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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
FORM 10-K
(Mark One)
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the fiscal year ended December 31, 1999
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ---------------------- to ----------------------
Commission File Number: 0-12358
CCB FINANCIAL CORPORATION
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(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C>
North Carolina 56-1347849
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(State or other jurisdiction of incorporation) (I.R.S. Employer Identification No.)
</TABLE>
111 Corcoran Street, Post Office Box 931, Durham, NC 27702
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(Address of principal executive offices)
Registrant's telephone number, including area code (919) 683-7777
Securities issued pursuant to Section 12(b) of the Act:
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<S> <C>
$5.00 par value Common Stock New York Stock Exchange
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(Title of class) (Name of exchange on which registered)
</TABLE>
Securities issued pursuant to Section 12(g) of the Act:
None
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 [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates of
the Registrant as of March 6, 2000 was $1,391,459,534. On March 6, 2000, there
were 39,430,660 outstanding shares of the Registrant's $5.00 par value Common
Stock.
DOCUMENT INCORPORATED BY REFERENCE
Portions of the Proxy Statement of Registrant for the Annual Meeting of
Shareholders to be held on April 18, 2000 are incorporated in Part III of this
report.
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<PAGE>
CROSS REFERENCE INDEX
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Page
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Part I.
Item 1. Business .................................................................... 3
Description ................................................................. 3
Average Balance Sheets ...................................................... 12
Net Interest Income Analysis -- Taxable Equivalent Basis .................... 12
Net Interest Income and Volume/Rate Variance -- Taxable Equivalent Basis .... 13
Investment Securities Portfolio ............................................. 20
Investment Securities -- Maturity/Yield Schedule ............................ 20
Types of Loans .............................................................. 18
Maturities and Sensitivities of Loans to Changes in Interest Rates .......... 19
Nonperforming and Risk Assets ............................................... 23
Loan Loss Experience ........................................................ 24
Average Deposits ............................................................ 21
Maturity Distribution of Large Denomination Time Deposits ................... 26
Return on Equity and Assets ................................................. 22
Short-Term Borrowings ....................................................... 41
Item 2. Properties .................................................................. 6
Item 3. Legal Proceedings ........................................................... 6
Item 4. Submission of Matters to a Vote of Security Holders ......................... 6
Part II.
Item 5. Market for the Registrant's Common Stock and Related Shareholder Matters .... 7
Item 6. Selected Financial Data ..................................................... 7
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations ................................................... 10
Item 7A. Quantitative and Qualitative Disclosures About Market Risk .................. 28
Item 8. Financial Statements and Supplementary Data ................................. 29
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure .................................................... 56
Part III.
Item 10. Directors and Executive Officers of the Registrant .......................... 56
Item 11. Executive Compensation ...................................................... 56
Item 12. Security Ownership of Certain Beneficial Owners and Management .............. 56
Item 13. Certain Relationships and Related Transactions .............................. 56
Part IV.
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K ............. 56
</TABLE>
<PAGE>
PART I.
Item 1. BUSINESS
REGISTRANT
CCB Financial Corporation ("CCB" which also may be referred to as "we",
"us" or "our") is a registered bank holding company headquartered in Durham,
North Carolina whose principal business is providing banking and other financial
services through its banking subsidiaries. CCB is the parent holding company of
Central Carolina Bank and Trust Company ("CCB Bank"), American Federal Bank, FSB
("AmFed") and Central Carolina Bank-Georgia ("CCB-Ga.") (collectively referred
to as the "Subsidiary Banks"). The principal assets of CCB are all of the
outstanding shares of common stock of the Subsidiary Banks and CCB's principal
sources of revenue are the interest income and dividends it receives from the
Subsidiary Banks. At December 31, 1999, CCB had consolidated assets of
approximately $8.2 billion and was the seventh largest banking organization
headquartered in North Carolina.
SUBSIDIARY BANKS
CCB Bank is chartered under the laws of the state of North Carolina to
engage in general banking business. CCB Bank offers commercial and retail
banking, savings and trust services through 168 offices located in 64 cities and
towns in North Carolina. In addition, it offers trust services through North
Carolina offices as well as an office located in Virginia and through a
subsidiary headquartered in Florida. CCB Bank had approximately $7 billion in
assets at December 31, 1999 and was the seventh largest bank in North Carolina.
CCB Bank provides a full range of financial services including accepting
deposits; making secured and unsecured loans; renting safe deposit boxes;
performing trust functions for corporations, employee benefit plans and
individuals; and providing certain insurance and brokerage services.
AmFed is a federally chartered savings bank located in Greenville, South
Carolina. AmFed offers commercial and retail banking through 39 offices located
in 23 cities and towns in South Carolina. Trust services are currently offered
through two trust offices. AmFed had approximately $1.3 billion in assets at
December 31, 1999. AmFed provides a full range of financial services including
accepting deposits; making secured and unsecured loans; renting safe deposit
boxes; performing trust functions for corporations, employee benefit plans and
individuals; and providing certain insurance and brokerage services. Management
anticipates merging the operations of AmFed into CCB Bank during the second
quarter of 2000, subject to regulatory approval.
CCB-Ga. was formed as a Georgia-chartered special purpose credit card
bank. During 1999, its credit card receivables were sold. As of December 31,
1999, CCB-Ga. is in the process of being dissolved.
NON-BANK SUBSIDIARIES
CCB Bank has six wholly-owned non-bank subsidiaries: CCBDE, Inc., CCB
Investment and Insurance Service Corporation ("CCBI"), Salem Trust Company,
Salem Advisors, Inc., Corcoran Holdings, Inc ("Corcoran") and Southland
Associates, Inc. CCBDE, Inc. is an investment holding company headquartered in
Wilmington, Delaware. CCBI provides full brokerage services through an
independent discount brokerage firm and sells annuity and mutual fund products.
Salem Trust Company, formed upon CCB Bank's acquisition of certain trust
operations from the former Barnett Bank, provides institutional trust services
in Florida. Salem Advisors, Inc. was formed in the fourth quarter of 1999 as an
investment advisory company. Corcoran is a holding company and sole owner of a
real estate investment trust formed in 1998, Watts Properties, Inc. Southland
Associates, Inc. previously engaged in real estate development and is not an
active corporation as of December 31, 1999.
AmFed has five wholly-owned non-bank subsidiaries: AMFEDDE, Inc., American
Service Corporation of S.C. ("ASC"), McBee Holdings, Inc. ("McBee"), Finance
South, Inc. ("Finance South") and Mortgage North. AMFEDDE, Inc. is an
investment holding company headquartered in Wilmington, Delaware. ASC sells
insurance, annuity and mutual fund products as well as providing full brokerage
services through an independent discount brokerage firm. McBee is a holding
company and sole owner of a loan participation company formed in 1998,
Greenville Participations, Inc. Finance South and Mortgage North are both in
the process of winding-down operations.
COMPETITION
Vigorous competition exists in all major areas where CCB is presently
engaged in business. Its Subsidiary Banks compete not only with other major
commercial banks but also with other diversified financial institutions such as
thrift institutions, money market and other mutual funds, securities firms,
mortgage companies, leasing companies, finance companies and a variety of
financial services and advisory companies. Additionally, competition is not
limited geographically as an increased variety of financial services are being
offered on the Internet. Competitor financial institutions larger than CCB may
be able to offer services and products that
3
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are not cost-efficient for the Subsidiary Banks to offer. In addition, the
competing financial institutions have access to greater financial resources that
allow higher lending limits than the Subsidiary Banks.
In the fourth quarter of 1999, the President signed into law the
Gramm-Leach-Bliley Act. This Act, also known as the Financial Services
Modernization Act, contains provisions that repeal Depression-era laws that
attempted to separate banks, securities firms and insurance companies. These
provisions may affect how CCB does business and the nature of the competition
that it faces. Under the Act, banks, securities firms or insurance companies may
affiliate under the umbrella of a financial holding company. A bank holding
company that wishes to become a financial holding company must satisfy a number
of conditions, including the requirements that all of its insured depository
institution subsidiaries are well-capitalized, well-managed and have at least a
"Satisfactory" CRA rating. Additionally, a financial holding company may not
commence a new financial activity or acquire control of a company engaged in
such activities without satisfying this CRA requirement. As a result of the Act,
CCB may face increased competition from more entities and from entities that may
have significantly larger financial resources. CCB has not made any decisions as
to whether to expand its existing insurance and securities brokerage operations.
The Act does not significantly alter the regulatory environment under which CCB
now operates. The Federal Reserve and the North Carolina Commissioner of Banks
will remain CCB's regulators. The nature of the activities that CCB may conduct
remain, in the first instance, a matter of North Carolina law. CCB's insurance
and securities activities are currently subject to regulation by the North
Carolina insurance commissioner and the SEC, respectively, and the Act does not
change this system.
The Act also contains several provisions concerning customer privacy. The
extent of CCB's obligations in this regard will not be known until the Federal
Reserve and the other federal banking agencies issue final rules applicable to
banks. At the time of the establishment of a customer relationship and no less
than annually thereafter, CCB will be required to disclose its privacy policy.
In addition, if CCB provides nonpublic personal information about customers to
third parties for use in the marketing of third party products, it must first
disclose this fact to its customers and provide them an opportunity to opt-out
of the arrangement. The Act does not limit the sharing of information among
affiliates within the CCB corporate structure. However, federal legislation
expanding the law to cover inter-affiliate sharing could be enacted in the
future. State laws with stronger financial privacy protections will be
enforceable rather than the federal law.
INTERSTATE BANKING AND BRANCHING
Federal law permits bank holding companies to acquire control of the assets
of banks in any state (the "Interstate Banking Law"). Acquisitions are subject
to anti-trust provisions that cap at 10% the portion of the total deposits of
insured depository institutions in the United States that a single bank holding
company may control, and generally cap at 30% the portion of the total deposits
of insured depository institutions in a state that a single bank holding company
may control. Under certain circumstances, states have the authority to increase
or decrease the 30% cap, and states may set minimum age requirements of up to
five years on target banks within their borders.
Subject to certain conditions, the Interstate Banking Law also permits
interstate branching by allowing a bank to merge with a bank located in a
different state. A state may prohibit interstate branching by enacting
legislation to "opt out" of the Interstate Banking Law. The Interstate Banking
Law also permits banks to open new branches or acquire existing branches of
banks located in other states that specifically permit that form of interstate
branching. North Carolina adopted statutes which, subject to conditions
contained therein, specifically allow out-of-state bank holding companies and
banks to acquire or merge with North Carolina banks and to establish or acquire
branches in North Carolina.
SUPERVISION AND REGULATION
The business and operations of CCB and its Subsidiary Banks are subject to
extensive federal and state governmental regulation and supervision. This
discussion is qualified in its entirety by reference to applicable statutory and
regulatory provisions and is not intended to be an exhaustive description of the
status of regulations applicable to CCB and the Subsidiary Banks' business.
Supervision, regulation and examination of CCB and the Subsidiary Banks and
their respective subsidiaries by the bank regulatory agencies are intended
primarily for the protection of depositors rather than CCB's shareholders. Any
change in applicable laws or regulations may have a material effect on CCB's
business.
Bank Holding Company Regulation
CCB is a bank holding company registered with the Board of Governors of the
Federal Reserve System (the "Federal Reserve") under the Bank Holding Company
Act of 1956, as amended (the "BHCA"), and is subject to supervision and
examination by and the regulations and reporting requirements of the Federal
Reserve. CCB is a legal entity separate and distinct from the Subsidiary Banks
and its other subsidiaries.
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There are a number of obligations and restrictions imposed by law on a bank
holding company and its insured depository institution subsidiaries that are
designed to minimize potential loss to depositors and the Federal Deposit
Insurance Corporation ("FDIC") insurance funds. For example, if a bank holding
company's insured depository institution subsidiary becomes "undercapitalized",
the bank holding company is required to guarantee (subject to certain limits)
the subsidiary's compliance with the terms of any capital restoration plan filed
with its appropriate federal banking agency. Also, a bank holding company is
required to serve as a source of financial strength to its depository
institution subsidiaries and to commit resources to support such institutions in
circumstances where it might not do so absent such policy. Under the BHCA, the
Federal Reserve has the authority to require a bank holding company to terminate
any activity or to relinquish control of a nonbank subsidiary upon the Federal
Reserve's determination that such activity or control constitutes a serious risk
to the financial soundness and stability of a depository institution subsidiary
of the bank holding company.
Bank holding companies are required to comply with the Federal Reserve's
risk-based capital guidelines which require a minimum ratio of total capital to
risk-weighted assets of 8%. At least half of the total capital is required to be
Tier 1 capital. 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 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.
There are also various legal restrictions on the extent to which CCB and
its nonbank subsidiaries can borrow or otherwise obtain credit from banking
subsidiaries under Section 23A of the Federal Reserve Act. In general, these
restrictions require that any such extensions of credit must be secured by
designated amounts of specified collateral and are limited, as to any one of CCB
or such nonbank subsidiaries, to 10% of the lending bank's capital stock and
surplus, as to CCB and all such nonbank subsidiaries in the aggregate, to 20% of
such lending bank's capital stock and surplus.
As a result of its ownership of a North Carolina-chartered commercial bank,
CCB also is registered with and subject to regulation by the North Carolina
Commissioner of Banks (the "Commissioner") under the state's bank holding
company laws.
Subsidiary Banks Regulation
CCB Bank is a North Carolina commercial bank and is subject to supervision
and examination by and regulations and reporting requirements of the
Commissioner and the FDIC. CCB Bank is a member of the Federal Home Loan Bank
("FHLB") system and its deposits are insured by the FDIC. AmFed is a
federally-chartered savings bank subject to regulation, examination and
supervision by the Office of Thrift Supervision ("OTS"), as its chartering
agency, and by the FDIC, as its deposit insurer. AmFed is also a member of the
FHLB system.
The federal banking agencies have broad enforcement powers over depository
institutions, including the power to terminate deposit insurance, to impose
substantial fines and other civil and criminal penalties, and to appoint a
conservator or receiver if any of a number of conditions are met. Almost every
aspect of the operations and financial condition of the Subsidiary Banks are
subject to extensive regulation and supervision and to various requirements and
restrictions under federal and state law. These include requirements governing
capital adequacy, liquidity, earnings, dividends, reserves against deposits,
management practices, branching, loans, investments and provision of services.
Insurance Assessments
CCB Bank and AmFed are subject to insurance assessments imposed by the
FDIC. Approximately two-thirds of CCB Bank's deposits are insured through the
FDIC's Bank Insurance Fund (the "BIF") and the remainder are insured by the
Savings Association Insurance Fund ("SAIF") due to deposits acquired through the
acquisition of thrift institutions in prior years which remain insured by the
SAIF. The actual assessment to be paid by each insured institution is based on
the institution's assessment risk classification, which is determined based on
whether the institution is considered "well capitalized", "adequately
capitalized" or "under capitalized", as such terms have been defined in
applicable federal regulations, and whether the institution is considered by its
supervisory agency to be financially sound or to have supervisory concerns. The
FDIC is refining its risk assessment process to better and more promptly reflect
changes in insured institutions' risk. Both CCB Bank and AmFed have the highest
rating in regards to the FDIC insurance assessment and, accordingly, pay the
lowest deposit insurance premium.
Fiscal and Monetary Policy
Banking is a business which depends on interest rate differentials. In
general, the difference between the interest paid by a bank on its deposits and
its other borrowings, and the interest received by a bank on its loans and
securities holdings, constitutes the major portion of its earnings. Thus, the
earnings and growth of CCB and its Subsidiary Banks are subject to the influence
of economic
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conditions generally, both domestic and foreign, and also to the monetary and
fiscal policies of the United States and its agencies, particularly the Federal
Reserve. The Federal Reserve regulates the supply of money through various
means, including open market dealings in United States government securities,
the discount rate at which banks may borrow from the Federal Reserve, and the
reserve requirements on deposits. The nature and timing of any changes in such
policies and their effect on CCB and its subsidiaries cannot be predicted.
YEAR 2000 ISSUE
The Year 2000 Issue presented a number of challenges to financial
institutions' management in terms of both personnel and monetary resources, the
pervasiveness of computer-oriented processes and the complexity of modern-day
banking operations. Due to the comprehensive strategic plan CCB developed to
identify and remediate potential Year 2000 Issues well in advance of the
millennium change-over, CCB to date has not experienced any problems related to
the Year 2000 Issue. See "Year 2000 Issue" in Management's Discussion and
Analysis of Financial Condition and Results of Operations for further
information regarding the financial impact of the Year 2000 Issue on CCB's
operations.
EXECUTIVE OFFICERS OF THE REGISTRANT
All officers of CCB are elected or appointed by the board of directors to
hold their offices at the pleasure of the board. At February 28, 2000, the
executive officers of CCB were as follows:
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<CAPTION>
Age at
Name December 31, 1999
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Ernest C. Roessler 58
Eugene J. McDonald 67
David B. Jordan 63
William L. Abercrombie, Jr. 52
J. Scott Edwards 53
Richard L. Furr 50
Sheldon M. Fox 39
<CAPTION>
Has Served as
an Executive
Officer of the
Name Position Corporation Since
- ----------------------------- -------------------------------------------------------------- ------------------
<S> <C> <C>
Ernest C. Roessler Chairman of the Board, President and Chief Executive Officer 1988
Eugene J. McDonald Executive Vice Chairman of the Board 1998
David B. Jordan Vice Chairman of the Board 1995
William L. Abercrombie, Jr. Vice Chairman of the Board 1997 (1)
J. Scott Edwards Senior Executive Vice President 1988
Richard L. Furr Senior Executive Vice President 1988
Sheldon M. Fox Executive Vice President and Chief Financial Officer 1998 (2)
</TABLE>
(1) Prior to August 1997, Mr. Abercrombie served as Chairman, President and
Chief Executive Officer of American Federal Bank, FSB which was acquired by
CCB on August 1, 1997. He continues to serve in those capacities.
(2) Prior to October 1998, Mr. Fox was a Partner with KPMG LLP.
EMPLOYEE RELATIONS
As of December 31, 1999, CCB and its Subsidiary Banks employed 2,831
full-time equivalent employees. CCB and its Subsidiary Banks are not parties to
any collective bargaining agreements and employee relations are considered to be
good.
Item 2. PROPERTIES
CCB's principal executive offices are located at 111 Corcoran Street,
Durham, North Carolina in a 17-story office building constructed in 1937. This
office building is owned in fee simple by CCB Bank and also serves as the home
office of CCB. A majority of the administrative functions are located therein.
CCB's Customer Service Center is a one-story leased building also located in
Durham, North Carolina that has been occupied since 1990. The Subsidiary Banks
operate 207 banking offices, approximately 90 of which are either leased
buildings or leased property on which the Subsidiary Banks have constructed
banking offices.
Item 3. LEGAL PROCEEDINGS
See Note 14 to the Consolidated Financial Statements for a discussion of
legal proceedings.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There has been no submission of matters to a vote of shareholders during
the quarter ended December 31, 1999.
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PART II.
Item 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SHAREHOLDER
MATTERS
See "Capital Resources" in Management's Discussion and Analysis of
Financial Condition and Results of Operations for CCB's stock prices and
dividends paid during 1999 and 1998 and discussion of other shareholder matters.
Such prices and dividends have been adjusted to reflect a two-for-one stock
split effected in the form of a 100 percent common stock dividend paid on
October 1, 1998 to shareholders of record on September 15, 1998. On February 1,
2000, a dividend of $.29 per share was declared for payment on April 3, 2000 to
shareholders of record as of March 15, 2000.
Each outstanding share of CCB's common stock has attached to it one right
(a "Right") issued pursuant to an Amended and Restated Rights Agreement (the
"Rights Agreement") as discussed in Note 11 to the Consolidated Financial
Statements. The Rights will not prevent a takeover of CCB. However, the Rights
may cause substantial dilution to a person or group that acquires 15 percent or
more (or 10% or more in certain circumstances) of CCB's common stock unless the
Rights are redeemed prior to such acquisition or terminated by the Board of
Directors. Nevertheless, the Rights should not interfere with a transaction that
is in the best interests of CCB and its shareholders because the Rights can be
redeemed or terminated, as described in Note 11 to the Consolidated Financial
Statements, before the consummation of such transaction.
The complete terms of the Rights are set forth in the Rights Agreement and
CCB's Amended and Restated Articles of Incorporation, as amended. The
description of the Rights and the Rights Agreement is qualified in its entirety
by reference to such documents. A copy of the Rights Agreement can be obtained
upon written request to W. Harold Parker, Jr., Senior Vice President and
Controller, CCB Financial Corporation, P.O. Box 931, Durham, North Carolina
27702.
