholders for any other
proper purpose, the Board of Directors may provide that the stock
transfer books shall be closed for a stated period but not to
exceed, in any case, fifty (50) days. If the stock transfer
books shall be closed for the purpose of determining shareholders
entitled to notice of or to vote at a meeting of shareholders,
such books shall be closed for at least ten (10) days immediately
preceding such meeting.
In lieu of closing the stock transfer books, the Board of
Directors may fix in advance a date as the record date for any
such determination of shareholders, such record date in any case
to be not more than fifty (50) days and, in case of a meeting of
shareholders, not less than ten (10) days immediately preceding
the date on which the particular action, requiring such
determination of shareholders, is to be taken.
If the stock transfer books are not closed and no record date
is fixed for the determination of shareholders entitled to notice
of or to vote at a meeting of shareholders, or shareholders
entitled to receive payment of a dividend, the date on which
notice of the meeting is mailed or the date on which the
resolution of the Board of Directors declaring such dividend is
adopted, as the case may be, shall be the record date for such
determination of shareholders.
When a determination of shareholders entitled to vote at any
meeting of shareholders has been made as provided in this
section, such determination shall apply to any adjournment
thereof except where the determination has been made through the
closing of the stock transfer books and the stated period of
closing has expired.
Section 4. Lost Certificates: The Board of Directors may
authorize the issuance of a new share certificate in place of a
certificate claimed to have been lost or destroyed, upon receipt
of an affidavit to such fact from the person claiming the loss or
destruction. When authorizing such issuance of a new
certificate, the Board may require the claimant to give the
Corporation a bond in such sum as the Board may direct to
indemnify the Corporation against loss from any claim with
respect to the certificate claimed to have been lost or
destroyed; or the Board may, by resolution reciting the
circumstances justifying such action, authorize the issuance of
the new certificate without requiring such a bond.
Section 5. Holder of Record: The Corporation may treat as
absolute owner of shares the person in whose name the shares
stand of record on its books just as if that person had full
competency, capacity and authority to exercise all rights of
ownership irrespective of any knowledge or notice to the contrary
or any description indicating a representative, pledge or other
fiduciary relation or any reference to any other instrument or to
the rights of any other person appearing upon its record or upon
the share certificate, except that any person furnishing to the
Corporation proof of his appointment as a fiduciary shall be
treated as if he were a holder of record of its shares.
ARTICLE XI
General Provisions
Section 1. Dividends: The Board of Directors from time to
time may declare, and the Corporation may pay, the dividends on
its outstanding shares in the manner and upon the terms and
conditions provided by law and by its Charter.
Section 2. Seal: The corporate seal of the corporation shall
consists of two concentric circles between which is "chartered
1982 Durham, North Carolina" and in the center of which is the
name of the corporation; and such seal, in the form approved and
adopted by the Board of Directors, shall be the corporate seal of
the corporation.
Section 3. Share Certificates: The share certificates of
this corporation shall be in a form approved by the Board of
Directors and shall indicate thereon a reference to any and all
restrictive conditions of said shares.
Section 4. Waiver of Notice: Whenever any notice is required
to be given to any shareholder or director under the provisions
of the North Carolina Business Corporation Act or under the
provisions of the Charter or Bylaws of this Corporation, a waiver
thereof in writing signed by the person or persons entitled to
such notice, whether before or after the time stated therein,
shall be equivalent to the giving of such notice.
Section 5. Amendments: Except as otherwise provided herein,
these Bylaws may be amended or repealed and new bylaws may be
adopted by the affirmative vote of a majority of the directors
then holding office at any regular or special meeting of the
Board of Directors.
Except as may be approved by the shareholders, the Board of
Directors shall have no power to adopt a bylaw: (1) providing for
the management of the Corporation otherwise than by the Board of
Directors or its Executive Committee; (2) increasing or
decreasing the number of directors; (3) classifying and
staggering the election of directors; or (4) requiring more than
a majority of the voting shares for a quorum at a meeting of the
shareholders or more than a majority of the votes cast to
constitute action by the shareholders, except where higher
percentages are required by law.