Item 6. SELECTED FINANCIAL DATA
The following selected financial data should be read in conjunction with
CCB's Consolidated Financial Statements and the accompanying notes presented
elsewhere herein. CCB's 1999 acquisition of Stone Street Bancorp consummated on
October 1, 1999 was accounted for as a purchase and accordingly, results of
operations of Stone Street Bancorp are included in the consolidated results of
operations from the date of purchase. Prior year amounts have been restated to
reflect the 1997 mergers with AmFed and Salem Trust Bank and the 1995 merger
with Security Capital Bancorp ("Security Capital") all of which were accounted
for as poolings-of-interests.
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Six Year Summary of Selected Financial Data
(In Thousands Except Per Share Data)
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Years Ended December 31
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1999 1998 1997 1996 1995
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SUMMARY OF OPERATIONS
Interest income $ 589,599 577,426 550,463 512,575 492,409
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Interest expense 257,547 254,562 250,099 237,572 234,880
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Net interest income 332,052 322,864 300,364 275,003 257,529
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Provision for loan losses 14,296 15,884 16,376 17,361 11,007
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Net interest income after provision 317,756 306,980 283,988 257,642 246,522
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Other income (1) 124,239 110,903 92,919 84,767 67,001
- ---------------------------------------------------
Gain on sale of credit card receivables 32,837 -- -- -- --
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Net investment securities gains (losses) 1,378 2,178 480 (2,161) (816)
- ---------------------------------------------------
Other expenses (2) 244,036 230,217 226,198 209,833 198,207
- --------------------------------------------------- ---------- ------- ------- ------- -------
Income before income taxes and extraordinary item 232,174 189,844 151,189 130,415 114,500
- ---------------------------------------------------
Income taxes (3) 81,351 68,632 55,765 43,589 37,356
- --------------------------------------------------- ---------- ------- ------- ------- -------
Income before extraordinary item 150,823 121,212 95,424 86,826 77,144
- ---------------------------------------------------
Extraordinary item (4) -- -- -- -- (1,709)
- --------------------------------------------------- ---------- ------- ------- ------- -------
Net income $ 150,823 121,212 95,424 86,826 75,435
=======================================================================================================================
PER SHARE (5)
Income before extraordinary item:
Basic $ 3.77 2.96 2.31 2.11 1.90
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Diluted 3.74 2.93 2.28 2.08 1.85
- ---------------------------------------------------
Net income:
Basic 3.77 2.96 2.31 2.11 1.86
- ---------------------------------------------------
Diluted 3.74 2.93 2.28 2.08 1.81
- ---------------------------------------------------
Cash dividends 1.10 .99 .89 .80 .72
- ---------------------------------------------------
Book value 18.19 17.05 16.40 14.82 13.66
- ---------------------------------------------------
Average shares outstanding:
Basic 39,944 40,898 41,438 41,107 40,589
- ---------------------------------------------------
Diluted 40,315 41,409 41,947 41,815 41,800
- ---------------------------------------------------
AVERAGE BALANCES
Assets $7,823,864 7,332,506 6,943,989 6,570,573 6,218,290
- ---------------------------------------------------
Loans 5,587,527 5,276,042 4,877,187 4,464,026 4,113,207
- ---------------------------------------------------
Earning assets 7,432,544 6,977,550 6,594,704 6,216,419 5,850,981
- ---------------------------------------------------
Deposits 6,519,029 6,141,074 5,800,128 5,449,912 5,153,952
- ---------------------------------------------------
Interest-bearing liabilities 6,161,472 5,780,005 5,495,194 5,242,467 5,047,523
- ---------------------------------------------------
Shareholders' equity 704,841 678,264 638,988 574,759 511,031
- ---------------------------------------------------
SELECTED PERIOD END BALANCES
Assets $8,186,298 7,740,353 7,138,528 6,880,205 6,589,762
- ---------------------------------------------------
Loans 5,954,184 5,487,337 5,093,569 4,745,663 4,267,175
- ---------------------------------------------------
Reserve for loan losses 77,266 73,182 67,594 61,257 55,114
- ---------------------------------------------------
Deposits 6,717,025 6,459,764 5,984,597 5,741,454 5,421,376
- ---------------------------------------------------
Shareholders' equity 719,961 687,894 681,360 611,449 556,917
- ---------------------------------------------------
RATIOS
Income before extraordinary item to:
Average assets 1.93% 1.65 1.37 1.32 1.24
- ---------------------------------------------------
Average shareholders' equity 21.40 17.87 14.93 15.11 15.10
- ---------------------------------------------------
Net income to:
Average assets 1.93 1.65 1.37 1.32 1.21
- ---------------------------------------------------
Average shareholders' equity 21.40 17.87 14.93 15.11 14.76
- ---------------------------------------------------
Net interest margin, taxable equivalent 4.69 4.76 4.70 4.56 4.56
- ---------------------------------------------------
Net loan losses to average loans .16 .20 .21 .25 .17
- ---------------------------------------------------
Dividend payout ratio 29.18 33.45 38.53 37.91 38.71
- ---------------------------------------------------
Average equity to average assets 9.01 9.25 9.20 8.75 8.22
- ---------------------------------------------------
<CAPTION>
Years Ended
December 31
----------- Growth
1994 Rate %
------------ ----------
<S> <C> <C>
SUMMARY OF OPERATIONS
Interest income 401,588 8.0
- ---------------------------------------------------
Interest expense 168,483 8.9
- --------------------------------------------------- --------
Net interest income 233,105 7.3
- ---------------------------------------------------
Provision for loan losses 10,761 5.8
- --------------------------------------------------- --------
Net interest income after provision 222,344 7.4
- ---------------------------------------------------
Other income (1) 58,128 16.4
- ---------------------------------------------------
Gain on sale of credit card receivables -- --
- ---------------------------------------------------
Net investment securities gains (losses) 357 --
- ---------------------------------------------------
Other expenses (2) 180,963 6.2
- --------------------------------------------------- --------
Income before income taxes and extraordinary item 99,866 18.4
- ---------------------------------------------------
Income taxes (3) 38,421 16.2
- --------------------------------------------------- --------
Income before extraordinary item 61,445 19.7
- ---------------------------------------------------
Extraordinary item (4) -- --
- --------------------------------------------------- --------
Net income 61,445 19.7
===========================================================================
PER SHARE (5)
Income before extraordinary item:
Basic 1.50 20.2
- ---------------------------------------------------
Diluted 1.47 20.5
- ---------------------------------------------------
Net income:
Basic 1.50 20.2
- ---------------------------------------------------
Diluted 1.47 20.5
- ---------------------------------------------------
Cash dividends .66 10.8
- ---------------------------------------------------
Book value 11.69 9.2
- ---------------------------------------------------
Average shares outstanding:
Basic 40,874 (.5)
- ---------------------------------------------------
Diluted 41,959 (.8)
- ---------------------------------------------------
AVERAGE BALANCES
Assets 5,575,057 7.0
- ---------------------------------------------------
Loans 3,569,065 9.4
- ---------------------------------------------------
Earning assets 5,230,756 7.3
- ---------------------------------------------------
Deposits 4,581,111 7.3
- ---------------------------------------------------
Interest-bearing liabilities 4,496,256 6.5
- ---------------------------------------------------
Shareholders' equity 478,314 8.1
- ---------------------------------------------------
SELECTED PERIOD END BALANCES
Assets 6,065,652 6.2
- ---------------------------------------------------
Loans 3,952,160 8.5
- ---------------------------------------------------
Reserve for loan losses 50,902 8.7
- ---------------------------------------------------
Deposits 4,980,250 6.2
- ---------------------------------------------------
Shareholders' equity 472,091 8.8
- ---------------------------------------------------
RATIOS
Income before extraordinary item to:
Average assets 1.10
- ---------------------------------------------------
Average shareholders' equity 12.85
- ---------------------------------------------------
Net income to:
Average assets 1.10
- ---------------------------------------------------
Average shareholders' equity 12.85
- ---------------------------------------------------
Net interest margin, taxable equivalent 4.61
- ---------------------------------------------------
Net loan losses to average loans .16
- ---------------------------------------------------
Dividend payout ratio 44.00
- ---------------------------------------------------
Average equity to average assets 8.58
- ---------------------------------------------------
</TABLE>
8
<PAGE>
(1) Other income in 1997 includes $2.3 million of gain ($1.4 million after-tax)
on the sale of a subsidiary which increased net income per diluted share by
$.03.
(2) Other expenses include merger-related expense of $17.9 million in 1997
related to mergers with AmFed and Salem Trust, $10.3 million in 1995 related
to the merger with Security Capital and $1.1 million in 1994 related to
Security Capital's acquisition of a savings and loan association. Other
expenses also include the levy in 1996 of a $12.9 million special assessment
by the FDIC. The after-tax effect of the aforementioned non-recurring
expense items was to decrease diluted net income per share by $.31 in 1997,
$.19 per share in 1996, $.17 per share in 1995 and $.02 per share in 1994.
(3) During 1996, a tax benefit of $1.6 million ($.04 per diluted share) was
recorded for forgiveness of the recapture of tax bad debt reserves of a
former savings bank subsidiary. During 1994, Security Capital recognized a
one-time charge of approximately $5.6 million ($.13 per diluted share) for
deferred tax liabilities recorded in anticipation of the merger of Security
Capital's three savings subsidiaries into its commercial bank subsidiary.
(4) The extraordinary item resulted from a prepayment penalty on the early
extinguishment of debt by AmFed and decreased diluted net income per share
by $.04.
(5) Amounts for 1997 and prior years have been restated to give effect to the
two-for-one stock split effected in the form of a 100% stock dividend paid
October 1, 1998. Cash dividends per share have not been restated for
mergers.
- --------------------------------------------------------------------------------
9
<PAGE>
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The purpose of this discussion and analysis is to provide a description of
the financial condition and changes therein and results of operations of CCB
Financial Corporation ("CCB" which also may be referred to as "we", "us" or
"our") and its wholly-owned subsidiaries, Central Carolina Bank and Trust
Company ("CCB Bank"), American Federal Bank, FSB ("AmFed") and Central Carolina
Bank-Georgia ("CCB-Ga.") (collectively, the "Subsidiary Banks") for the years
ended December 31, 1999, 1998 and 1997. The consolidated financial statements
also include the accounts and results of operations of CCB Bank's wholly-owned
subsidiaries: CCBDE, Inc.; CCB Investment and Insurance Service Corporation
("CCBI"); Salem Trust Company; Salem Advisors, Inc., Corcoran Holdings, Inc.,
and its wholly-owned subsidiary, Watts Properties, Inc.; and Southland
Associates, Inc. AmFed's wholly-owned subsidiaries are also included in the
consolidated financial statements: AMFEDDE, Inc.; American Service Corporation
of S.C. ("ASC"); McBee Holdings, Inc. and its wholly-owned subsidiary,
Greenville Participations, Inc.; Finance South, Inc. ("Finance South") and
Mortgage North. The discussion and analysis of financial condition and results
of operations should be read in conjunction with the consolidated financial
statements and accompanying notes appearing elsewhere in this report. Our
financial condition and results of operations are discussed as a single
business segment.
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 our markets, success and timing of business initiatives, technological
change and changes in legal, regulatory and tax policies.
Readers should also consider information on risk and uncertainties noted in
the discussions of competition, interstate banking and branching, and
supervision and regulation contained elsewhere in this report on Form 10-K.
Acquisitions and Other Changes in Corporate Structure
On October 1, 1999, CCB acquired Stone Street Bancorp, Inc. ("Stone
Street"), a $129 million savings bank located in the Winston-Salem, North
Carolina area. The acquisition was accounted for as a purchase and resulted in
the issuance of approximately 646,000 shares of CCB stock. In accordance with
purchase accounting, the operations and income of Stone Street are included in
the income of CCB from the date of purchase. On October 1, 1998, CCB's
shareholders received a two-for-one stock split effected in the form of a 100%
stock dividend. The accompanying discussion and analysis of financial condition
and results of operations and the consolidated financial statements have been
restated as if the stock split had occurred at the beginning of the earliest
period presented.
Results of Operations
Performance Overview
With the consolidation trend in the financial services industry and entry
of new competition due to regulatory changes, management continually monitors
the services and products the Subsidiary Banks offer to ensure both their
quality to customers and return to shareholders. As a result of this analysis,
management determined in the second quarter of 1999 that it would be in our best
interests to sell the majority of our credit card receivables and offer consumer
credit cards through an agency agreement rather than as an issuer. We will
continue to issue commercial credit cards. The credit card industry has
increasingly become an economies-of-scale business and we did not have the
volume of accounts needed to achieve those economies-of-scale. Additionally, the
industry has experienced, and management expects it to continue to experience, a
high percentage of charge-offs due to high levels of consumer debt. With our
sale of $151 million of consumer credit card receivables (the "Credit Card
Sale"), we realized a gain of $32.8 million ($19.9 million after-tax). The
Credit Card Sale increased diluted income per share by $.49.
Net income in 1999 totaled $150.8 million compared to 1998's $121.2 million
and this equated to $3.74 per diluted share in 1999 versus $2.93 in 1998. Net
income per diluted share was $2.28 in 1997. Returns on average assets and
average shareholders' equity in 1999 were 1.93% and 21.40%, respectively,
compared to 1998's 1.65% and 17.87%. These ratios were 1.37% and 14.93% in 1997.
Table 1 compares the contributions to net income per diluted share by income
statement caption for the years ended December 31, 1999, 1998 and 1997 and the
respective changes from year to year.
10
<PAGE>
T A B L E 1
Components of Diluted Income Per Share
<TABLE>
<CAPTION>
Years Ended December 31 Change From
------------------------------------- ------------------------
1999 1998 1997 1999/1998 1998/1997
----------- ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Interest income $ 14.62 13.95 13.12 .67 .83
- -------------------------------------
Interest expense 6.39 6.15 5.96 .24 .19
- ------------------------------------- -------- ----- ----- ---- ----
Net interest income 8.23 7.80 7.16 .43 .64
- -------------------------------------
Provision for loan losses .35 .38 .39 (.03) (.01)
- ------------------------------------- -------- ----- ----- ----- -----
Net interest income after provision 7.88 7.42 6.77 .46 .65
- -------------------------------------
Other income (1) 3.93 2.73 2.23 1.20 .50
- -------------------------------------
Other expenses (2) 6.05 5.56 5.39 .49 .17
- ------------------------------------- -------- ----- ----- ----- -----
Income before income taxes 5.76 4.59 3.61 1.17 .98
- -------------------------------------
Income taxes 2.02 1.66 1.33 .36 .33
- ------------------------------------- -------- ----- ----- ----- -----
Net income (1) (2) $ 3.74 2.93 2.28 .81 .65
- ------------------------------------- -------- ----- ----- ----- -----
</TABLE>
(1) Other income includes gains totaling $.81 per diluted share ($.49 after-tax)
realized in the 1999 Credit Card Sale and $.05 per diluted share ($.03
after-tax) realized in the 1997 sale of a subsidiary.
(2) Other expenses in 1997 include merger-related expense totaling $.43 per
diluted share ($.31 after-tax).
- --------------------------------------------------------------------------------
Operating Income
Operating income, which we define as income before non-recurring items,
increased 8% over 1998. Operating income per diluted share was $3.25, $2.93 and
$2.56 in 1999, 1998 and 1997, respectively. Over the past five years, our
results of operations have been significantly impacted by the non-recurring
items described below.
o As discussed previously, we realized a $32.8 million gain ($19.9 million
after-tax) on the 1999 Credit Card Sale.
o To effect two mergers in 1997 and one in 1995, CCB incurred $17.9 million
and $10.3 million, respectively, of merger-related expense which included
severance and other employee benefit costs, excess facilities costs, system
conversion costs and other transaction-related expenses. The after-tax effect of
the merger-related expense was $13.1 million in 1997 and $7.3 million in 1995.
During 1997, AmFed sold substantially all the assets of a subsidiary resulting
in a gain of $2.3 million or $1.4 million after-tax.
o During 1996, CCB experienced two non-recurring items. First, the
Subsidiary Banks paid the Federal Deposit Insurance Corporation (the "FDIC") a
special one-time levy totaling $12.9 million (the "FDIC Special Assessment")
used to recapitalize the Savings Association Insurance Fund (the "SAIF").
Second, through Congressional legislative action, the recapture of tax bad debt
reserves required upon a savings bank's conversion to a commercial bank was
forgiven. Consequently, a $1.6 million tax benefit was recorded prior to a
former savings bank subsidiary being merged into CCB Bank (the "Recapture Tax
Benefit").
Excluding the effects of the non-recurring items, returns on average assets
were 1.67% for 1999, 1.65% for 1998 and 1.54% for 1997 and returns on average
shareholders' equity were 18.57% for 1999, 17.87% for 1998 and 16.76% for 1997.
Net Interest Income
Net interest income is one of the major determining factors in a financial
institution's performance as it is generally the principal source of earnings.
It is impacted by the volume, yield/cost and relative mix of both earning assets
and interest-bearing and noninterest-bearing sources of funds. The difference
between earning asset yields (with a taxable equivalent adjustment made to
provide comparability between tax-exempt and taxable income) and the average
rate paid for interest-bearing funds is measured by the interest rate spread and
the net interest margin. Table 2 presents average balance sheets and a net
interest income analysis on a taxable equivalent basis for each of the years in
the three-year period ended December 31, 1999.
11
<PAGE>
T A B L E 2
Average Balances and Net Interest Income Analysis
(Taxable Equivalent Basis -- In Thousands) (1)
<TABLE>
<CAPTION>
Years Ended December 31
-------------------------------------------------------------------
1999 1998
---------------------------------- --------------------------------
Interest Average Interest Average
Average Income/ Yield/ Average Income/ Yield/
Balance Expense Rate Balance Expense Rate
------------- ---------- --------- ----------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Earning assets:
Loans (2) $5,587,527 486,292 8.70% 5,276,042 470,888 8.93
- --------------------------------------------
U.S. Treasury and U.S. Government agencies
and corporations (3) 1,417,637 94,511 6.67 1,230,904 86,148 6.99
- --------------------------------------------
States and political subdivisions 75,339 6,536 8.68 80,693 7,093 8.79
- --------------------------------------------
Equity and other securities (3) 46,813 3,728 7.96 46,775 3,707 7.92
- --------------------------------------------
Federal funds sold and other short-term
investments 253,169 12,569 4.96 294,652 16,341 5.55
- --------------------------------------------
Time deposits in other banks 52,059 2,750 5.28 48,484 2,376 4.90
- -------------------------------------------- ---------- ------- ---- --------- ------- ----
Total earning assets 7,432,544 606,386 8.16% 6,977,550 586,553 8.41
- -------------------------------------------- ------- ---- ------- ----
Non-earning assets:
Cash and due from banks 218,504 204,985
- --------------------------------------------
Premises and equipment 99,249 89,236
- --------------------------------------------
All other assets, net 73,567 60,735
- -------------------------------------------- ---------- ---------
Total assets $7,823,864 7,332,506
======================================================== =========
Interest-bearing liabilities:
Savings and time deposits $5,675,782 232,767 4.10% 5,364,255 232,609 4.34
- --------------------------------------------
Short-term borrowed funds 266,993 12,016 4.50 245,778 11,822 4.81
- --------------------------------------------
Long-term debt 218,697 12,764 5.83 169,972 10,131 5.96
- -------------------------------------------- ---------- ------- ---- --------- ------- ----
Total interest-bearing liabilities 6,161,472 257,547 4.18% 5,780,005 254,562 4.41
- -------------------------------------------- ------- ---- ------- ----
Other liabilities and shareholders' equity:
Demand deposits 843,247 776,819
- --------------------------------------------
Other liabilities 114,304 97,418
- --------------------------------------------
Shareholders' equity 704,841 678,264
- -------------------------------------------- ---------- ---------
Total liabilities and
shareholders' equity $7,823,864 7,332,506
======================================================== =========
Net interest income and
net interest margin (4) $348,839 4.69% 331,991 4.76
============================================ ================= ==================
Interest rate spread (5) 3.98% 4.00
============================================ ==== ====
<CAPTION>
Years Ended December 31
-------------------------------
1997
-------------------------------
Interest Average
Average Income/ Yield/
Balance Expense Rate
----------- ---------- --------
<S> <C> <C> <C>
Earning assets:
Loans (2) 4,877,187 442,917 9.08
- --------------------------------------------
U.S. Treasury and U.S. Government agencies
and corporations (3) 1,348,214 92,749 6.88
- --------------------------------------------
States and political subdivisions 81,967 7,254 8.85
- --------------------------------------------
Equity and other securities (3) 47,327 3,676 7.77
- --------------------------------------------
Federal funds sold and other short-term
investments 184,653 10,342 5.60
- --------------------------------------------
Time deposits in other banks 55,356 2,716 4.91
- -------------------------------------------- --------- ------- ----
Total earning assets 6,594,704 559,654 8.49
- -------------------------------------------- ------- ----
Non-earning assets:
Cash and due from banks 184,261
- --------------------------------------------
Premises and equipment 85,815
- --------------------------------------------
All other assets, net 79,209
- -------------------------------------------- ---------
Total assets 6,943,989
=======================================================
Interest-bearing liabilities:
Savings and time deposits 5,111,486 229,600 4.49
- --------------------------------------------
Short-term borrowed funds 304,372 15,371 5.05
- --------------------------------------------
Long-term debt 79,336 5,128 6.46
- -------------------------------------------- --------- ------- ----
Total interest-bearing liabilities 5,495,194 250,099 4.55
- -------------------------------------------- ------- ----
Other liabilities and shareholders' equity:
Demand deposits 688,642
- --------------------------------------------
Other liabilities 121,165
- --------------------------------------------
Shareholders' equity 638,988
- -------------------------------------------- ---------
Total liabilities and
shareholders' equity 6,943,989
=======================================================
Net interest income and
net interest margin (4) 309,555 4.70
============================================ ======= ====
Interest rate spread (5) 3.94
============================================ ====
</TABLE>
(1) The taxable equivalent basis is computed using 35% federal and applicable
state tax rates in 1999, 1998 and 1997.
(2) The average loan balances include non-accruing loans. Loan fees of $17.1
million, $16.2 million, and $13.2 million for 1999, 1998, and 1997,
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.
- --------------------------------------------------------------------------------
The net interest margin was 4.69% in 1999, seven basis points lower than
1998's. Over this same period, net interest income on a taxable equivalent basis
grew $16.8 million to $348.8 million. The principal factors impacting CCB's
yields and net interest income are discussed below.
Interest Rates
The generally low interest rates of fourth quarter 1998 carried over into
1999 until the third quarter when the Federal Reserve began a series of three
25-basis point increases in the discount rate, which generally affects other
interest rates. CCB's prime rate began 1999 at 7.75%, increased 25 basis points
in July, August and November and ended the year at 8.50%. Prime was 8.50% for
the first three quarters of 1998 but dropped 75 basis points in the fourth
quarter to end the year at 7.75%. Due to the 1999 interest rate increases not
occurring until later in the year, the yield on earning assets and the rate paid
on interest-bearing liabilities fell 25 and 23 basis points, respectively, for
the full year 1999. The interest rate spread tightened two basis points to 3.98%
for the year ended December 31, 1999 and fell to 3.92% for the fourth quarter of
1999. With our balance sheet sensitivity, in times of rising interest rates, we
feel the effect of higher costs of interest-bearing liabilities sooner than
increases in yield from earning assets. Management expects further increases in
interest rates in 2000 as the Federal Reserve acts to combat inflationary
pressures which will further tighten our interest rate spread and net interest
margin.
12
<PAGE>
Interest-Earning Assets
The 1999 growth in the earning asset portfolio was $455 million on average
of which $311.5 million was due to continuing strong loan demand. Within the
average loan portfolio, loans extended for construction and development purposes
continue to comprise the largest percentage at 32% for 1999 compared to 1998's
26%. Loans extended for commercial purposes remained stable at 23% of the
portfolio. Approximately $125 million of interest-earning assets were acquired
through Stone Street, primarily mortgage loans. In the Credit Card Sale, we sold
$151 million of higher-yielding credit card receivables. However, while these
assets had a high yield, they also typically experienced a higher charge-off
percentage than other loan types. Average earning assets as a percentage of
total average assets has been stable at 95% over the last three years.
Interest-Bearing Liabilities
CCB's loan growth has been more rapid than its growth in low cost deposits
which has resulted in funding the loan growth in part with higher-cost funds.
Average savings and time deposits grew $311.5 million and demand deposits grew
$66.4 million from 1998's levels. Substantially all deposits originate within
the market areas of CCB Bank and AmFed. Stone Street did not have a significant
proportion of noninterest-bearing deposits which adversely impacted the net
interest margin. As with the rest of the financial institutions industry, we
have seen decreased growth rates in traditional deposits as consumers elect
other savings and investment opportunities. However, as discussed in Liquidity
and Interest-Sensitivity, alternative but higher-cost sources to fund future
loan growth are available if deposit growth does not keep pace with loan demand.
See Table 3 for further analysis of the effects of volume and rate on net
interest income.
T A B L E 3
VOLUME AND RATE VARIANCE ANALYSIS
(Taxable Equivalent Basis -- In Thousands) (1) (2)
<TABLE>
<CAPTION>
Years Ended December 31
-------------------------------------------------------------------
1999 1998
-------------------------------------------------------------------
Volume Rate Total Volume Rate Total
Variance Variance Variance Variance Variance Variance
---------- ------------ ---------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
INTEREST INCOME:
Loans $ 27,239 (11,835) 15,404 35,853 (7,882) 27,971
- -------------------------------------------------------------
U.S. Treasury and U.S. Government agencies and corporations 12,476 (4,113) 8,363 (8,082) 1,481 (6,601)
- -------------------------------------------------------------
States and political subdivisions (469) (88) (557) (112) (49) (161)
- -------------------------------------------------------------
Equity and other securities 4 17 21 (44) 75 31
- -------------------------------------------------------------
Federal funds sold and short-term investments (2,149) (1,623) (3,772) 6,092 (93) 5,999
- -------------------------------------------------------------
Time deposits in other banks 182 192 374 (335) (5) (340)
- ------------------------------------------------------------- -------- ------- ------ ------ ------ ------
Increase (decrease) in interest income 37,283 (17,450) 19,833 33,372 (6,473) 26,899
- ------------------------------------------------------------- -------- ------- ------ ------ ------ ------
INTEREST EXPENSE:
Savings and time deposits 13,270 (13,112) 158 10,948 (7,939) 3,009
- -------------------------------------------------------------
Short-term borrowed funds 983 (789) 194 (2,846) (703) (3,549)
- -------------------------------------------------------------
Long-term debt 2,858 (225) 2,633 5,429 (426) 5,003
- ------------------------------------------------------------- -------- ------- ------ ------ ------ ------
Increase (decrease) in interest expense 17,111 (14,126) 2,985 13,531 (9,068) 4,463
- ------------------------------------------------------------- -------- ------- ------ ------ ------ ------
INCREASE (DECREASE) IN NET INTEREST INCOME $ 20,172 (3,324) 16,848 19,841 2,595 22,436
=================================================================================================================================
</TABLE>
(1) The taxable equivalent basis is computed using 35% federal and applicable
state tax rates in 1999, 1998 and 1997.
(2) The rate/volume variance for each category has been allocated on a
consistent basis between rate and volume variances based on the percentage
of the rate or volume variance to the sum of the absolute value of the two
variances.
- --------------------------------------------------------------------------------
CCB realized net taxable equivalent interest income of $586.6 million in
1998. Average earning asset increases of $382.8 million in 1998 were due solely
to internal growth. Increases in the volume of earning assets resulted in a
$33.4 million increase in total interest income which was partially offset by
declines in rate. The overall yield on earning assets decreased eight basis
points to 8.41% from 1997's 8.49% primarily due to decreased loan yields. The
cost of interest-bearing liabilities decreased 14 basis points to 4.41% from
1997's 4.55% primarily due to the lower rates paid for savings and time
deposits, 4.34% in 1998 versus 4.49% in 1997. As a result, net interest income
on a taxable equivalent basis increased by $22.4 million or 7.2%. The net
interest margin increased by six basis points to 4.76% for 1998. This compares
to a 4.70% net interest margin for 1997. The interest rate spread grew six basis
points to 4.00% for 1998.
13
<PAGE>
Noninterest Income and Noninterest Expenses
The levels of noninterest income have become a significant factor in
determining our financial success considering the trend of tightening the
interest rate spread and the net interest margin over the last several years.
Noninterest income, excluding net securities gains and losses and the gain from
the Credit Card Sale, totaled $124.2 million in 1999 compared to 1998's $111
million, an 11.9% increase. Increases in noninterest income were due to growth
of the asset and customer bases, a stronger emphasis on the collection of fees
for services rendered and new revenue-generating customer service initiatives.
In addition, we have incorporated a heightened sales focus in the branch network
which is key to the success of the "sales centers" discussed below. Noninterest
income, excluding net securities gains and losses, totaled $92.9 million in
1997. The five-year compound growth rate for noninterest income was 16.4% at
December 31, 1999.
Service charges on deposit accounts continue to be the largest source of
noninterest income totaling $61.8 million in 1999, $54.1 million in 1998 and
$44.9 million in 1997. Increases were due primarily to an increase in the number
of accounts subject to service charges, repricing of certain customer services
and ATM surcharge income on our expanding ATM network. The largest components of
the growth within service charges on deposits included account analysis fees on
commercial transaction accounts, service charges on commercial and personal
accounts and overdraft charges. We monitor service charges closely and evaluate
such fees periodically to ensure that they reflect the costs of providing the
services and are competitive in the marketplace.
Over the past two years, trust and custodian fees grew to $12.6 million in
1999 from 1997's $8.4 million due to growth of assets managed, new trust
business acquired in 1998 and the continued promotion of employee benefit trust
products introduced in 1996. Expansion of trust operations have resulted from
the mid-1998 acquisition of institutional trust business which operates from
Salem Trust Company's three Florida offices, the opening of a trust office in
Virginia in the third quarter of 1998 and the mid-1997 opening of a two-office
trust department by AmFed. Additionally, an investment advisory subsidiary was
formed in the fourth quarter of 1999. CCB's trust operations will continue to
pursue employee benefit-related trust business through the marketing of the
401(k) Spectrum(R) product. Managed assets totaled $5 billion at December 31,
1999 and $4 billion at December 31, 1998. We anticipate further growth in the
Trust area as the trust offices/operations formed in the past three years
continue to mature. Three new professional banking offices are planned for
certain metropolitan areas; these offices will cater to higher-wealth
individuals with a focus on providing high-touch service and will provide
additional sources of fee income.
Sales and insurance commissions income totaled $12.8 million in 1999, $10.8
million in 1998 and $9.4 million in 1997. Brokerage services are offered through
an affiliation with an independent brokerage firm. Brokerage fees of $9.9
million were generated in 1999 and $8.2 million in 1998. Through a correspondent
bank program initiated in 1997, we provide brokerage services to two other
financial institutions which generates additional commission income; we will
continue to pursue additional correspondent bank relationships. Revenue in this
category is also derived from the sale of insurance and annuity products. During
1998 and 1999, CCBI hired a number of experienced insurance agents to build our
network. Management anticipates a significant increase in the revenues from the
sales of insurance and annuity products as our investment of resources in this
product comes to fruition.
Negative goodwill (the excess of net assets acquired over costs) totaling
$33.6 million was recorded in connection with acquisitions completed in 1993 and
is being accreted to income over a ten-year period on a straight-line basis.
Accretion of negative goodwill totaled $3.4 million in 1999, 1998 and 1997.
With the rise in mortgage loan interest rates during 1999, the volume of
mortgage originations dropped significantly. Mortgage loan origination volume
totaled $779 million in 1999 compared to nearly $1 billion in 1998.
Consequently, mortgage operations income for 1999 amounted to $9.1 million
compared to 1998's $12.9 million. Income from mortgage operations was comprised
of servicing income ($2.2 million), origination fees on loans held for sale
($3.5 million) and secondary marketing income ($3.4 million) in 1999. Included
within secondary marketing income is the capitalization of mortgage servicing
rights ("MSR") from the sale of mortgage loans with servicing retained. At
December 31, 1999 and 1998, there was no impairment of the recorded MSR and no
adjustment to the MSR valuation account was made during 1999 or 1998. In the
past several years, we have sold mortgages with servicing released through
contracts with out-of-state financial institutions. We intend to continue
selling the majority of originated servicing due to the lack of volume needed to
make servicing a profitable business.
Also included in "other operating income" are gains on sales of branches
totaling $1.1 million in both 1999 and 1998 and $645,000 in 1997.
Net securities gains of $1.4 million, $2.2 million and $480,000 were
realized in 1999, 1998 and 1997, respectively, through the sale or issuer call
of securities held in the available for sale portfolio. The net securities gains
realized in 1999 resulted primarily from the sale or issuer call of U.S.
government agencies and mortgage-backed securities. The net securities gains in
1998 were realized through the sale of mortgage-backed securities which were
sold because the securities were paying down on an accelerated basis due to the
low mortgage interest rates.
14
<PAGE>
Despite our advances in increasing noninterest income over the past three
years, management believes significant future growth opportunities are available
through the previously discussed further expansion of trust, brokerage and
insurance services and through branch optimization and alternative delivery
channels such as CCB7.
Branch optimization includes not only placing branches in the right
locations and closing duplicate facilities but designing branch operations for
maximum productivity/profitability. During 1997, CCB Bank experimented with a
new branch concept called sales centers. The new design seeks to increase
productivity from traditional branch levels by employing energetic,
sales-oriented individuals who are trained to function as a teller, sales and
service representative and loan originator. Accordingly, their compensation is
based on their revenue production. As of December 31, 1999, 40 branches are
operating as sales centers; management plans to convert 50% of existing branches
to the sales center model by the end of 2001.
We entered the in-store market in 1995 with the opening of a CCB7 within a
newly constructed Harris Teeter supermarket. Since then, we have opened nineteen
more CCB7's located in high-volume Harris Teeter stores. These banking offices
have extended hours during the weekday and are open on weekends and selected
holidays. Four new full-service CCB7 offices and five CCB7's comprising only an
ATM are planned for 2000. By the end of 2000, the CCB7 network will total 25
full-service offices and 16 ATM offices. We value our in-store banking offices
as additional sources of consumer loans/deposits and fee income.
Table 4 presents various operating efficiency ratios for the prior five
years (excluding the impact of non-recurring items). Noninterest income as a
percentage of average assets has risen significantly since 1995 due to a greater
focus on identifying and collecting additional sources of noninterest revenue.
T A B L E 4
Operating Efficiency Ratios
<TABLE>
<CAPTION>
Years Ended December 31
------------------------------
1999 1998 1997
---------- --------- ---------
<S> <C> <C>
As a percentage of average assets (1):
Noninterest income 1.61% 1.54 1.31
- ------------------------------------------------------------------------------------------- ----- ----- -----
Personnel expense 1.74 1.70 1.65
- -------------------------------------------------------------------------------------------
Occupancy and equipment expense .44 .42 .41
- -------------------------------------------------------------------------------------------
Other operating expense .93 1.03 .93
- ------------------------------------------------------------------------------------------- ------ ----- -----
Total noninterest expense 3.11 3.15 2.99
- ------------------------------------------------------------------------------------------- ------ ----- -----
Net overhead (noninterest expense less noninterest income) 1.50% 1.61 1.68
=======================================================================================================================
Noninterest expense as a percentage of net interest income and noninterest income (1) (2) 51.43% 51.73 51.99
- -------------------------------------------------------------------------------------------
Average assets per employee (in millions) $ 2.76 2.68 2.63
- -------------------------------------------------------------------------------------------
Years Ended December
31
-------------------
1996 1995
--------- ---------
As a percentage of average assets (1):
Noninterest income 1.26 1.06
- ------------------------------------------------------------------------------------------- ----- -----
Personnel expense 1.61 1.60
- -------------------------------------------------------------------------------------------
Occupancy and equipment expense .43 .41
- -------------------------------------------------------------------------------------------
Other operating expense .95 1.01
- ------------------------------------------------------------------------------------------- ----- -----
Total noninterest expense 2.99 3.02
- ------------------------------------------------------------------------------------------- ----- -----
Net overhead (noninterest expense less noninterest income) 1.73 1.96
=============================================================================================================
Noninterest expense as a percentage of net interest income and noninterest income (1) (2) 53.80 56.46
- -------------------------------------------------------------------------------------------
Average assets per employee (in millions) 2.47 2.36
- -------------------------------------------------------------------------------------------
</TABLE>
(1) Excludes the 1999 Credit Card Sale, the 1997 gain on sale of a subsidiary,
the FDIC Special Assessment incurred in 1996 and merger-related expenses
incurred in 1997 and 1995.
(2) Presented using taxable equivalent net interest income. The taxable
equivalent basis is computed using a 35% federal tax rate and applicable
state tax rates.
- --------------------------------------------------------------------------------
Noninterest expense rose $13.8 million in 1999 to $244 million over 1998's
$230.2 million, a 6% increase. Noninterest expense in 1997 totaled $208.3
million, excluding the impact of $17.9 million of merger-related expense. As
reported in Table 4, total noninterest expense as a percentage of average assets
improved to 3.11% in 1999 from 1998's 3.15% indicating that noninterest expenses
grew at a slower rate than average assets.
The majority of the increase in noninterest expense was due to a $11.9
million increase in personnel expense. Higher personnel expense was due
primarily to an increased staff level and general wage increases and a greater
emphasis on incentive-based compensation. Commissions and incentive pay totaled
$18.5 million in 1999 compared to $14.2 million in 1998 and $9.9 million in
1997. Temporary and contract personnel costs rose $548,000 in 1999 due to a
tight labor market in CCB's market area and the need for specialized personnel
to implement technological improvements, including remediation of the Year 2000
Issue.
Net occupancy and equipment expenses were up $4.6 million for the year
ended December 31, 1999 due primarily to higher computer equipment costs. These
costs were incurred as a result of upgrading or purchasing equipment as part of
Year 2000 remediation efforts and other continuing technological initiatives
such as implementation of a data warehouse, improved product profitability
models and improved branch platforms.
Other operating expense decreased by $2.7 million in 1999 after 1998's
$10.1 million increase over 1997's level. This decrease resulted from a
tightened control over expenses, completion of the Year 2000 remediation efforts
and lower outside consultant fees. Expense categories which decreased in 1999
included legal and professional services, marketing and deposit and other
insurance expense. During 1998, other operating expenses increased due to
improvements in the branch network, Year 2000 remediation and
15
<PAGE>
other initiatives undertaken to improve future revenue streams. Increased
expenses were experienced in professional services, printing and office
supplies, credit card program-related expenses and data processing.
CCB's efficiency ratio (noninterest expense as a percentage of taxable
equivalent net interest income plus noninterest income) has improved over the
past four years from 56.46% in 1995 to 51.43% in 1999 as disclosed in Table 4.
Management's goal is to reach and maintain an efficiency ratio of less than 50%.
We will continue to closely monitor this ratio and anticipate continuing
improvement as new revenue-enhancement opportunities are identified and
cost-containment programs are continued.
Income Taxes
Income tax expense was $81.4 million in 1999, $68.6 million in 1998 and
$55.8 million in 1997. CCB's effective income tax rates were 35%, 36.2% and
36.9% in 1999, 1998 and 1997, respectively. Tax planning strategies implemented
late in 1998 had a positive impact on 1999's effective tax rate and are expected
to continue in the future. Non-deductible merger-related expense resulted in
1997's higher effective tax rate. Net deferred tax assets of $35.6 million are
recorded on the Consolidated Balance Sheets as of December 31, 1999. CCB has
determined that a valuation allowance for the deferred tax assets was not
warranted at December 31, 1999.
Fourth Quarter Results
During the fourth quarter of 1999, our net income totaled $33.4 million or
$.83 per diluted share compared to 1998's $31.6 million or $.77 per diluted
share. Income statements for each of the quarters in the five-quarter period
ended December 31, 1999 are included in Table 5. Returns on average assets were
1.64% in 1999 and 1.66% in 1998; returns on average shareholders' equity were
18.13% in both 1999 and 1998.
Average assets for the three months ended December 31, 1999 totaled $8.1
billion compared to 1998's $7.5 billion. Average earning assets increased 6.7%
to $7.7 billion. With the rise in interest rates during 1999, the yield on
earning assets rose 7 basis points from 1998's fourth quarter level but the cost
of interest-bearing liabilities rose 13 basis points. Consequently, the net
interest margin for the fourth quarter of 1999 was 8 basis points lower than
1998's 4.72%. The previously discussed Federal Reserve interest rate increases
in the third and fourth quarters of 1999 resulted in compression of our interest
rate spread. Our interest rate spread for the second quarter of 1999 was 4.07%
compared to third quarter's 3.96% and fourth quarter's 3.92%. We expect further
compression of our interest rate spread in 2000 if interest rates continue to
rise.
Noninterest income as a percentage of average assets was 1.59% for both the
fourth quarter of 1999 and 1998. Noninterest expense as a percentage of average
assets was 3.08% for 1999 compared to 1998's 3.07%. The efficiency ratios for
these periods in 1999 and 1998 were 51.58% and 50.58%, respectively.