Section 6. Fiscal Year: The fiscal year of the Corporation
shall be fixed by the Board of Directors.
Section 7. Notification of Indemnification: The Secretary of
the Corporation, or his duly authorized delegate, shall give
written notice of any proposed change or amendment to ARTICLE XI,
Section 7 of the bylaws to each and every director of this
Corporation and of its subsidiary and affiliated Corporations,
and to each and every officer of said Corporations who would be
affected thereby. Such notice shall be delivered by first class
mail to the interested party at his or her address as disclosed
in the records of the Corporation with which he/she is
affiliated. Such notice shall be delivered at least fourteen
(14) days prior to the date on which action upon the proposed
amendment is to be taken, and shall set forth the substance of
the amendment as proposed.
Section 8. Indemnification: Any person who is or was serving
as a member of the Board of Directors of CCB Financial
Corporation, or who is or was serving, at the request of CCB
Financial Corporation, as a member of the Board of Directors of a
subsidiary or affiliated corporation of CCB Financial
Corporation, shall be indemnified by CCB Financial Corporation to
the fullest extent from time to time permitted by the law of
North Carolina and/or any applicable federal law, against
liability including, but not limited to, judgments, decrees,
fines, penalties, excise taxes and amounts paid in settlement
actually and reasonably incurred by him/her, and litigation
expenses, including costs and reasonable attorney fees, incurred
by the Director arising out of his or her status as a Director or
out of his or her activities in that capacity. Indemnification
as provided in this Article shall, to the fullest extent
permitted by law, extend to and cover all such liability and
litigation expenses incurred by the Director in connection with,
or in consequence of, any threatened, pending, or completed
action, suit or other proceeding, whether civil or criminal,
administrative or investigative, formal or informal, and whether
or not brought by or on behalf of CCB Financial Corporation or
otherwise, to which the Director is made, or is threatened to be
made, a party by reason of the fact that he or she is or was a
Director of CCB Financial Corporation or is or was a Director of
a subsidiary or affiliated corporation serving at the request of
CCB Financial Corporation.
To the fullest extent permitted by law, expenses incurred by a
Director in defending any such action, suit, or proceeding shall
be paid by CCB Financial Corporation in advance of the final
disposition of such action, suit, or proceeding upon receipt by
the Corporation of an unsecured, written promise by the Director
or on the Director's behalf to repay any and all amounts so paid
by CCB Financial Corporation unless it shall ultimately be
determined that the Director is entitled to be indemnified by CCB
Financial Corporation against such expenses.
All officers of the Corporation shall have rights co-equal and
co-extensive to those provided for Directors herein.
PROVIDED, however, that no indemnification shall be permitted
for any Director or Officer included herein against liability or
litigation expenses which may be incurred by such Director or
Officer on account of any activities of such Director or Officer
known or believed by the Director or Officer at the time taken to
be clearly in conflict with the best interest of CCB Financial
Corporation or any other corporation, partnership, joint
venture, trust or other enterprise which the Director or Officer
is or was serving or employed by at the request of CCB Financial
Corporation.
The Board of Directors is hereby authorized to take any and
all such action as may be necessary and appropriate to authorize
or in CCB Financial Corporation to carry out the purposes of this
Article including, but not limited to, authorizing the
Corporation to enter into indemnification agreements with
Directors and Officers included herein, or such other agreements
as may be necessary and appropriate to carry out the purposes of
this Article.
The rights provided for Directors and stated Officers herein
shall be in addition to and not exclusive of any other rights to
which they may be or become entitled under the General Statutes
of North Carolina, or under any other statutes, insurance
policies, or other agreements of any kind.