16
<PAGE>
T A B L E 5
Income Statements for Five Quarters Ended December 31, 1999
(In Thousands Except Per Share Data)
<TABLE>
<CAPTION>
Three Months Ended
---------------------------------------------------------------
12/31/99 9/30/99 6/30/99 3/31/99 12/31/98
------------- --------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C>
Total interest income $ 154,344 146,486 145,796 142,973 145,517
- ---------------------------------------------
Total interest expense 69,620 63,741 62,071 62,115 62,756
- --------------------------------------------- --------- ------- ------- ------- -------
NET INTEREST INCOME 84,724 82,745 83,725 80,858 82,761
- ---------------------------------------------
Provision for loan losses 3,525 3,284 5,676 1,811 4,320
- --------------------------------------------- --------- ------- ------- ------- -------
NET INTEREST INCOME AFTER PROVISION 81,199 79,461 78,049 79,047 78,441
- --------------------------------------------- --------- ------- ------- ------- -------
Service charges on deposits 16,685 15,626 15,289 14,231 14,368
- ---------------------------------------------
Trust income 3,456 2,959 3,163 2,996 2,766
- ---------------------------------------------
Sales and insurance commissions 3,353 3,281 3,430 2,742 2,324
- ---------------------------------------------
Merchant discount 3,048 3,002 3,240 2,576 2,411
- ---------------------------------------------
Secondary marketing and mortgage servicing 1,297 532 2,893 4,409 3,169
- ---------------------------------------------
Accretion of negative goodwill 839 839 839 839 839
- ---------------------------------------------
Gain on sale of credit card receivables (1) -- -- 32,837 -- --
- ---------------------------------------------
Other 2,949 2,310 3,289 4,127 3,609
- ---------------------------------------------
Securities gains, net 849 -- 408 121 789
- --------------------------------------------- --------- ------- ------- ------- -------
Total other income 32,476 28,549 65,388 32,041 30,275
- --------------------------------------------- --------- ------- ------- ------- -------
Personnel 34,678 34,330 34,408 32,889 30,358
- ---------------------------------------------
Occupancy and equipment 9,404 9,069 8,388 8,183 8,180
- ---------------------------------------------
Foreclosed property expense 152 103 28 273 159
- ---------------------------------------------
Deposit and other insurance 630 611 615 634 565
- ---------------------------------------------
Amortization of intangible assets 1,074 1,025 1,026 1,025 1,040
- ---------------------------------------------
Other 16,827 15,315 17,131 16,218 18,011
- --------------------------------------------- --------- ------- ------- ------- -------
Total other expenses 62,765 60,453 61,596 59,222 58,313
- --------------------------------------------- --------- ------- ------- ------- -------
INCOME BEFORE INCOME TAXES 50,910 47,557 81,841 51,866 50,403
- ---------------------------------------------
Income taxes 17,470 16,012 29,756 18,113 18,814
- --------------------------------------------- --------- ------- ------- ------- -------
NET INCOME $ 33,440 31,545 52,085 33,753 31,589
==============================================================================================================
EARNINGS PER COMMON SHARE:
Income before Credit Card Sale (1):
Basic $ .84 .80 .80 .84 .78
- ---------------------------------------------
Diluted .83 .79 .80 .83 .77
- ---------------------------------------------
Net income:
Basic .84 .80 1.30 .84 .78
- ---------------------------------------------
Diluted .83 .79 1.29 .83 .77
- ---------------------------------------------
</TABLE>
(1) Credit Card Sale gain was $19.9 million after-tax.
- --------------------------------------------------------------------------------
17
<PAGE>
Financial Position
Loans
Loans are the largest category of earning assets and produce the highest
yields. Loan growth and maintenance of a high quality loan portfolio are key
ingredients to improved earnings. In our effort toward reaching these goals,
management shifted loan resources during 1999. In addition to the Credit Card
Sale, we sold $200 million of mortgage loans in the first quarter of 1999.
Adjusting for the sales of mortgages and credit card receivables, average loans
grew 13.5% during the year. The five-year compound growth rate for average loans
is 9.4% and for average assets is 7%.
Our loan portfolio is comprised primarily of diversified credits with no
significant borrower or industry concentration. We believe our strategy of
lending to medium-sized commercial customers and consumers allows a higher
interest rate spread which helps support the net interest margin. Table 6 shows
the year-end breakdown of the major categories of the loan portfolio for the
previous five years based upon regulatory classifications. The Stone Street
acquisition added approximately $109 million of loans. Table 7 provides maturity
and interest-sensitivity information about certain segments of the loan
portfolio.
Substantially all loans are made on a secured basis with the exception of
certain revolving credit accounts and, with the exception of marketable mortgage
loans, are originated for retention in the portfolio. In general, we do not
purchase loans or participate with others in the origination of loans and
confine our lending activities to North and South Carolina except for automobile
loans which are offered from Virginia to Georgia through referrals from a major
automobile insurance company. Lending officers of the Subsidiary Banks generally
consider the cash flow or earnings power of the borrower as the primary source
of repayment. The Subsidiary Banks do not engage in highly leveraged
transactions or foreign lending activities. There were no concentrations of
loans exceeding 10% of total loans other than those categories included in Table
6.
T A B L E 6
LOAN PORTFOLIO
(In Thousands)
<TABLE>
<CAPTION>
As of December 31
-------------------------------------------------------------------------
1999 1998 1997 1996 1995
------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Commercial, financial and agricultural $ 697,776 686,133 688,040 549,831 629,814
- ----------------------------------------
Real estate -- construction 1,152,081 906,916 733,026 629,829 504,461
- ----------------------------------------
Real estate -- mortgage 3,406,789 3,143,637 2,915,851 2,602,639 2,279,621
- ----------------------------------------
Instalment loans to individuals 571,771 488,110 506,339 739,991 594,508
- ----------------------------------------
Revolving credit 58,926 214,685 212,794 193,561 230,142
- ----------------------------------------
Lease financing 76,424 54,955 43,265 38,323 37,223
- ---------------------------------------- ---------- --------- --------- --------- ---------
Total gross loans 5,963,767 5,494,436 5,099,315 4,754,174 4,275,769
- ----------------------------------------
Less: Unearned income 9,583 7,099 5,746 8,511 8,594
- ---------------------------------------- ---------- --------- --------- --------- ---------
Total loans $5,954,184 5,487,337 5,093,569 4,745,663 4,267,175
- ---------------------------------------- ---------- --------- --------- --------- ---------
</TABLE>
Loans in the commercial, financial and agricultural category consist
primarily of short-term and/or floating rate commercial loans made to
medium-sized companies. There is no substantial loan concentration in any one
industry or to any one borrower. Real estate-construction loans are primarily
made to commercial developers and residential contractors on a floating rate
basis. Cash flow analyses for each project are the primary decision factor, with
additional reliance upon collateral values. We expect moderate to strong growth
in these categories during 2000 while maintaining our focus on quality credit
underwriting.
Real estate-mortgage loans consist primarily of loans secured by first or
second deeds of trust on primary residences ($2.3 billion or 66% of total real
estate-mortgage loans). The remainder of real estate-mortgage loans are
primarily for commercial purposes and often include the commercial borrower's
real property in addition to other collateral. Our general policy is to sell
current originations of fixed rate residential mortgages and retain only certain
loans in the portfolio. The level and direction of long-term interest rates had
a dramatic impact on the volume of mortgage originations. Higher interest rates
in the last half of 1999 significantly decreased the volume of loan originations
and these interest rate levels are estimated to continue during 2000 and
possibly rise higher. Consequently, we expect very modest growth in this
category during 2000.
Instalment loans to individuals consist primarily of loans secured by
automobiles and other consumer personal property. Lending officers consider the
customer's debt obligations, ability and willingness to repay and general
economic trends in their decision to extend credit. Since 1993, we have had an
alliance with a major automobile insurance company, which, through referrals
from company agents, has increased the amount of automobile loans outstanding.
The agreements with the insurance company cover a market area stretching from
Virginia to Georgia.
18
<PAGE>
Revolving credit includes overdraft protection and traditional credit card
products. As discussed earlier, the consumer credit card portfolio was sold in
the Credit Card Sale. We retained only commercial credit card accounts. We will
earn an agent fee for new cards opened and total cards outstanding from the
company to which the credit card portfolio was sold. We expect only moderate
growth during 2000.
The leasing portfolio, net of unearned income, increased 39% in 1999 to
$76.4 million due to our increasing the number of lenders originating leases in
1998. The leasing portfolio is not concentrated in any one line of business or
type of equipment. We anticipate continued strong growth in this category during
2000.
T A B L E 7
MATURITIES AND SENSITIVITIES OF LOANS TO CHANGES IN INTEREST RATES
(In Thousands)
<TABLE>
<CAPTION>
As of December 31, 1999
-----------------------------------------------
Commercial,
Financial and Real Estate-
Agricultural Construction Total
--------------- -------------- ------------
<S> <C> <C> <C>
Due in one year or less $ 163,905 70,255 234,160
- ---------------------------------------
Due after one year through five years:
Fixed interest rates 291,914 298,212 590,126
- ---------------------------------------
Floating interest rates 45,637 54,546 100,183
- ---------------------------------------
Due after five years:
Fixed interest rates 50,196 209,248 259,444
- ---------------------------------------
Floating interest rates 146,124 519,820 665,944
- --------------------------------------- --------- --------- ---------
Total $ 697,776 1,152,081 1,849,857
=======================================================================================
</TABLE>
Investment Securities
Average investment securities increased 13.4% from 1998. These funds were
primarily reinvested in shorter-term U.S. Government agencies as there was not a
rate advantage in committing funds to longer-term investments and in
anticipation of continued strong loan demand. Average investment securities
totaled 20.7% of average earning assets for 1999 versus 19.5% for 1998. Taxable
securities remain the primary component of the portfolio. See Table 8 for
additional information about CCB's investment securities portfolio.
CCB segregates debt and equity securities that have readily determinable
fair values into one of three categories for accounting and reporting purposes.
Debt and equity securities that we have the positive intent and ability to hold
until maturity are classified as held to maturity and are reported at amortized
cost. Securities held to maturity totaled $73.4 million, comprising 4.5% of the
total investment securities portfolio at December 31, 1999. Debt and equity
securities that are bought and held principally for the purpose of selling them
in the near term are classified as trading securities and reported at fair
value, with unrealized gains and losses included in earnings. CCB had no trading
securities at any time during the three years ended December 31, 1999. Debt and
equity securities not classified as either held to maturity or as trading
securities are classified as available for sale securities and are reported at
fair value, with unrealized gains and losses excluded from earnings and reported
in a separate component of shareholders' equity, net of taxes. At December 31,
1999, securities available for sale totaled $1.6 billion, which represented over
95% of the total portfolio. The mark-to-market adjustment for available for sale
securities totaled $22.2 million in unrealized losses at December 31, 1999 due
to the previously discussed rise in interest rates during the latter part of
1999. After considering applicable tax benefits, the mark-to-market adjustment
resulted in a $13.7 million decrease to total shareholders' equity. As of
December 31, 1998, the mark-to-market adjustment for unrealized gains in
available for sale securities totaled $21.7 million and resulted in a net $13.3
million addition to total shareholders' equity after applying applicable taxes.
CCB does not currently anticipate selling a significant amount of the securities
available for sale in the near future. Future fluctuations in shareholders'
equity may occur due to changes in the market values of debt and equity
securities classified as available for sale.
19
<PAGE>
T A B L E 8
Investment Securities Portfolio
(In Thousands)
<TABLE>
<CAPTION>
As of December 31
--------------------------------------------------------------------
1999 1998 1997
-------------------------- ------------------------- ------------
Amortized Carrying Amortized Carrying Amortized Carrying
Cost Value Cost Value Cost Value
------------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
SECURITIES AVAILABLE FOR SALE
U.S. Treasury $ 354,316 355,230 389,043 400,914 472,396 480,659
- ---------------------------------------------------
U.S. Government agencies and corporations 1,183,709 1,160,142 826,367 835,128 841,034 854,481
- ---------------------------------------------------
Equity securities 47,347 47,748 47,067 48,156 45,946 46,967
- --------------------------------------------------- ----------- ---------- --------- --------- --------- ---------
Total securities available for sale $ 1,585,372 1,563,120 1,262,477 1,284,198 1,359,376 1,382,107
================================================================================================================================
Maturity and Yield Schedule as of December 31, 1999
Weighted
Carrying Average
Value Yield (1)
----------- ----------
U.S. Treasury:
Within 1 year $ 149,231 6.80%
- ---------------------------------------------------
After 1 but within 5 years 205,999 6.80
- --------------------------------------------------- ----------- ----------
Total U.S. Treasury 355,230 6.80
- --------------------------------------------------- ----------- ----------
U.S. Government agencies and corporations:
Within 1 year 21,140 6.38
- ---------------------------------------------------
After 1 but within 5 years 728,573 6.60
- ---------------------------------------------------
After 5 but within 10 years 352,785 7.25
- ---------------------------------------------------
After 10 years (2) 57,644 8.63
- --------------------------------------------------- ----------- ----------
Total U.S. Government agencies and corporations 1,160,142 6.90
- --------------------------------------------------- ----------- ----------
Equity securities 47,748 7.96
- --------------------------------------------------- ----------- ----------
Total securities available for sale $ 1,563,120 6.91%
============================================================================
As of December 31
-------------------------------------------------------------------------------
1999 1998 1997
-------------------------------------------------------------------------------
Carrying Market Carrying Market Carrying Market
Value Value Value Value Value Value
------------ ---------- ---------- --------- ---------- ---------
SECURITIES HELD TO MATURITY
States and political subdivisions $ 73,370 75,448 80,189 85,277 81,617 87,002
====================================================================================================================
MATURITY AND YIELD SCHEDULE AS OF DECEMBER 31, 1999
Weighted
Carrying Average
Value Yield (1)
----------- --------------
States and political subdivisions:
Within 1 year $ 1,600 8.46%
- ---------------------------------------------------
After 1 but within 5 years 10,878 8.81
- ---------------------------------------------------
After 5 but within 10 years 48,836 8.50
- ---------------------------------------------------
After 10 years 12,056 8.50
- --------------------------------------------------- ------------ ----------
Total securities held to maturity $ 73,370 8.55%
============================================================================
</TABLE>
(1) Where applicable, the weighted average yield is computed on a taxable
equivalent basis using a 35% federal tax rate and applicable state tax
rates.
(2) The amount shown consists primarily of mortgage-backed securities which have
monthly curtailments of principal even though the final maturity of each
security is in excess of 10 years.
- --------------------------------------------------------------------------------
Deposits
Average deposits grew 6.2% to $6.5 billion during 1999. Average money
market accounts and consumer time deposits both grew approximately $135 million.
Interest-bearing deposits as a percentage of total deposits remained at over 87%
in both 1999 and 1998. Demand deposits on average grew $66.4 million in 1999.
See Table 9 for average deposits by type for the three-year period ended
December 31, 1999. As noted previously, lower deposit growth has been
experienced due to competitive pressures from other investment opportunities
available to consumers.
20
<PAGE>
T A B L E 9
AVERAGE DEPOSITS
(In Thousands)
<TABLE>
<CAPTION>
Years Ended December 31
-------------------------------------------------------------------------------
1999 1998 1997
-------------------------- ------------------------ -----------------------
Average Average Average Average Average Average
Balance Rate Balance Rate Balance Rate
-------------- --------- ------------ --------- ------------ --------
<S> <C> <C> <C> <C> <C> <C>
Savings and time deposits:
Savings and NOW accounts $ 799,769 .98% 736,548 1.06 691,365 1.27
- -----------------------------------
Money market accounts 1,864,644 3.65 1,729,207 3.72 1,608,929 3.78
- -----------------------------------
Time 3,011,369 5.20 2,898,500 5.54 2,811,192 5.69
- ----------------------------------- ----------- ---- --------- ---- --------- ----
Total savings and time deposits 5,675,782 4.10% 5,364,255 4.34 5,111,486 4.49
- ----------------------------------- ---- ---- ----
Demand deposits 843,247 776,819 688,642
- ----------------------------------- ----------- --------- ---------
Total deposits $ 6,519,029 6,141,074 5,800,128
- ----------------------------------- ----------- --------- ---------
</TABLE>
Long-Term Debt and Other Borrowings
CCB's ratio of average long-term debt to average shareholders' equity
increased to 31% from 1998's 25.1% for two reasons. With consumer concerns over
the millennium change-over and the potential for large cash withdrawals, we
borrowed from the Federal Home Loan Bank of Atlanta ("FHLB") to increase the
level of cash in our branches by approximately $90 million at year-end.
Secondly, CCB was in the second phase of a stock repurchase program, as
discussed below, and required funding for the stock repurchases. Of the $295.9
million of FHLB advances outstanding at December 31, 1999, approximately $225.7
million is due within five years.
Capital Resources
CCB has had a higher than needed capital position due to acquisitions and
strong earnings growth over the past five years. Our ratio of average
shareholders' equity to average total assets remains strong at 9.01% and 9.25%
for 1999 and 1998, respectively.
Regulatory Capital
Bank holding companies are required to comply with the Federal Reserve's
risk-based capital guidelines requiring a minimum leverage ratio relative to
total assets and minimum capital ratios relative to risk-adjusted assets. The
minimum leverage ratio is 3% but may be raised from 100 to 200 basis points
based on an individual bank's regulatory examination rating and growth profile.
The minimum risk-adjusted capital ratios are 4% for Tier I capital and 8% for
total capital. CCB and the Subsidiary Banks continue to maintain higher capital
ratios than required under regulatory guidelines. Table 10 discloses CCB's
components of capital, risk-adjusted asset information and capital ratios.
T A B L E 10
CAPITAL INFORMATION AND RATIOS
(In Thousands)
<TABLE>
<CAPTION>
As of December 31
---------------------------------
1999 1998
---------------- --------------
<S> <C> <C>
Tier I capital $ 705,586 645,888
- ------------------------------
Tier II capital:
Allowable loan loss reserve 76,453 71,890
- ------------------------------
Subordinated debt 19,791 26,388
- ------------------------------
Other 180 491
- ------------------------------ ------------ -------
Total capital $ 802,010 744,657
- ------------------------------ ------------ -------
Risk-adjusted assets $ 6,115,397 5,749,904
- ------------------------------
Average regulatory assets 8,061,860 7,534,208
- ------------------------------
Tier I capital ratio 11.54% 11.23
- ------------------------------
Total capital ratio 13.11 12.95
- ------------------------------
Leverage ratio 8.75 8.57
- ------------------------------ ------------ ----------
</TABLE>
The Subsidiary Banks also have the highest rating in regards to the FDIC
insurance assessment and, accordingly, pay the lowest deposit insurance
premium.
21
<PAGE>
Equity Capital
CCB's primary source of additional equity capital has historically been
the retention of earnings which added $107 million, $80.8 million and $58.7
million to capital in 1999, 1998 and 1997, respectively. Table 11 presents the
rate of internal capital growth for each of the five previous years. Our stock
repurchase program, discussed below, positively impacted both 1999 and 1998's
rates of internal capital growth.
T A B L E 11
RATE OF INTERNAL CAPITAL GROWTH
<TABLE>
<CAPTION>
Years Ended December 31
-------------------------------------------------------------
1999 (1) 1998 1997 (1) 1996 (1) 1995 (1)
---------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Average assets to average equity times 11.10 x 10.81 10.87 11.43 12.17
- ----------------------------------------------
Return on average assets equals 1.67% 1.65 1.54 1.42 1.36
- ---------------------------------------------- ----- ----- ----- ----- -----
Return on average shareholders' equity times 18.57% 17.87 16.76 16.20 16.53
- ----------------------------------------------
Earnings retained equals 66.54% 66.67 65.68 69.31 70.21
- ---------------------------------------------- ----- ----- ----- ----- -----
Rate of internal capital growth 12.35% 11.91 11.01 11.23 11.61
- ---------------------------------------------- ----- ----- ----- ----- -----
</TABLE>
(1) Excludes the after-tax impact of non-recurring items, as applicable: for
1999, the Credit Card Sale; for 1997, merger-related expense of $13.1
million and gain on sale of subsidiary of $1.4 million; for 1996, the FDIC
Special Assessment and the Recapture Tax Benefit; and for 1995,
merger-related expense of $7.3 million.
- --------------------------------------------------------------------------------
CCB's common stock is traded on The New York Stock Exchange under the
symbol CCB. At December 31, 1999, CCB had approximately 9,400 shareholders of
record. See Table 12 for stock prices and dividends during each quarter of 1999
and 1998.
T A B L E 12
STOCK PRICES AND DIVIDENDS
<TABLE>
<CAPTION>
Prices Cash
-------------------------------------- Dividends
High Low Close Declared
------------ ---------- ---------- ----------
<S> <C> <C> <C> <C>
1999
First Quarter $ 58.88 51.50 54.06 .26
- ----------------
Second Quarter 59.13 50.94 52.88 .26
- ----------------
Third Quarter 54.38 40.00 41.63 .29
- ----------------
Fourth Quarter 48.31 40.13 43.56 .29
- ----------------
1998
First Quarter 57.00 47.00 55.28 .235
- ----------------
Second Quarter 56.06 51.75 53.13 .235
- ----------------
Third Quarter 58.50 46.25 50.38 .26
- ----------------
Fourth Quarter 57.38 43.13 57.00 .26
- ---------------- --------- ----- ----- ----
</TABLE>
During 1998 and continuing into 1999, we undertook a stock repurchase
program as a capital management tool. The Board of Directors authorized the
repurchase and subsequent retirement of up to 2,000,000 shares of common stock
plus any additional purchases needed to retire shares issued in the exercise of
options, restricted stock awards, mergers or other corporate purposes. During
1999, 1,509,634 shares were repurchased and retired and 1,391,300 shares were
repurchased and retired during 1998. The shares were repurchased at an average
cost of $49.68 and $55.06 per share, respectively, in 1999 and 1998. It is
anticipated that another share repurchase authorization will be approved in
2000.
Dividends per share have increased from $.89 in 1997 to $.99 in 1998 to
$1.10 in 1999. The 1999 increase continues CCB's 35th consecutive year of
annual dividend increases, a record that places CCB first among U.S. banks
tracked by Moody's Investors Service. Dividends paid as a percentage of
earnings, excluding non-recurring items, equaled 33.53%, 33.45% and 34.36% for
the years ended 1999, 1998 and 1997, respectively. CCB's dividend guideline is
to pay approximately 30% to 40% of operating earnings in dividends. Management
feels that this guideline provides a reasonable cash return to shareholders and
at the same time maintains sufficient equity to support future growth and
expansion.
Capital expenditures for new and improved facilities as well as furniture,
equipment and computer software amounted to $35 million in 1999, $18.1 million
in 1998 and $10.6 million in 1997. There were no significant capital resource
commitments at December 31, 1999 other than the operating lease commitments
specified in the notes to the Consolidated Financial Statements. Additionally,
CCB has budgeted $16.5 million in 2000 for technological improvements and $19.8
million for new or renovated facilities. Technology improvements planned for
2000 include the first phase of our internet banking product and tools to
further enhance cross-selling, track profitability of individual customers and
measure product profitability.
22
<PAGE>
Year 2000 Issue
The Year 2000 Issue resulted from many computer programs having been
written using two digit dates rather than four to define the applicable year
due to data storage considerations. Since such systems had no accommodation for
the full four-digit year, a serious problem was anticipated when "00" was used
to identify the Year 2000. Uncorrected, this error could have resulted 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.
CCB began discussing the Year 2000 Issue more than four years ago and
adopted a Year 2000 Strategic Project Plan to address the issue. Our plan
followed guidelines outlined by the Federal Financial Institutions Examination
Council. In addition to ensuring the proper operation of our own systems, we
monitored the remediation efforts of third-party entities and major customers
whose own Year 2000 disruptions could have impacted CCB's operations. We
utilized in-house project teams and independent consultants in our remediation
efforts. Federal regulatory agencies periodically reviewed our Year 2000
conversion efforts and had no adverse criticism. CCB completed the Year 2000
project by the end of June 1999.
Due to our comprehensive remediation efforts and the successful
remediation efforts of third-party entities, CCB has not experienced any Year
2000 rollover problems to date. The Year 2000 project has cost $5.7 million, of
which $2.3 million was attributable to the purchase of capitalizable software
and hardware. During 1999 and 1998, CCB incurred $1.1 million and $2.2 million
of non-capitalizable expense attributable to the Year 2000 project. Total
non-capitalizable expense incurred prior to 1998 was less than $75,000.
Management anticipates less than $200,000 to be incurred during 2000. The Year
2000 project team will monitor the leap year rollover on February 29th and the
year-end rollover to 2001.
Asset Quality
Nonperforming assets (nonaccrual loans, other real estate acquired through
loan foreclosures and restructured loans) and risk assets (nonperforming assets
plus accruing loans 90 days or more past due) at the end of each of the
previous five years are presented in Table 13. During 1999, a $2 million credit
moved from nonaccrual status to restructured status and a $700,000 credit
previously categorized as restructured was paid out. Foreclosed real estate
increased $2.1 million from 1998's level due primarily to foreclosure on a $1.9
million credit. Risk assets to total assets were .30%, .31% and .30% at
December 31, 1999, 1998 and 1997, respectively. Our reserve for loan losses to
risk assets was 3.14 times at December 31, 1999 compared to 3.03 times and 3.20
times at December 31, 1998 and 1997, respectively. In addition to the total
risk assets disclosed in Table 13, management has identified $2.4 million of
loans whose borrowers have possible credit problems that cause serious doubts
about the ability of such borrowers to comply with the present loan repayment
terms.
T A B L E 13
Nonperforming and Risk Assets
(In Thousands)
<TABLE>
<CAPTION>
As of December 31
-------------------------------------------------
1999 1998 1997 1996
------------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Nonaccrual loans (1) $ 15,950 16,761 16,088 15,752
- -----------------------------------------------------------------------------
Other real estate acquired through loan foreclosures 2,872 791 845 2,469
- -----------------------------------------------------------------------------
Restructured loans 2,251 739 784 838
- ----------------------------------------------------------------------------- -------- ------ ------ ------
Total nonperforming assets 21,073 18,291 17,717 19,059
- -----------------------------------------------------------------------------
Accruing loans 90 days or more past due 3,555 5,889 3,423 3,066
- ----------------------------------------------------------------------------- -------- ------ ------ ------
Total risk assets $ 24,628 24,180 21,140 22,125
- ----------------------------------------------------------------------------- -------- ------ ------ ------
Ratio of nonperforming assets to:
Loans outstanding and other real estate acquired through loan foreclosures .35% .33 .35 .40
- -----------------------------------------------------------------------------
Total assets .26 .24 .25 .28
- -----------------------------------------------------------------------------
Ratio of total risk assets to:
Loans outstanding and other real estate acquired through loan foreclosures .41 .44 .41 .47
- -----------------------------------------------------------------------------
Total assets .30 .31 .30 .32
- -----------------------------------------------------------------------------
Reserve for loan losses to total risk assets 3.14 x 3.03 3.20 2.77
- -----------------------------------------------------------------------------
<CAPTION>
As of
December 31
------------
1995
-----------
<S> <C>
Nonaccrual loans (1) 17,518
- -----------------------------------------------------------------------------
Other real estate acquired through loan foreclosures 3,198
- -----------------------------------------------------------------------------
Restructured loans 915
- ----------------------------------------------------------------------------- ------
Total nonperforming assets 21,631
- -----------------------------------------------------------------------------
Accruing loans 90 days or more past due 4,120
- ----------------------------------------------------------------------------- ------
Total risk assets 25,751
- ----------------------------------------------------------------------------- ------
Ratio of nonperforming assets to:
Loans outstanding and other real estate acquired through loan foreclosures .51
- -----------------------------------------------------------------------------
Total assets .33
- -----------------------------------------------------------------------------
Ratio of total risk assets to:
Loans outstanding and other real estate acquired through loan foreclosures .60
- -----------------------------------------------------------------------------
Total assets .39
- -----------------------------------------------------------------------------
Reserve for loan losses to total risk assets 2.14
- -----------------------------------------------------------------------------
</TABLE>
(1) For the years ended December 31, 1999, 1998 and 1997, gross interest income
that would have been recorded during the year on the nonaccrual loans
listed above, if the loans had been current in accordance with their
original terms, would have amounted to approximately $1,307,000 in 1999,
$1,138,000 in 1998 and $1,055,000 in 1997. Gross interest income included
in net income on these nonaccrual loans amounted to approximately
$322,000, $288,000 and $171,000 for the years ended December 31, 1999,
1998, and 1997, respectively. These amounts also include interest from
prior years collected during the respective years.
- --------------------------------------------------------------------------------
Our general nonaccrual policy is to place business credits in a nonaccrual
status when there are doubts regarding the collectibility of principal or
interest or when payment of principal or interest is 90 days or more past due
(unless determined that the collectibility
23
<PAGE>
is not reasonably considered in doubt). Generally, instalment loans to
individuals and revolving credit accounts past due more than 90 and 120 days,
respectively, are charged-off.
Loans are considered impaired if it is probable that we will be unable to
collect all amounts due under the terms of the loan agreement. The value of the
impaired loan is based on discounted cash flows or the fair value of the
collateral for a collateral-dependent loan. Any impairment losses are
recognized through charges to the reserve for loan losses. At December 31, 1999
and 1998, impaired loans amounted to $8.9 million and $15.8 million,
respectively. Impaired loans totaling $6.5 million were not accruing interest
at December 31, 1999 and $9 million were not accruing interest at December 31,
1998. The related reserve for loan losses on these loans amounted to $1.9
million and $2.6 million at December 31, 1999 and 1998, respectively.
Table 14 presents a summary of loss experience and the reserve for loan
losses for the previous five years. In conjunction with 1999's decrease in
actual charge-offs, charge-offs as a percentage of average loans fell 4 basis
points to .16%. Net charge-offs in the five-year period ended 1999 occurred
primarily in revolving credit and instalment loans to individuals. The
percentage of net charge-offs to average loans for revolving credit was higher
in 1999 because delinquent accounts were not included in the Credit Card Sale.
In the third quarter of 1999, the majority of those accounts were charged-off.
We anticipate decreased revolving credit charge-offs in 2000. As part of the
Credit Card Sale, we decreased our loan loss reserve by $2 million. The Stone
Street acquisition added $886,000 to the reserve for loan losses.
T A B L E 14
Summary of Loan Loss Experience
and the Reserve for Loan Losses
(In Thousands)
<TABLE>
<CAPTION>
Years Ended December 31
---------------------------------------------------------
1999 1998 1997 1996
--------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Balance at beginning of year $ 73,182 67,594 61,257 55,114
- ----------------------------------------------------------------------
Loan losses charged to reserve:
Commercial, financial and agricultural (488) (269) (673) (438)
- ----------------------------------------------------------------------
Real estate -- construction (22) (111) (25) (38)
- ----------------------------------------------------------------------
Real estate -- mortgage (548) (424) (545) (869)
- ----------------------------------------------------------------------
Instalment loans to individuals (5,987) (4,971) (4,514) (5,136)
- ----------------------------------------------------------------------
Revolving credit (5,519) (7,066) (7,344) (7,633)
- ----------------------------------------------------------------------
Lease financing (17) (68) (43) (166)
- ---------------------------------------------------------------------- ----------- ------ ------ ------
Total loan losses charged to reserve (12,581) (12,909) (13,144) (14,280)
- ---------------------------------------------------------------------- ----------- ------- ------- -------
Recoveries of loans previously charged-off:
Commercial, financial and agricultural 467 51 63 445
- ----------------------------------------------------------------------
Real estate -- construction 9 64 41 61
- ----------------------------------------------------------------------
Real estate -- mortgage 81 143 136 305
- ----------------------------------------------------------------------
Instalment loans to individuals 1,391 842 1,431 1,127
- ----------------------------------------------------------------------
Revolving credit 1,490 1,490 1,339 1,083
- ----------------------------------------------------------------------
Lease financing 12 23 95 41
- ---------------------------------------------------------------------- ----------- ------- ------- -------
Total recoveries of loans previously charged-off 3,450 2,613 3,105 3,062
- ---------------------------------------------------------------------- ----------- ------- ------- -------
Net charge-offs (9,131) (10,296) (10,039) (11,218)
- ----------------------------------------------------------------------
Provision charged to operations 14,296 15,884 16,376 17,361
- ----------------------------------------------------------------------
Reserves related to credit card receivables sold (1,967) -- -- --
- ----------------------------------------------------------------------
Reserves related to acquired financial institution 886 -- -- --
- ---------------------------------------------------------------------- ----------- ------- ------- -------
Balance at end of year $ 77,266 73,182 67,594 61,257
- ---------------------------------------------------------------------- ----------- ------- ------- -------
Loans outstanding at end of year $ 5,954,184 5,487,337 5,093,569 4,745,663
- ----------------------------------------------------------------------
Ratio of reserve for loan losses to loans outstanding at end of year 1.30% 1.33 1.33 1.29
- ----------------------------------------------------------------------
Average loans outstanding $ 5,587,527 5,276,042 4,877,187 4,464,026
- ----------------------------------------------------------------------
Ratio of net charge-offs of loans to average loans:
Total .16% .20 .21 .25
- ----------------------------------------------------------------------
Excluding revolving credit .09 .09 .09 .11
- ----------------------------------------------------------------------
Revolving credit 3.09 2.66 2.87 2.85
- ---------------------------------------------------------------------- ----------- ---------- ---------- ----------
<CAPTION>
Years Ended
December 31
-------------
1995
-------------
<S> <C>
Balance at beginning of year 50,902
- ----------------------------------------------------------------------
Loan losses charged to reserve:
Commercial, financial and agricultural (343)
- ----------------------------------------------------------------------
Real estate -- construction (392)
- ----------------------------------------------------------------------
Real estate -- mortgage (328)
- ----------------------------------------------------------------------
Instalment loans to individuals (3,337)
- ----------------------------------------------------------------------
Revolving credit (4,334)
- ----------------------------------------------------------------------
Lease financing (71)
- ---------------------------------------------------------------------- ------
Total loan losses charged to reserve (8,805)
- ---------------------------------------------------------------------- ------
Recoveries of loans previously charged-off:
Commercial, financial and agricultural 176
- ----------------------------------------------------------------------
Real estate -- construction 38
- ----------------------------------------------------------------------
Real estate -- mortgage 77
- ----------------------------------------------------------------------
Instalment loans to individuals 680
- ----------------------------------------------------------------------
Revolving credit 1,024
- ----------------------------------------------------------------------
Lease financing 15
- ---------------------------------------------------------------------- ------
Total recoveries of loans previously charged-off 2,010
- ---------------------------------------------------------------------- ------
Net charge-offs (6,795)
- ----------------------------------------------------------------------
Provision charged to operations 11,007
- ----------------------------------------------------------------------
Reserves related to credit card receivables sold --
- ----------------------------------------------------------------------
Reserves related to acquired financial institution --
- ---------------------------------------------------------------------- ------
Balance at end of year 55,114
- ---------------------------------------------------------------------- ------
Loans outstanding at end of year 4,267,175
- ----------------------------------------------------------------------
Ratio of reserve for loan losses to loans outstanding at end of year 1.29
- ----------------------------------------------------------------------
Average loans outstanding 4,113,207
- ----------------------------------------------------------------------
Ratio of net charge-offs of loans to average loans:
Total .17
- ----------------------------------------------------------------------
Excluding revolving credit .09
- ----------------------------------------------------------------------
Revolving credit 1.73
- ---------------------------------------------------------------------- ----------
</TABLE>
Management performs a detailed analysis of the loan portfolio to determine
the adequacy of the reserve for loan losses. The reserve is comprised of
allocated and unallocated portions. An allocation of the reserve for loan
losses as of the end of the previous five years is presented in Table 15.
24
<PAGE>
T A B L E 15
ALLOCATION OF THE RESERVE FOR LOAN LOSSES
(In Thousands)
<TABLE>
<CAPTION>
As of December 31
---------------------------------------------------------------------
1999 1998 1997
---------------------- ---------------------- ----------------------
Amount % of Amount % of Amount % of
of Loans of Loans of Loans
Reserve in Each Reserve in Each Reserve in Each
Allocated Category Allocated Category Allocated Category
----------- ---------- ----------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Commercial, financial and agricultural $ 13,348 11.7% 13,085 12.5 8,492 13.5
- ----------------------------------------
Real estate -- construction 10,297 19.3 8,850 16.5 4,420 14.4
- ----------------------------------------
Real estate -- mortgage 3,734 57.2 4,969 57.3 4,339 57.2
- ----------------------------------------
Instalment loans to individuals 16,248 9.6 13,901 8.9 10,648 9.9
- ----------------------------------------
Revolving credit 2,948 1.0 10,270 3.9 8,507 4.2
- ----------------------------------------
Lease financing 592 1.2 463 .9 319 .8
- ----------------------------------------
Unallocated portion of reserve 30,099 -- 21,644 -- 30,869 --
- ---------------------------------------- -------- ----- ------ ----- ------ -----
Total $ 77,266 100.0% 73,182 100.0 67,594 100.0
- ---------------------------------------- -------- ----- ------ ----- ------ -----
<CAPTION>
As of December 31
-------------------------------------------
1996 1995
--------------------- ---------------------
Amount % of Amount % of
of Loans of Loans
Reserve in Each Reserve in Each
Allocated Category Allocated Category
---------- --------- ----------- ---------
<S> <C> <C> <C> <C>
Commercial, financial and agricultural 9,955 11.6 6,113 14.8
- ----------------------------------------
Real estate -- construction 2,584 13.3 3,185 11.8
- ----------------------------------------
Real estate -- mortgage 7,034 54.8 9,823 53.4
- ----------------------------------------
Instalment loans to individuals 9,743 15.6 5,185 13.9
- ----------------------------------------
Revolving credit 5,937 4.1 4,929 5.4
- ----------------------------------------
Lease financing 314 .6 240 .7
- ----------------------------------------
Unallocated portion of reserve 25,690 -- 25,639 --
- ---------------------------------------- ------ ----- ------ -----
Total 61,257 100.0 55,114 100.0
- ---------------------------------------- ------ ----- ------ -----
</TABLE>
The allocated reserve consists of specific as well as general allocations.
Specific loan loss allocations are determined for significant credits where
management believes that a risk of loss exists. A key tool in controlling loan
losses is CCB's loan grading system that begins at the inception of the credit
relationship. Under this grading system, substantially all credit relationships
greater than $100,000 (excluding residential mortgage and home equity lines)
are assigned grades that direct the timing and intensity of loan review
activity throughout the life of the relationship. All significant relationships
are reviewed at least annually. Relationships that have the lowest grade are
reviewed each thirty days. All relationships in excess of $100,000 which have
been internally classified as "Special Mention", "Substandard" or "Loss" are
evaluated individually for their potential loss; factors such as collateral
value and guarantor strength are included in the evaluation process. In
addition, general allocations are determined for each loan type by assigning a
risk factor to compute their respective loss reserve. The risk factors have
been developed using historical loss levels, economic trends, market conditions
and other factors. The allocated reserve is determined as a result of this
analysis which includes the specific and general reserves discussed above.
Management considers the following risk factors: historical charge-off rates,
recent trends in consumer debt levels, consumer bankruptcy rates nationally and
in our market areas and other pertinent factors. Management reviews risk assets
and charge-offs by loan type on a monthly basis.
For the unallocated portion of the reserve for loan losses, management
determines the appropriate reserve to provide for losses inherent in the loan
portfolio and for unfavorable credit events that have occurred for specific
borrowers of which management is not yet aware. Factors considered in
management's determination of the appropriate level of unallocated reserve are
general economic and lending trends.
Management believes that the reserve for loan losses is adequate to absorb
estimated probable losses inherent in the loan portfolio. The most recent
regulatory agency examinations have not revealed any material problem credits
that had not been previously identified; however, future regulatory
examinations may result in the regulatory agencies requiring additions to the
reserve for loan losses based on information available at the examination date.
Liquidity and Interest-Sensitivity
Liquidity ensures that adequate funds are available to meet deposit
withdrawals, fund loan and capital expenditure commitments, maintain reserve
requirements, pay operating expenses, provide funds for dividends, debt service
and other commitments and operate the organization on an ongoing basis. Funds
are primarily provided by our Subsidiary Banks through financial resources from
operating activities, expansion of the deposit base, borrowing funds in money
market operations and through the sale or maturity of assets.
Net cash provided by operating activities and deposits from customers have
been the primary sources of liquidity for CCB. Historically, average
certificates of deposit in denominations of $100,000 or more have comprised a
relatively small percentage of average total deposits, 6.3% in 1999 versus 7.4%
in 1998. These deposits fell on average $22.1 million from 1998 to 1999.
Management intentionally places low reliance on the higher-cost large
certificates of deposit because of the availability of less expensive sources
of funding and considers them a secondary source of liquidity that can be
obtained as needed.
25
<PAGE>
At December 31, 1999, certificates of deposit in amounts of $100,000 or
more totaled $422.3 million compared to $452.8 million at December 31, 1998.