ARTICLE XII
Additional Constituents
In connection with the exercise of its or their judgment in
determining what is in the best interests of the Corporation and
its shareholders, the Board of Directors of the Corporation, any
committee of the Board of Directors, or any individual director
may, but shall not be required to, in addition to considering the
long-term and short-term interests of the shareholders, consider
any of the following factors and any other factors which it or
they deem relevant: (i) the social and economic effects of the
matter to be considered on the Corporation and its subsidiaries,
its and their employees, depositors, customers, and creditors,
and the communities in which the Corporation and its subsidiaries
operate or are located; and (ii) when evaluating a business
combination or a proposal by another person or persons to make a
business combination or a tender or exchange offer or any other
proposal relating to a potential change of control of the
Corporation or any of its subsidiaries or the sale of all or
substantially all of the assets of the Corporation or any of its
subsidiaries (x) the business and financial condition and
earnings prospects of the acquiring person or persons, including,
but not limited to, debt service and other existing financial
obligations, financial obligations to be incurred in connection
with the acquisition, and other likely financial obligations of
the acquiring person or persons, and the possible effect of such
conditions upon the Corporation and its subsidiaries and the
communities in which the Corporation and its subsidiaries operate
or are located, (y) the competence, experience, and integrity of
the acquiring person or persons and its or their management, and
(z) the prospects for successful conclusion of the business
combination, offer or proposal. The provisions of this Article
shall be deemed solely to grant discretionary authority to the
directors and shall not be deemed to provide to any constituency
the right to be considered. As used in this Article, the term
"person" means any individual, partnership, firm, corporation,
association, trust, unincorporated organization or other entity;
and, when two or more persons act as a partnership, limited
partnership, syndicate, or other group acting in concert for the
purpose of acquiring, holding, voting or disposing of securities
of the Corporation, such partnership, limited partnership,
syndicate or group shall also be deemed a "person" for purposes
of this Article.
REPORT OF VOTE BY PROXY COMMITTEE
CCB FINANCIAL CORPORATION
1999 ANNUAL MEETING OF SHAREHOLDERS
I. We, the undersigned, have been duly appointed, jointly
and severally, to vote at the Annual Meeting of the
Shareholders of CCB Financial Corporation the shares of
common stock of CCB Financial Corporation standing in the
name of the shareholders of record at the close of business
on February 26, 1999 who have filed valid appointments of
proxy with the Secretary.
II. We, the undersigned, have been duly appointed, jointly
and severally, to vote the shares of common stock of CCB
Financial Corporation evidenced by valid appointments of
proxy filed with the Secretary representing 32,272,565
shares of the total of 40,183,281 entitled to vote at such
meeting, and we do hereby vote the total shares so presented
as follows:
Proposal No. 1 - Election of Directors:
NOMINEE FOR WITHHELD
-------- --------- ----------
Three-Year Term:
Timothy B. Burnett 31,948,047 324,518
Blake P. Garrett, Jr. 31,952,723 319,842
Owen G. Kenan 31,951,161 321,404
Bonnie McElveen-Hunter 31,944,441 328,124
George J. Morrow 31,336,439 936,126
Ernest C. Roessler 31,953,365 319,200
H. Allen Tate, Jr. 31,917,339 355,226
Proposal No. 2 - Ratification of Appointment of
Independent Accounts:
FOR AGAINST ABSTAIN
----- -------- --------
32,122,854 34,106 115,603
WITNESS our signatures this 27th day of April, 1999.
/s/ LEO P. PYLYPEC
------------------
Leo P. Pylypec
/s/ W. HAROLD PARKER, JR.
------------------
W. Harold Parker, Jr.
/s/ MANUEL L. ROJAS
------------------
Manuel L. Rojas
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE SIX MONTHS ENDED JUNE 30,
1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000714612
<NAME> CCB FINANCIAL CORPORATION
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 235,174
<INT-BEARING-DEPOSITS> 22,218
<FED-FUNDS-SOLD> 220,194
<TRADING-ASSETS> 0
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<INVESTMENTS-CARRYING> 74,795
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<ALLOWANCE> 72,813
<TOTAL-ASSETS> 7,745,694
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0
0
<COMMON> 198,994
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<INTEREST-LOAN> 234,167
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<INTEREST-OTHER> 10,258
<INTEREST-TOTAL> 288,769
<INTEREST-DEPOSIT> 112,505
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<SECURITIES-GAINS> 529
<EXPENSE-OTHER> 120,818
<INCOME-PRETAX> 133,707
<INCOME-PRE-EXTRAORDINARY> 85,838
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 85,838
<EPS-BASIC> 2.14
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