During 1999, the maximum month-end balance for certificates of deposit in
amounts of $100,000 or more was $473.3 million. The following is a remaining
maturity schedule of these deposits at December 31, 1999 (in thousands):
<TABLE>
<CAPTION>
Over 3 Over 6
3 Months Through Through
or Less 6 Months 12 Months Total
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Jumbo deposits $209,982 107,318 104,980 $422,280
</TABLE>
For both 1999 and 1997, the Subsidiary Banks were net short-term borrowers
as average short-term liabilities exceeded average short-term investments by
$13.8 million and $119.7 million, respectively, due to high loan demand. In
1998, the Subsidiary Banks were net short-term lenders due to the interest rate
environment; the Subsidiary Banks received higher than normal paydowns on
mortgage-backed securities due to lower interest rates, excess funds were not
reinvested in longer-term investment securities due to the flat yield curve and
longer-term borrowings at attractive interest rates were available.
Correspondent relationships are maintained with several larger banks
enabling the Subsidiary Banks to purchase federal funds when needed. Also
available as liquidity sources are access to the Federal Reserve discount
window and CCB Bank's line of credit maintained with the FHLB. This line of
credit is secured by a blanket collateral agreement on CCB Bank's mortgage loan
portfolio.
Maturities of securities held for investment and sales and maturities of
securities categorized as available for sale are other sources of liquidity.
Securities with carrying values of $170.6 million mature in 2000. Securities
classified as available for sale are considered in our asset/liability
management strategies and may be sold in response to changes in interest rates,
liquidity needs and/or significant prepayment risk.
Liquidity at the Parent Company level is provided through cash dividends
from the Subsidiary Banks and the capacity of the Parent Company to raise
additional borrowed funds as needed. At December 31, 1999, the Parent Company
had an unused $50 million credit agreement with a financial institution. The
credit agreement is unsecured and expires in November 2001.
In addition to ensuring adequate liquidity, CCB is concerned with
interest-sensitivity management to avoid significant net interest margin
fluctuations while promoting consistent net income increases during periods of
changing interest rates. Responsibility for both liquidity and
interest-sensitivity management rests with the Asset/Liability Management
Committee ("ALCO") comprised of senior management. ALCO reviews interest rate
and liquidity exposures and, based on its view of existing and expected market
conditions, adopts balance sheet strategies that are intended to optimize net
interest income to the extent possible while minimizing the risk associated
with changes in interest rates. Determining and monitoring the appropriate
balance between interest-sensitive assets and interest-sensitive liabilities
and the impact on earnings of changes in interest rates is accomplished through
ALCO's use of Gap Analysis and Simulation Analysis.
Gap Analysis measures the interest-sensitivity of assets and liabilities
at a given point in time. The interest-sensitivity of assets and liabilities is
based on the timing of contractual maturities and repricing opportunities.
Prepayments of loans and certain investment securities and early withdrawals of
deposits represent options which may or may not be exercised and thus are not
considered in the Gap Analysis. A positive interest-sensitive gap occurs when
interest-sensitive assets exceed interest-sensitive liabilities. The reverse
situation results in a negative gap. Management feels that an essentially
balanced position (+/- 10% of total earning assets) between interest-sensitive
assets and liabilities is necessary in order to protect against wide
fluctuations in interest rates. An analysis of CCB's interest-sensitivity
position at December 31, 1999 is presented in Table 16. At December 31, 1999,
CCB had a cumulative "negative gap" (interest-sensitive liabilities exceeding
interest-sensitive assets) of $712.4 million or 9.23% of total earning assets
over a twelve-month horizon. The ratio of interest-sensitive assets to
interest-sensitive liabilities was .83x. Gap Analysis is a limited measurement
tool, however, because it does not incorporate the interrelationships between
interest rates charged or paid, balance sheet trends and reaction to interest
rate changes. In addition, a gap analysis model does not consider that changes
in interest rates do not affect all categories of assets and liabilities
equally or simultaneously. Therefore, ALCO uses Gap Analysis as a tool to
monitor changes in the balance sheet structure. To estimate the impact that
changes in interest rates would have on our earnings, ALCO uses Simulation
Analysis.
26
<PAGE>
T A B L E 16
Interest-Sensitivity Analysis (1)
(In Thousands)
<TABLE>
<CAPTION>
As of December 31, 1999
--------------------------------------------------------------------
6 Month
30 Day 60 Day 90 Day 6 Month to 1 Year
Sensitive Sensitive Sensitive Sensitive Sensitive
--------------- ----------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Earning assets:
Time deposits in other banks $ 62,920 -- -- -- 100
- -----------------------------------------------------
Federal funds sold and other short-term investments 37,918 -- -- -- --
- -----------------------------------------------------
Investment securities (2) 80,199 52,262 48,151 111,422 90,623
- -----------------------------------------------------
Loans 1,343,041 537,260 92,211 300,597 614,524
- ----------------------------------------------------- ----------- ------- ------ ------- -------
Total earning assets $1,524,078 589,522 140,362 412,019 705,247
- ----------------------------------------------------- ------------ ------- ------- ------- -------
Interest-bearing liabilities:
Savings deposits $1,188,035 170,046 19,352 58,056 116,112
- -----------------------------------------------------
Other time deposits 221,577 178,495 194,489 836,604 769,056
- -----------------------------------------------------
Short-term borrowed funds 329,670 -- -- -- --
- -----------------------------------------------------
Long-term debt 2,050 4 5 15 31
- ----------------------------------------------------- ------------ ------- ------- ------- -------
Total interest-bearing liabilities $1,741,332 348,545 213,846 894,675 885,199
- ----------------------------------------------------- ------------ ------- ------- ------- -------
Interest-sensitivity gap $ (217,254) 240,977 (73,484) (482,656) (179,952)
- ----------------------------------------------------- ------------- ------- ------- -------- --------
Cumulative gap $ (217,254) 23,723 (49,761) (532,417) (712,369)
- ----------------------------------------------------- ------------- ------- ------- -------- --------
Cumulative ratio of interest-sensitive assets
interest-sensitive liabilities .88 x 1.01 .98 .83 .83
- ----------------------------------------------------- -------------- -------- -------- --------- ---------
Cumulative gap to total earning assets (2.82)% .31 (.65) (6.90) (9.23)
- ----------------------------------------------------- -------------- -------- -------- --------- ---------
<CAPTION>
As of December 31, 1999
--------------------------------------
Non-
Total Interest
Sensitive Sensitive Total
------------- ----------- ------------
<S> <C> <C> <C>
Earning assets:
Time deposits in other banks 63,020 -- 63,020
- -----------------------------------------------------
Federal funds sold and other short-term investments 37,918 -- 37,918
- -----------------------------------------------------
Investment securities (2) 382,657 1,276,085 1,658,742
- -----------------------------------------------------
Loans 2,887,633 3,066,551 5,954,184
- ----------------------------------------------------- --------- --------- ---------
Total earning assets 3,371,228 4,342,636 7,713,864
- ----------------------------------------------------- --------- --------- ---------
Interest-bearing liabilities:
Savings deposits 1,551,601 1,195,763 2,747,364
- -----------------------------------------------------
Other time deposits 2,200,221 936,051 3,136,272
- -----------------------------------------------------
Short-term borrowed funds 329,670 -- 329,670
- -----------------------------------------------------
Long-term debt 2,105 326,817 328,922
- ----------------------------------------------------- --------- --------- ---------
Total interest-bearing liabilities 4,083,597 2,458,631 6,542,228
- ----------------------------------------------------- --------- --------- ---------
Interest-sensitivity gap (712,369)
- ----------------------------------------------------- ---------
Cumulative gap
- -----------------------------------------------------
Cumulative ratio of interest-sensitive assets
interest-sensitive liabilities
- -----------------------------------------------------
Cumulative gap to total earning assets
- -----------------------------------------------------
</TABLE>
(1) Assets and liabilities that mature in one year or less and/or have interest
rates that can be adjusted during this period are considered
interest-sensitive. The interest-sensitivity position has meaning only as
of the date for which it is prepared.
(2) Investment securities are presented at their amortized cost. The
mark-to-market adjustment of $(22,252,000) for available for sale
securities is not included.
- --------------------------------------------------------------------------------
Simulation Analysis is performed using a computer-based asset/liability
model incorporating current portfolio balances and rates, contractual
maturities, repricing opportunities, and assumptions about prepayments, future
interest rates, and future volumes. Using this information, the model
calculates earnings estimates for CCB under multiple interest rate scenarios.
To measure the sensitivity of CCB's earnings, the results of multiple
simulations, which assume changes in interest rates, are compared to the "base
case" simulation, which assumes no changes in interest rates. The sensitivity
of earnings is expressed as a percentage change in comparison to the "base
case" simulation. The model assumes an immediate parallel shift in the interest
rate environment. As a matter of policy, ALCO has stated that the maximum
negative impact to net income from a positive or negative 100 basis point
change in interest rates over a 12-month period should not exceed 6%, which was
achieved during 1999 and 1998. At December 31, 1999, earnings sensitivity was
well under this guideline as a 100 basis point increase is projected to
decrease net income 2.1% and a 100 basis point decrease is projected to
decrease net income 1.2%. The model's projection of net income decreasing
whether interest rates rise or fall is due primarily to the impact of issuer
calls of investment securities. In a falling interest rate environment, issuer
calls of higher-yielding securities produce excess cash that would be
re-invested at the lower rates available on the market. In a rising interest
rate environment, maturities of lower-yielding callable securities extend and
less cash is generated for re-investment at the higher market rates available.
ALCO in practice manages earnings sensitivity, however, with a targeted goal of
only a 2% to 3% impact on net income. As of December 31, 1999, management
believes that it has accomplished its objective to avoid material negative
changes in net income resulting from possible future changes in interest rates.
Projected percentage changes in net income brought about by changes in interest
rates are not material relative to CCB's net income. If simulation results show
that earnings sensitivity exceeds the targeted limit, ALCO will adopt
on-balance sheet and/or off-balance sheet strategies to bring earnings
sensitivity within target guidelines.
Management uses both on- and off-balance sheet strategies to manage the
balance sheet. The most efficient and cost-effective method of on-balance sheet
management is creating desired maturity and repricing streams through the
tactical pricing of interest-earning and interest-bearing on-balance sheet
products. ALCO reviews the interest-earning and interest-bearing portfolios to
ensure a proper mix of fixed and variable rate products. Emphasis will continue
to be placed on granting loans with short maturities and floating rates where
possible. This strategy increases liquidity and is necessitated by the
continued shortening of maturities and more frequent repricing opportunities of
our funding sources. As of year-end, approximately 22.6% of all loans reprice
or mature within 30 days. See Table 7 for additional detail regarding loan
maturity and sensitivity to changes in interest rates at December 31, 1999.
Within CCB's overall interest rate risk management strategy, off-balance
sheet derivatives have been and may be used in the future as a cost- and
capital-efficient way to manage interest rate sensitivity by modifying the
repricing or maturity of on-balance
27
<PAGE>
sheet assets or liabilities. As of December 31, 1999, CCB had off-balance sheet
derivative financial instruments in the form of interest rate swaps (basis
swaps) with notional principal of $200 million. Notional amounts do not
represent amounts to be exchanged between parties and are not a measure of
financial risks, but only provide the basis for calculating interest payments
between the counterparties. The interest rate swaps were entered into in July
1999 and April 1998 and have two-year terms. The purpose of entering into the
interest rate swaps was to synthetically convert U.S. Treasury-based
liabilities into prime rate-based liabilities and to lock-in a favorable spread
between the two indices. Interest payments received on these financial
instruments had a small positive impact on interest expense for 1999 and a
small negative impact for 1998. CCB was party to another basis swap for $100
million that expired during 1999; the basis swap entered into in July replaced
it. Our derivatives provide for the quarterly exchange of interest payments
between counterparties. We have credit risk when amounts receivable from our
counterparties exceed the amount payable. Therefore, the risk of loss with any
counterparty is limited to a small fraction of the notional amount.
Furthermore, potential credit risk resulting from a counterparty's
nonperformance is monitored through routine review of the counterparty's
financial ratings. Accordingly, we believe the amount of off-balance sheet
credit risk exposure is minimal.
CCB has not experienced any liquidity problems in the past. Considering
today's environment, ensuring adequate liquidity is more of a challenge but
management believes it has adequate resources available. Reliance will continue
to be placed on the same funding sources, primarily financial resources
provided by operating activities and expansion of the "core" deposit base.
Management will continue to monitor CCB's interest-sensitivity position with
goals of ensuring adequate liquidity while at the same time seeking profitable
spreads between the yields on funding uses and the rates paid for funding
sources. Emphasis will continue to be placed on granting loans with short
maturities and floating rates where possible. This strategy increases liquidity
and is necessitated by the continued shortening of maturities and more frequent
repricing opportunities of CCB's funding sources. Management will continue to
monitor CCB's interest rate risk position to minimize the adverse impact on
earnings caused by changes in interest rates.
Other Accounting Matters
In June, 1998, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities,"
which establishes accounting and reporting standards requiring that every
derivative instrument (including certain derivative instruments embedded in
other contracts) be recorded in the balance sheet as either an asset or
liability measured at its fair value. The Statement requires that changes in a
derivative's fair value be recognized currently in earnings unless specific
hedge accounting criteria are met. Special accounting for qualifying hedges
allows a derivative's gains and losses to offset related results on the hedged
item in the income statement, and requires that a company must formally
document, designate and assess the effectiveness of transactions that receive
hedge accounting. In June 1999, the FASB issued SFAS No. 137, "Accounting for
Derivative Instruments and Hedging Activities -- Deferral of the Effective Date
of FASB Statement No. 133," which delays the original effective date of SFAS
No. 133 until fiscal years beginning after June 15, 2000. Management has not
yet quantified the impact of adopting SFAS No. 133, as amended, and has not
determined the timing of or method of adoption of the Statement.
Item 7A. 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.
CCB's market risk arises primarily from interest rate risk inherent in its
lending and deposit-taking activities. The structure of CCB's loan and deposit
portfolios is such that a significant rise or decline in interest rates may
adversely impact net market values and net interest income. CCB does not
maintain a trading account nor is CCB subject to currency exchange risk or
commodity price risk. Responsibility for monitoring interest rate risk rests
with ALCO, comprised of senior management. ALCO regularly reviews CCB'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. See "Liquidity and Interest Sensitivity" in
Management's Discussion and Analysis of Financial Condition and Results of
Operations for further information about market risk.
28
<PAGE>
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<TABLE>
<S> <C>
Page
-
(a) The following audited consolidated financial statements and related documents are set
forth in this Annual Report on Form 10-K on the pages indicated:
CCB Financial Corporation and Subsidiaries:
Consolidated Balance Sheets at December 31, 1999 and 1998 .............................. 30
Consolidated Statements of Income for each of the years in the three-year period
ended December 31, 1999 ............................................................... 31
Consolidated Statements of Shareholders' Equity and Comprehensive Income for each
of the years in the three-year period ended December 31, 1999 ......................... 32
Consolidated Statements of Cash Flows for each of the years in the three-year period
ended December 31, 1999 ................................................................ 33
Notes to Consolidated Financial Statements ............................................. 34
Report of Management Regarding Responsibility for Financial Statements ................... 54
Independent Auditors' Report ............................................................. 55
(b) The following supplementary data is set forth in this Annual Report on Form 10-K on
the page indicated:
Quarterly Financial Data ............................................................. 52
</TABLE>
29
<PAGE>
CCB FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
-------------- ------------
(In Thousands Except for Share
Data)
<S> <C> <C>
Assets:
Cash and due from banks (note 3) $ 300,051 250,922
- --------------------------------------------------------------------------------------- ---------- -------
Time deposits in other banks 63,020 59,529
- --------------------------------------------------------------------------------------- ---------- -------
Federal funds sold and other short-term investments 37,918 430,000
- --------------------------------------------------------------------------------------- ---------- -------
Investment securities (notes 4 and 8):
Available for sale (amortized cost of $1,585,372 and $1,262,477) 1,563,120 1,284,198
- --------------------------------------------------------------------------------------- ---------- ---------
Held to maturity (market values of $75,448 and $85,277) 73,370 80,189
- --------------------------------------------------------------------------------------- ---------- ---------
Loans (notes 5, 8 and 9) 5,954,184 5,487,337
- ---------------------------------------------------------------------------------------
Less reserve for loan losses (note 6) 77,266 73,182
- --------------------------------------------------------------------------------------- ---------- ---------
Net loans 5,876,918 5,414,155
- --------------------------------------------------------------------------------------- ---------- ---------
Premises and equipment (notes 7 and 9) 113,858 92,770
- ---------------------------------------------------------------------------------------
Other assets (notes 5 and 13) 158,043 128,590
- --------------------------------------------------------------------------------------- ---------- ---------
Total assets $8,186,298 7,740,353
- --------------------------------------------------------------------------------------- ---------- ---------
Liabilities:
Deposits:
Demand (noninterest-bearing) $ 833,389 854,938
- ---------------------------------------------------------------------------------------
Savings and NOW accounts 852,265 863,920
- ---------------------------------------------------------------------------------------
Money market accounts 1,895,099 1,784,091
- ---------------------------------------------------------------------------------------
Jumbo certificates of deposit (note 8) 422,280 452,808
- ---------------------------------------------------------------------------------------
Time deposits (note 8) 2,713,992 2,504,007
- --------------------------------------------------------------------------------------- ---------- ---------
Total deposits 6,717,025 6,459,764
- ---------------------------------------------------------------------------------------
Short-term borrowed funds (note 8) 329,670 288,256
- ---------------------------------------------------------------------------------------
Long-term debt (note 9) 328,922 216,695
- ---------------------------------------------------------------------------------------
Other liabilities (notes 10 and 13) 90,720 87,744
- --------------------------------------------------------------------------------------- ---------- ---------
Total liabilities 7,466,337 7,052,459
- --------------------------------------------------------------------------------------- ---------- ---------
Shareholders' equity (notes 4, 11 and 15):
Serial preferred stock. Authorized 10,000,000 shares; none issued -- --
- ---------------------------------------------------------------------------------------
Common stock of $5 par value. Authorized 100,000,000 shares; 39,579,808 and 40,345,214
shares
issued in 1999 and 1998, respectively 197,900 201,726
- ---------------------------------------------------------------------------------------
Additional paid-in capital 29,690 73,771
- ---------------------------------------------------------------------------------------
Retained earnings 506,092 399,066
- ---------------------------------------------------------------------------------------
Accumulated comprehensive income (loss) (13,721) 13,331
- --------------------------------------------------------------------------------------- ---------- ---------
Total shareholders' equity 719,961 687,894
- --------------------------------------------------------------------------------------- ---------- ---------
Total liabilities and shareholders' equity $8,186,298 7,740,353
- --------------------------------------------------------------------------------------- ---------- ---------
</TABLE>
Commitments and contingencies (note 14)
See accompanying notes to consolidated financial statements.
30
<PAGE>
CCB FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Years Ended December 31, 1999, 1998 and 1997
<TABLE>
<CAPTION>
1999 1998 1997
-------------- ----------- ----------
(In Thousands Except Per Share Data)
<S> <C> <C> <C>
Interest income:
Interest and fees on loans $478,908 470,664 442,618
- -----------------------------------------------------------------
Interest and dividends on investment securities:
U.S. Treasury 23,127 27,502 31,546
- -----------------------------------------------------------------
U.S. Government agencies and corporations 65,255 53,117 55,613
- -----------------------------------------------------------------
States and political subdivisions (primarily tax-exempt) 4,360 4,738 4,840
- -----------------------------------------------------------------
Equity and other securities 3,147 3,135 3,070
- -----------------------------------------------------------------
Interest on time deposits in other banks 2,750 2,377 2,716
- -----------------------------------------------------------------
Interest on federal funds sold and other short-term investments 12,052 15,893 10,060
- ----------------------------------------------------------------- -------- ------- --------
Total interest income 589,599 577,426 550,463
- ----------------------------------------------------------------- -------- ------- --------
Interest expense:
Deposits 232,767 232,609 229,600
- -----------------------------------------------------------------
Short-term borrowed funds (note 8) 12,016 11,822 15,371
- -----------------------------------------------------------------
Long-term debt (note 9) 12,764 10,131 5,128
- ----------------------------------------------------------------- -------- ------- --------
Total interest expense 257,547 254,562 250,099
- ----------------------------------------------------------------- -------- ------- --------
Net interest income 332,052 322,864 300,364
- -----------------------------------------------------------------
Provision for loan losses (note 6) 14,296 15,884 16,376
- ----------------------------------------------------------------- -------- ------- --------
Net interest income after provision for loan losses 317,756 306,980 283,988
- ----------------------------------------------------------------- -------- ------- --------
Other income:
Service charges on deposit accounts 61,831 54,117 44,937
- -----------------------------------------------------------------
Trust and custodian fees 12,574 10,221 8,415
- -----------------------------------------------------------------
Sales and insurance commissions 12,806 10,835 9,433
- -----------------------------------------------------------------
Merchant discount 11,866 8,826 7,017
- -----------------------------------------------------------------
Secondary marketing and servicing of mortgages 9,131 12,865 8,179
- -----------------------------------------------------------------
Accretion of negative goodwill from acquisitions 3,356 3,356 3,356
- -----------------------------------------------------------------
Other operating 12,675 10,683 11,582
- -----------------------------------------------------------------
Gain on sale of credit card receivables 32,837 -- --
- -----------------------------------------------------------------
Investment securities gains (note 4) 1,381 2,205 578
- -----------------------------------------------------------------
Investment securities losses (note 4) (3) (27) (98)
- ----------------------------------------------------------------- ---------- ------- --------
Total other income 158,454 113,081 93,399
- ----------------------------------------------------------------- --------- ------- --------
Other expenses:
Personnel (note 10) 136,305 124,419 114,572
- -----------------------------------------------------------------
Net occupancy (note 14) 17,331 15,890 15,595
- -----------------------------------------------------------------
Equipment (note 14) 17,713 14,522 12,867
- -----------------------------------------------------------------
Merger-related expense (note 2) -- -- 17,916
- -----------------------------------------------------------------
Other operating (note 12) 72,687 75,386 65,248
- ----------------------------------------------------------------- --------- ------- --------
Total other expenses 244,036 230,217 226,198
- ----------------------------------------------------------------- --------- ------- --------
Income before income taxes 232,174 189,844 151,189
- -----------------------------------------------------------------
Income taxes (note 13) 81,351 68,632 55,765
- ----------------------------------------------------------------- --------- ------- --------
Net income $150,823 121,212 95,424
- ----------------------------------------------------------------- --------- ------- --------
Earnings per common share (note 11):
Basic $ 3.77 2.96 2.31
- -----------------------------------------------------------------
Diluted 3.74 2.93 2.28
- -----------------------------------------------------------------
Weighted average shares outstanding (note 11):
Basic 39,944 40,898 41,438
- -----------------------------------------------------------------
Diluted 40,315 41,409 41,947
- -----------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
31
<PAGE>
CCB FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
AND COMPREHENSIVE INCOME
Years Ended December 31, 1999, 1998 and 1997
<TABLE>
<CAPTION>
Common
Stock
---------------
<S> <C>
Balance December 31, 1996 $206,338
Net income --
- -----------------------------------------------------------
Other comprehensive income --
Unrealized gains on securities, net of deferred tax
expense of $3,956 and reclassification adjustment
(note 4) --
- -----------------------------------------------------------
Total comprehensive income
- -----------------------------------------------------------
Restricted stock transactions, net (note 10) 54
- -----------------------------------------------------------
Stock options exercised, net of shares tendered (note 10) 1,377
- -----------------------------------------------------------
Earned portion of management recognition plan
(note 10) --
- -----------------------------------------------------------
Other transactions, net (5)
- -----------------------------------------------------------
Cash dividends ($.89 per share) --
- ----------------------------------------------------------- ---------
Balance December 31, 1997 207,764
Net income --
- -----------------------------------------------------------
Other comprehensive loss --
Unrealized losses on securities, net of deferred tax
benefit of $484 and reclassification adjustment
(note 4) --
- -----------------------------------------------------------
Total comprehensive income
- -----------------------------------------------------------
Restricted stock transactions, net (note 10) 42
- -----------------------------------------------------------
Stock options exercised, net of shares tendered (note 10) 879
- -----------------------------------------------------------
Earned portion of management recognition plan
(note 10) --
- -----------------------------------------------------------
Purchase and retirement of shares (6,957)
- -----------------------------------------------------------
Other transactions, net (2)
- -----------------------------------------------------------
Cash dividends ($.99 per share) --
- ----------------------------------------------------------- ---------
Balance December 31, 1998 201,726
Net income --
- -----------------------------------------------------------
Other comprehensive loss --
Unrealized losses on securities, net of deferred tax
benefit of $16,920 and reclassification adjustment
(note 4) --
- -----------------------------------------------------------
Total comprehensive income
- -----------------------------------------------------------
Restricted stock transactions, net (note 10) 9
- -----------------------------------------------------------
Stock options exercised, net of shares tendered (note 10) 486
- -----------------------------------------------------------
Shares issued in acquisition (note 2) 3,228
- -----------------------------------------------------------
Purchase and retirement of shares (7,548)
- -----------------------------------------------------------
Other transactions, net (1)
- -----------------------------------------------------------
Cash dividends ($1.10 per share) --
- ----------------------------------------------------------- ---------
Balance December 31, 1999 $197,900
- ----------------------------------------------------------- ---------
<CAPTION>
Accumulated
Other
Additional Comprehensive Management Total
Paid-In Retained Income Recognition Shareholders'
Capital Earnings (Loss) Plans Equity
-------------- ------------ --------------- ------------- --------------
(In Thousands)
<S> <C> <C> <C> <C> <C>
Balance December 31, 1996 140,617 257,903 7,329 (738) 611,449
Net income -- 95,424 -- -- 95,424
- -----------------------------------------------------------
Other comprehensive income --
Unrealized gains on securities, net of deferred tax
expense of $3,956 and reclassification adjustment
(note 4) -- -- 6,651 -- 6,651
- ----------------------------------------------------------- -------
Total comprehensive income 102,075
- -----------------------------------------------------------
Restricted stock transactions, net (note 10) 373 (27) -- -- 400
- -----------------------------------------------------------
Stock options exercised, net of shares tendered (note 10) 2,729 (689) -- -- 3,417
- -----------------------------------------------------------
Earned portion of management recognition plan
(note 10) -- -- -- 706 706
- -----------------------------------------------------------
Other transactions, net 65 3 -- -- 63
- -----------------------------------------------------------
Cash dividends ($.89 per share) -- (36,750) -- -- (36,750)
- ----------------------------------------------------------- ------- ------- ----- ---- -------
Balance December 31, 1997 143,784 315,864 13,980 (32) 681,360
Net income -- 121,212 -- -- 121,212
- -----------------------------------------------------------
Other comprehensive loss --
Unrealized losses on securities, net of deferred tax
benefit of $484 and reclassification adjustment
(note 4) -- -- (649) -- (649)
- ----------------------------------------------------------- -------
Total comprehensive income 120,563
- -----------------------------------------------------------
Restricted stock transactions, net (note 10) 503 (10) -- -- 535
- -----------------------------------------------------------
Stock options exercised, net of shares tendered (note 10) 1,497 (403) -- -- 1,973
- -----------------------------------------------------------
Earned portion of management recognition plan
(note 10) -- -- -- 32 32
- -----------------------------------------------------------
Purchase and retirement of shares (72,445) 2,801 -- -- (76,601)
- -----------------------------------------------------------
Other transactions, net 432 -- -- -- 430
- -----------------------------------------------------------
Cash dividends ($.99 per share) -- (40,398) -- -- (40,398)
- ----------------------------------------------------------- ------- ------- ------ ---- -------
Balance December 31, 1998 73,771 399,066 13,331 -- 687,894
Net income -- 150,823 -- -- 150,823
- -----------------------------------------------------------
Other comprehensive loss --
Unrealized losses on securities, net of deferred tax
benefit of $16,920 and reclassification adjustment
(note 4) -- -- (27,052) -- (27,052)
- ----------------------------------------------------------- -------
Total comprehensive income 123,771
- -----------------------------------------------------------
Restricted stock transactions, net (note 10) 93 -- -- -- 102
- -----------------------------------------------------------
Stock options exercised, net of shares tendered (note 10) 216 -- -- -- 702
- -----------------------------------------------------------
Shares issued in acquisition (note 2) 23,067 -- -- -- 26,295
- -----------------------------------------------------------
Purchase and retirement of shares (67,448) -- -- -- (74,996)
- -----------------------------------------------------------
Other transactions, net (9) -- -- -- (10)
- -----------------------------------------------------------
Cash dividends ($1.10 per share) -- (43,797) -- -- (43,797)
- ----------------------------------------------------------- --------- ------- ------- ---- -------
Balance December 31, 1999 29,690 506,092 (13,721) -- 719,961
- ----------------------------------------------------------- --------- ------- ------- ---- -------
</TABLE>
See accompanying notes to consolidated financial statements.
32
<PAGE>
CCB FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years Ended December 31, 1999, 1998 and 1997
<TABLE>
<CAPTION>
1999 1998 1997
------------- ------------- -------------
(In Thousands)
<S> <C> <C> <C>
Operating activities:
Net income $ 150,823 121,212 95,424
- ----------------------------------------------------------------------------------
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and accretion, net 25,331 16,859 23,418
- ----------------------------------------------------------------------------------
Provision for loan losses 14,296 15,884 16,376
- ----------------------------------------------------------------------------------
Net gain on sales of investment securities (1,378) (2,178) (480)
- ----------------------------------------------------------------------------------
Gains on sales of mortgage loans and credit card receivables (36,315) -- --
- ----------------------------------------------------------------------------------
Sales of loans held for sale 724,883 576,595 232,095
- ----------------------------------------------------------------------------------
Origination of loans held for sale (771,710) (630,658) (214,170)
- ----------------------------------------------------------------------------------
Changes in:
Accrued interest receivable (5,230) 2,084 (4,202)
- ----------------------------------------------------------------------------------
Accrued interest payable 429 (1,668) (17,550)
- ----------------------------------------------------------------------------------
Other assets 12,503 27,631 821
- ----------------------------------------------------------------------------------
Other liabilities 1,281 (4,282) 905
- ----------------------------------------------------------------------------------
Other operating activities, net (6,507) (5,053) (5,600)
- ---------------------------------------------------------------------------------- ---------- -------- --------
Net cash provided by operating activities 108,406 116,426 127,037
- ---------------------------------------------------------------------------------- ---------- -------- --------
Investing activities:
Proceeds from:
Maturities and issuer calls of investment securities held to maturity 7,636 1,407 2,622
- ----------------------------------------------------------------------------------
Sales of investment securities available for sale 44,715 36,036 176,481
- ----------------------------------------------------------------------------------
Maturities and issuer calls of investment securities available for sale 550,654 628,252 501,394
- ----------------------------------------------------------------------------------
Sales of mortgage loans and credit card receivables 386,729 -- 25,658
- ----------------------------------------------------------------------------------
Purchases of:
Investment securities available for sale (912,932) (571,024) (677,990)
- ----------------------------------------------------------------------------------
Premises and equipment (34,980) (18,129) (10,584)
- ----------------------------------------------------------------------------------
Net originations of loans (684,329) (360,194) (529,365)
- ----------------------------------------------------------------------------------
Net cash acquired (paid) in acquisitions and dispositions (11,385) (8,675) 14,577
- ---------------------------------------------------------------------------------- ---------- -------- --------
Net cash used by investing activities (653,892) (292,327) (497,207)
- ---------------------------------------------------------------------------------- ---------- -------- --------
Financing activities:
Net increase in deposit accounts 203,910 484,220 243,143
- ----------------------------------------------------------------------------------
Net increase (decrease) in short-term borrowed funds 30,614 11,819 (80,402)
- ----------------------------------------------------------------------------------
Proceeds from issuance of long-term debt 154,600 126,140 50,129
- ----------------------------------------------------------------------------------
Repayments of long-term debt (64,558) (10,131) (7,997)
- ----------------------------------------------------------------------------------
Issuances of common stock from exercise of stock options, net 261 1,973 3,417
- ----------------------------------------------------------------------------------
Purchase and retirement of common stock (74,996) (76,601) --
- ----------------------------------------------------------------------------------
Other equity transactions, net (10) (14) (44)
- ----------------------------------------------------------------------------------
Cash dividends paid (43,797) (40,398) (36,750)
- ---------------------------------------------------------------------------------- ---------- -------- --------
Net cash provided by financing activities 206,024 497,008 171,496
- ---------------------------------------------------------------------------------- ---------- -------- --------
Net increase (decrease) in cash and cash equivalents (339,462) 321,107 (198,674)
- ----------------------------------------------------------------------------------
Cash and cash equivalents at beginning of year (note 1) 740,451 419,344 618,018
- ---------------------------------------------------------------------------------- ---------- -------- --------
Cash and cash equivalents at end of year (note 1) $ 400,989 740,451 419,344
- ---------------------------------------------------------------------------------- ---------- -------- --------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid during the year $ 257,118 256,250 267,649
- ----------------------------------------------------------------------------------
Income taxes paid during the year 81,492 71,618 57,597
- ----------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
33
<PAGE>
CCB FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Consolidation
The consolidated financial statements include the accounts and results of
operations of CCB Financial Corporation ("CCB") and its wholly-owned
subsidiaries, Central Carolina Bank and Trust Company ("CCB Bank"), American
Federal Bank, FSB ("AmFed") and Central Carolina Bank-Georgia ("CCB-Ga.")
(collectively, the "Subsidiary Banks"). The consolidated financial statements
also include the accounts and results of operations of the wholly-owned
subsidiaries of CCB Bank (CCB Investment and Insurance Service Corporation;
CCBDE, Inc.; Salem Trust Company; Salem Advisors, Inc.; Southland Associates,
Inc. and Corcoran Holdings, Inc. and its subsidiary, Watts Properties, Inc.)
and AmFed (American Service Corporation of S.C.; AMFEDDE, Inc.; Mortgage North;
Finance South, Inc. and McBee Holdings, Inc. and its subsidiary, Greenville
Participations, Inc.). All significant intercompany transactions and accounts
are eliminated in consolidation. CCB operates as one business segment.
CCB Bank and AmFed provide a full range of banking services to individual
and corporate customers through their branch networks based in North Carolina
and South Carolina, respectively. CCB Bank also provides trust services to
customers in Virginia and Florida through trust offices located in each of
those states. CCB-Ga. is a special purpose bank that provided nationwide credit
card services until the sale of the majority of its credit card receivables
during 1999. CCB-Ga. is in the process of being dissolved. Neither CCB nor its
Subsidiary Banks have foreign operations. CCB believes that there is no
concentration of risk with any single customer or supplier, or small group of
customers or suppliers, whose failure or nonperformance would materially affect
CCB's results. Products and services offered to customers include traditional
banking services such as accepting deposits; making secured and unsecured
loans; renting safety deposit boxes; performing trust functions for
corporations, employee benefit plans and individuals; and providing certain
insurance and brokerage services. The Subsidiary Banks are subject to
competition from other financial entities and are subject to the regulations of
certain Federal and state agencies and undergo periodic examinations by those
regulatory agencies.
Certain amounts for prior years have been reclassified to conform to the
1999 presentation. These reclassifications have no effect on shareholders'
equity or net income as previously reported.
Financial Statement Presentation
In preparing the financial statements, management is required to make
estimates and assumptions that affect the reported balances of assets and
liabilities as of the date of the balance sheet and income and expenses for the
periods presented. Actual results could differ from those estimates.
For purposes of the Statements of Cash Flows, CCB considers time deposits
in other banks, federal funds sold and other short-term investments to be cash
equivalents.
Investment Securities
CCB classifies its investment securities in one of the three following
categories: (a) debt securities that CCB has the positive intent and ability to
hold to maturity are classified as held for investment and reported at
amortized cost; (b) debt and equity securities that are bought and held
principally for the purpose of selling them in the near term are classified as
trading and reported at fair value, with unrealized gains and losses included
in earnings; and (c) debt and equity securities not classified as either held
for investment or trading are classified as available for sale and reported at
fair value, with unrealized gains and losses excluded from earnings and
reported as a separate component of shareholders' equity. CCB has had no
securities classified as trading securities. The net unrealized gains or losses
on securities available for sale, net of taxes, are reported as a separate
component of shareholders' equity. Changes in market values of securities
classified as available for sale will cause fluctuations in shareholders'
equity. Unrealized losses on securities held to maturity due to fluctuations in
fair value are recognized when it is determined that an other than temporary
decline in value has occurred.
Investment securities classified as available for sale will be considered
in CCB's asset/liability management strategies and may be sold in response to
changes in interest rates, liquidity needs and/or significant prepayment risk.
The cost of investment securities sold is determined by the "identified
certificate" method. Premium amortization and discount accretion are computed
using the interest method.
34
<PAGE>
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- Continued
Loan Portfolio
The loan portfolio is comprised of the following: commercial, financial
and agricultural; real estate-construction; real estate-mortgage; instalment
loans to individuals, revolving credit accounts and leases. The lease portfolio
includes rolling stock such as automobiles, trucks and trailers as well as a
broadly diversified base of equipment.
Interest income on loans is recorded on the accrual basis. Accrual of
interest on loans (including impaired loans) is discontinued when management
deems that collection of additional interest is doubtful. Interest received on
nonaccrual loans and impaired loans is generally applied against principal or
may be reported as interest income depending on management's judgment as to the
collectibility of principal. When borrowers with loans on a nonaccrual status
demonstrate their ability to repay their loans in accordance with the
contractual terms of the notes, the loans are returned to accrual status.
Reserve for Loan Losses
The reserve for loan losses is increased by provisions charged to expense
and reduced by loan charge-offs, net of recoveries. The reserve is maintained
at a level considered adequate by management to provide for probable loan
losses. The reserve is comprised of specific loan loss allocations, nonaccrual
loan and classified loan allocations, and general allocations by loan type for
all other loans. Specific loan loss allocations are determined for significant
credits where management believes that a risk of loss exists.
While management uses the best information available on which to base
estimates, future adjustments to the reserve may be necessary if economic
conditions, particularly in the Subsidiary Banks' markets, differ substantially
from the assumptions used by management. Additionally, bank regulatory agency
examiners periodically review the loan portfolio and may require CCB to
charge-off loans and/or increase the reserve for loan losses to reflect their
assessment of the collectibility of loans based on available information at the
time of their examination.
For all specifically reviewed loans for which it is probable that the
Subsidiary Banks will be unable to collect all amounts due according to the
terms of the loan agreement, the Subsidiary Banks determine a value at either
the present value of expected cash flows discounted at the loan's effective
interest rate, or if more practical, the market price or value of the
collateral. If the resulting value of the impaired loan is less than the
recorded balance, impairment is recognized by creating a valuation allowance
for the difference and recognizing a corresponding bad debt expense.
Premises and Equipment
Premises and equipment are stated at cost less accumulated depreciation
and amortization. Depreciation is computed over the estimated lives of the
assets on accelerated and straight-line methods. Leasehold improvements are
amortized over the term of the respective leases or the estimated useful lives
of the improvements, whichever is shorter.
Other Real Estate
Other real estate acquired through loan foreclosures is valued at the
lower of cost or fair value less estimated cost of sale.
Mortgage Servicing Rights
Mortgage servicing rights ("MSR") are the rights to service mortgage loans
for others which are capitalized and included in "other assets" on the
Consolidated Balance Sheets at the lower of their cost or market. The cost of
mortgage loans originated or purchased is allocated between the cost of the
loans and the MSR. Capitalization of the allocated cost of MSR occurs when the
underlying loans are sold or securitized. The cost of the MSR is amortized over
the estimated period of and in proportion to net servicing revenues. MSR for
loans originated by the Subsidiary Banks prior to 1996 were not capitalized in
accordance with the then current accounting standards.
CCB periodically evaluates MSR for impairment by estimating the fair value
based on market prices for similar servicing assets. For purposes of impairment
evaluation, the MSR are stratified based on predominate risk characteristics of
the underlying loans, including loan type (conventional or government), term
and amortization type (fixed or adjustable). If the carrying value of the MSR
exceed the estimated fair value, a valuation allowance is established. Changes
to the valuation allowance are charged against or credited to mortgage
servicing income and fees up to the original cost of the MSR.
Subordinated Notes
Underwriting discounts and commissions and issuance expenses of the
subordinated notes are included in "other assets" on the Consolidated Balance
Sheets. These expenses are being amortized over the life of the subordinated
notes.
35
<PAGE>
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- Continued
Intangibles Arising from Acquisitions
Intangible assets arising from acquisitions result from CCB paying amounts
in excess of fair value for businesses, core deposits and tangible assets
acquired. Such amounts are being amortized by systematic charges to income over
a period no greater than the estimated remaining life of the assets acquired or
not exceeding the estimated remaining life of the existing deposit base assumed
(primarily for up to 10 years). Goodwill is amortized on a straight-line basis
over periods ranging from 10 to 20 years. CCB's unamortized goodwill is
reviewed for impairment whenever the facts and circumstances indicate that the
carrying amount may not be recoverable. Unamortized goodwill associated with
disposed assets is charged to current earnings.
Negative goodwill, included in "other liabilities" on the Consolidated
Balance Sheets, represents the excess of fair value of net assets acquired over
cost after recording the liability for recaptured tax bad debt reserves and
after reducing the basis in noncurrent assets acquired to zero. Negative
goodwill is being accreted into earnings on a straight-line basis over the
estimated periods to be benefited (generally 10 years).
Comprehensive Income
Comprehensive income is the change in CCB's equity during the period from
transactions and other events and circumstances from non-owner sources. Total
comprehensive income is divided into net income and other comprehensive income
(loss). CCB's "other comprehensive income (loss)" for the three-year period
ended December 31, 1999 and "accumulated other comprehensive income (loss)" as
of December 31, 1999 and 1998 are comprised solely of unrealized gains and
losses on certain investments in debt and equity securities.
Income Taxes
The provision for income taxes is based on income and expense reported for
financial statement purposes after adjustment for permanent differences such as
tax-exempt interest income. Deferred income taxes are provided when there is a
difference between the periods items are reported for financial statement
purposes and when they are reported for tax purposes and are recorded at the
enacted tax rates expected to apply to taxable income in the years in which
these temporary differences are expected to be recovered or settled. Subsequent
changes in tax rates will require adjustment to these assets and liabilities.
Incentive and Performance Unit Plans
CCB has incentive and related performance unit plans covering certain
officers of CCB and the Subsidiary Banks. The market value of shares issued
under the incentive plans and the estimated value of awards under the
performance unit plans are being charged to operating expense over periods of
up to three years.
Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting
for Stock-Based Compensation" encourages but does not require that companies
record compensation cost for stock-based employee compensation plans at fair
value. CCB has chosen to account for stock-based compensation plans using the
intrinsic value method prescribed in Accounting Principles Board ("APB")
Opinion No. 25, "Accounting for Stock Issued to Employees". Under the intrinsic
value based method, compensation cost is the excess, if any, of the quoted
market price of the stock at grant date or other measurement date over the
amount an employee must pay to acquire the stock. CCB's stock options have no
intrinsic value at grant date, and consequently, no compensation cost is
recognized for them.
An employer that continues to apply the intrinsic value accounting method
rather than the "fair value based method" must disclose certain pro forma
information. Under the fair value based method, compensation cost is measured
at the grant date of the option based on the value of the award and is
recognized over the service period, which is usually the vesting period. The
required pro forma amounts reflect the difference between compensation cost, if
any, included in net income and the related cost measured by the fair value
based method, including tax effects, that would have been recognized in the
income statement if the fair value based method had been used.
Stock Split and Per Share Data
All share and per share data has been retroactively restated for the
two-for-one stock split effected in the form of a 100% stock dividend paid on
October 1, 1998.
Basic earnings per share ("EPS") excludes dilution and is computed by
dividing net income available to common shareholders by the weighted average
number of common shares outstanding during each period. Diluted EPS reflects
the potential dilution that could occur if securities or other contracts to
issue common stock were exercised or converted into common stock. Diluted EPS
is
36
<PAGE>
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- Continued
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
the period.
Fair Value of Financial Instruments
The financial statements include disclosure of fair value information
about financial instruments, whether or not recognized on the balance sheet,
for which it is practicable to estimate that value. In cases where quoted
market prices are not available, fair values are based on estimates using
present value or other valuation techniques. Those techniques are significantly
affected by the assumptions used, including the discount rate and estimates of
future cash flows. In that regard, the derived fair value estimates cannot be
substantiated by comparison to independent markets and, in many cases, could
not be realized in immediate settlement of the financial instrument. As the
fair value of certain financial instruments and all nonfinancial instruments
are not presented, the aggregate fair value amounts presented do not represent
the underlying value of CCB.
Derivative Financial Instruments
CCB uses off-balance sheet derivative contracts for interest rate risk
management. These contracts are accounted for on the accrual basis and the net
interest differential, including premiums paid, if any, are recognized as an
adjustment to interest income or expense of the related asset or liability. CCB
does not utilize derivative financial instruments for trading purposes.
(2) ACQUISITIONS
On October 1, 1999, CCB acquired Stone Street Bancorp, Inc. ("Stone
Street"), a $129 million savings bank located in the Winston-Salem, North
Carolina area. The acquisition was accounted for as a purchase and resulted in
the issuance of approximately 646,000 shares of CCB stock. In accordance with
purchase accounting, the operations and income of Stone Street are included in
the income of CCB from the date of purchase. Goodwill totaling $3.6 million was
recorded in the acquisition and is being amortized over a 15-year period. The
Stone Street acquisition is not material to CCB's financial position or net
earnings and pro forma information is not deemed necessary.
(3) RESTRICTIONS ON CASH AND DUE FROM BANKS
The Subsidiary Banks are required to maintain reserve and clearing
balances with the Federal Reserve Bank. These balances are included in "cash
and due from banks" on the Consolidated Balance Sheets. For the reserve
maintenance periods in effect at both December 31, 1999 and 1998, the
Subsidiary Banks were required to maintain average reserve and clearing
balances of $7,600,000.
(4) INVESTMENT SECURITIES
Investment securities with amortized costs of approximately $829,416,000
at December 31, 1999 and $638,400,000 at December 31, 1998 were pledged to
secure public funds on deposit, repurchase agreements and for other purposes
required by law. The investment securities portfolio is segregated into
securities available for sale and securities held to maturity.
CCB's other comprehensive income (loss) for the years ended December 31,
1999, 1998 and 1997 and accumulated other comprehensive income (loss) as of
December 31, 1999 and 1998 are comprised solely of unrealized gains and losses
on certain investments in debt and equity securities. Other comprehensive
income (loss) for the years ended December 31, 1999, 1998 and 1997 follows:
<TABLE>
<CAPTION>
1999 1998 1997
------------- -------- --------
(In Thousands)
<S> <C> <C> <C>
Unrealized holding gains (losses) arising during the year $ (26,225) 658 6,939
- -------------------------------------------------------------------------
Less reclassification adjustment for net realized gains, net of tax 827 1,307 288
- ------------------------------------------------------------------------- --------- ----- -----
Unrealized gains (losses) on securities, net of applicable income taxes $ (27,052) (649) 6,651
- ------------------------------------------------------------------------- --------- ----- -----
</TABLE>
37
<PAGE>
(4) INVESTMENT SECURITIES -- Continued
Securities Available for Sale
Securities available for sale are presented on the Consolidated Balance
Sheets at their market value. The amortized cost and approximate market values
of these securities at December 31, 1999 and 1998 were as follows:
<TABLE>
<CAPTION>
1999
----------------------------------------------------
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
------------- ------------ ------------ ------------
(In Thousands)
<S> <C> <C> <C> <C>
U.S. Treasury $ 354,316 1,977 (1,063) 355,230
- -----------------------------
U.S. Government agencies and
corporations 1,109,062 439 (25,264) 1,084,237
- -----------------------------
Mortgage-backed securities 74,647 1,356 (98) 75,905
- -----------------------------
Equity securities 47,347 539 (138) 47,748
- ----------------------------- ---------- ----- ------- ---------
Total $1,585,372 4,311 (26,563) 1,563,120
- ----------------------------- ---------- ----- ------- ---------
<CAPTION>
1998
--------------------------------------------------
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
----------- ------------ ------------ ------------
(In Thousands)
<S> <C> <C> <C> <C>
U.S. Treasury 389,043 11,871 -- 400,914
- -----------------------------
U.S. Government agencies and
corporations 672,502 4,222 (563) 676,161
- -----------------------------
Mortgage-backed securities 153,865 5,102 -- 158,967
- -----------------------------
Equity securities 47,067 1,090 (1) 48,156
- ----------------------------- ------- ------ ------- -------
Total 1,262,477 22,285 (564) 1,284,198
- ----------------------------- --------- ------ ------ ---------
</TABLE>
Equity securities include CCB Bank's and AmFed's required investment in
stock of the Federal Home Loan Bank (the "FHLB") which totaled $25,494,000 at
December 31, 1999 and $25,423,000.00 at December 31, 1998. No ready market
exists for this stock and it has no quoted market value. However, redemption of
this stock has historically been at par value. Accordingly, the carrying
amounts were deemed to be a reasonable estimate of fair value.
Net unrealized gains (losses) on securities available for sale totaled
$(22,252,000), $21,721,000, and $22,731,000 at December 31, 1999, 1998 and
1997, respectively, and are included as a component of shareholders' equity,
net of deferred tax liabilities (benefits) of $(8,531,000), $8,390,000 and
$8,751,000 at December 31, 1999, 1998 and 1997, respectively. In the opinion of
management, no securities are permanently impaired.
Gross gains and losses from sales of investment securities available for
sale totaled $1,303,000 and $3,000, respectively in 1999, $2,203,000 and
$26,000, respectively, in 1998 and $578,000 and $98,000, respectively, in 1997.
Following is a maturity schedule of securities available for sale at
December 31, 1999:
<TABLE>
<CAPTION>
Amortized Carrying
Cost Value
------------- ------------
(In Thousands)
<S> <C> <C>
Within 1 year $ 168,739 168,956
- --------------------------------------
After 1 but within 5 years 934,610 922,795
- --------------------------------------
After 5 but within 10 years 351,841 339,700
- --------------------------------------
After 10 years 8,188 8,016
- -------------------------------------- ---------- -------
Subtotal 1,463,378 1,439,467
- --------------------------------------
Mortgage-backed securities 74,647 75,905
- --------------------------------------
Equity securities 47,347 47,748
- -------------------------------------- ---------- ---------
Total securities available for sale $1,585,372 1,563,120
- -------------------------------------- ---------- ---------
</TABLE>
Securities Held to Maturity
The carrying values and approximate market values of securities held to
maturity at December 31, 1999 and 1998 were as follows:
<TABLE>
<CAPTION>
1999 1998
--------------------------------------------- --------------------------------------------
Carrying Unrealized Unrealized Market Carrying Unrealized Unrealized Market
Value Gains Losses Value Value Gains Losses Value
---------- ------------ ------------ -------- ---------- ------------ ------------ -------
(In Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
States and political subdivisions $73,370 2,121 (43) 75,448 80,189 5,088 -- 85,277
- ----------------------------------- ------- ----- --- ------ ------ ----- -- ------
</TABLE>
Following is a maturity schedule of securities held to maturity at
December 31, 1999:
<TABLE>
<CAPTION>
Carrying Market
Value Value
---------- ---------
(In Thousands)
<S> <C> <C>
Within 1 year $ 1,600 1,603
- -----------------------------------------------
After 1 but within 5 years 10,878 11,248
- -----------------------------------------------
After 5 but within 10 years 48,836 50,216
- -----------------------------------------------
After 10 years 12,056 12,381
- ----------------------------------------------- ------- ------
Total securities held to maturity $73,370 75,448
- ----------------------------------------------- ------- ------
</TABLE>
38
<PAGE>
(4) INVESTMENT SECURITIES -- Continued
Gains from calls of securities held to maturity totaled $78,000 during
1999 and $2,000 during 1998. Losses from calls of securities held to maturity
totaled $1,000 during 1998.
(5) LOANS
A summary of loans at December 31, 1999 and 1998 follows:
<TABLE>
<CAPTION>
1999 1998
------------- ------------
(In Thousands)
<S> <C> <C>
Commercial, financial and agricultural $ 697,776 686,133
- ----------------------------------------
Real estate-construction 1,152,081 906,916
- ----------------------------------------
Real estate-mortgage 3,406,789 3,143,637
- ----------------------------------------
Instalment loans to individuals 571,771 488,110
- ----------------------------------------
Revolving credit 58,926 214,685
- ----------------------------------------
Lease financing 76,424 54,955
- ---------------------------------------- ---------- ---------
Total gross loans 5,963,767 5,494,436
- ----------------------------------------
Less: Unearned income 9,583 7,099
- ---------------------------------------- ---------- ---------
Total loans $5,954,184 5,487,337
- ---------------------------------------- ---------- ---------
</TABLE>
During 1999, the Subsidiary Banks sold $151,342,000 of consumer credit
card receivables to a large credit card issuer. As a result of the sale, the
Subsidiary Banks realized a gain of $32,837,000. Under an agent bank agreement,
the Subsidiary Banks will continue to offer consumer credit card products
through the issuer bank. The Subsidiary Banks retained the commercial credit
card portfolio.
Loans of $15,950,000 and $16,761,000 at December 31, 1999 and 1998,
respectively, were not accruing interest. Loans with outstanding balances of
$4,248,000 in 1999, $2,205,000 in 1998 and $2,281,000 in 1997 were transferred
from loans to other real estate acquired through loan foreclosure. Other real
estate acquired through loan foreclosures amounted to $2,872,000 and $791,000
at December 31, 1999 and 1998, respectively, and is included in "other assets"
on the Consolidated Balance Sheets.
The following is an analysis of interest income related to loans on
nonaccrual status for the years ended December 31, 1999, 1998 and 1997:
<TABLE>
<CAPTION>
1999 1998 1997
--------- ------- ------
(In Thousands)
<S> <C> <C> <C>
Interest income that would have been recognized if the loans had been current at original $1,307 1,138 1,055
contractual rates
- ------------------------------------------------------------------------------------------
Amount recognized as interest income 322 288 171
- ------------------------------------------------------------------------------------------ ------ ----- -----
Difference $ 985 850 884
- ------------------------------------------------------------------------------------------ ------ ----- -----
</TABLE>
In general, the Subsidiary Banks do not purchase loans or participate with
others in the origination of loans and confine their lending activities to
North and South Carolina with the exception of certain instalment loans which
are available in market areas stretching from Virginia to Georgia.
Substantially all loans are made on a secured basis and, with the exception of
marketable mortgage loans, are originated for retention in the Subsidiary
Banks' portfolios. Loans held for sale totaled $21,516,000 and $77,626,000 at
December 31, 1999 and 1998, respectively. The Subsidiary Banks do not engage in
highly leveraged transactions or foreign lending activities. The loan
portfolios are well diversified and there are no significant concentrations of
credit risk.
At December 31, 1999, impaired loans totaled $8,903,000, of which
$6,513,000 were on nonaccrual status, and their related reserve for loan losses
totaled $1,897,000. The average carrying value of impaired loans was
$14,442,000 during 1999 and gross interest income recognized on impaired loans
totaled $1,075,000. At December 31, 1998, the carrying value of loans
considered to be impaired totaled $15,766,000, of which $9,030,000 were on
nonaccrual status. The related reserve for loan losses on the impaired loans
totaled $2,574,000. The average carrying value of impaired loans was
$15,267,000 during the year ended December 31, 1998. Gross interest income
recognized on the impaired loans totaled $845,000 during 1998 and $320,000
during 1997.
During 1999 and 1998, the Subsidiary Banks had loan and deposit
relationships with Executive Officers and Directors of CCB and their
Associates. In the opinion of management, these loans do not involve more than
the normal risk of collectibility and are made on terms comparable to other
borrowers. Following is an analysis of these borrowings for the year ended
December 31, 1999 (in thousands):
<TABLE>
<CAPTION>
Balance at
Beginning New Balance at
of Year Loans Repayments End of Year
----------- ------- ------------ ------------
<S> <C> <C> <C> <C>
Directors, Executive Officers and Associates $38,518 7,690 5,850 $40,358
- ---------------------------------------------- ------- ----- ----- -------
</TABLE>
39
<PAGE>
(5) LOANS -- Continued
Loans serviced for the benefit of others totaled $948 million at December
31, 1999, $1.1 billion at December 31, 1998, and $1.2 billion at December 31,
1997. Mortgage servicing fees totaled $3,496,000 in 1999, $3,980,000 in 1998
and $3,978,000 in 1997. Mortgage servicing rights totaled $2,686,000 and
$4,981,000 at December 31, 1999 and 1998, respectively, and are included in
"other assets" on the Consolidated Balance Sheets. The estimated fair value of
mortgage servicing rights was $3,270,000 at December 31, 1999 and $5,333,000 at
December 31, 1998. Additionally, there is value associated with servicing
originated prior to January 1, 1996 for which the carrying value is zero. No
valuation allowance for capitalized mortgage servicing rights was required at
December 31, 1999. The following table summarizes the changes in mortgage
servicing rights during 1999 and 1998:
<TABLE>
<CAPTION>
1999 1998
----------- -----------
(In Thousands)
<S> <C> <C>
Balance at beginning of year $ 4,981 3,640
- ---------------------------------------
Capitalized mortgage servicing rights 12,508 12,980
- ---------------------------------------
Amortization (1,391) (1,358)
- ---------------------------------------
Sale of mortgage servicing (13,412) (10,281)
- --------------------------------------- --------- -------
Balance at end of year $ 2,686 4,981
- --------------------------------------- --------- -------
</TABLE>
Certain real estate-mortgage loans are pledged as collateral for advances
from the FHLB as set forth in Note 9.
(6) RESERVE FOR LOAN LOSSES
Following is a summary of the reserve for loan losses:
<TABLE>
<CAPTION>
1999 1998 1997
------------ ------------ ------------
(In Thousands)
<S> <C> <C> <C>
Balance at beginning of year $ 73,182 67,594 61,257
- -----------------------------------------------
Provision charged to operations 14,296 15,884 16,376
- -----------------------------------------------
Decrease from sale of credit card receivables (1,967) -- --
- -----------------------------------------------
Addition from acquired financial institution 886 -- --
- -----------------------------------------------
Recoveries of loans previously charged-off 3,450 2,613 3,105
- -----------------------------------------------
Loan losses charged to reserve (12,581) (12,909) (13,144)
- ----------------------------------------------- --------- ------- -------
Balance at end of year $ 77,266 73,182 67,594
- ----------------------------------------------- --------- ------- -------
</TABLE>
(7) PREMISES AND EQUIPMENT
Following is a summary of premises and equipment:
<TABLE>
<CAPTION>
Accumulated
Depreciation Net
and Book
Cost Amortization Value
---------- -------------- ---------
(In Thousands)
<S> <C> <C> <C>
December 31, 1999:
Land $ 19,624 -- 19,624
- -------------------------------
Buildings 75,091 36,406 38,685
- -------------------------------
Leasehold improvements 16,526 5,168 11,358
- -------------------------------
Furniture and equipment 131,530 87,339 44,191
- ------------------------------- -------- ------ ------
Total premises and equipment $242,771 128,913 113,858
- ------------------------------- -------- ------- -------
December 31, 1998:
Land $ 18,282 -- 18,282
- -------------------------------
Buildings 68,755 33,905 34,850
- -------------------------------
Leasehold improvements 14,326 4,071 10,255
- -------------------------------
Furniture and equipment 105,964 76,581 29,383
- ------------------------------- -------- ------- -------
Total premises and equipment $207,327 114,557 92,770
- ------------------------------- -------- ------- -------
</TABLE>
40
<PAGE>
(8) TIME DEPOSITS AND OTHER SHORT-TERM BORROWED FUNDS
Maturities of time deposits are as follows:
<TABLE>
<CAPTION>
Year Ending December 31 Total Maturities
- --------------------------------- -----------------
(In Thousands)
<S> <C>
2000 $ 2,193,963
- ----------------
2001 765,478
- ----------------
2002 148,393
- ----------------
2003 28,160
- ----------------
2004 and thereafter 278
- --------------------------------- -----------
Total $ 3,136,272
- ---------------- -----------
</TABLE>
Short-term borrowed funds outstanding at December 31, 1999 and 1998
consisted of the following:
<TABLE>
<CAPTION>
1999 1998
----------- ----------
(In Thousands)
<S> <C> <C>
FHLB short-term advances $ 100,000 105,000
- ------------------------------------------------
Federal funds purchased and master notes 174,748 128,482
- ------------------------------------------------
Treasury tax and loan depository note account 10,568 8,513
- ------------------------------------------------
Securities sold under agreements to repurchase 44,354 46,261
- ------------------------------------------------ --------- -------
Total short-term borrowed funds $ 329,670 288,256
- ------------------------------------------------ --------- -------
</TABLE>
The short-term FHLB advances were drawn under CCB Bank's FHLB line of
credit and are secured by a blanket collateral agreement on CCB Bank's mortgage
loan portfolio. Master note borrowings are unsecured obligations of CCB which
mature daily and bore a weighted average interest rate of 4.71% at December 31,
1999. The treasury tax and loan depository note account is payable on demand
and is collateralized by various investment securities with amortized costs of
$32,478,000 and market values of $32,172,000 at December 31, 1999. Interest on
borrowings under this arrangement is payable at .25% below the weekly federal
funds rate as quoted by the Federal Reserve.
The following table presents certain information for securities sold under
agreements to repurchase. These short-term borrowings by the Subsidiary Banks
are collateralized by U.S. Treasury and U.S. Government agency and corporation
securities with carrying and market values of $380,128,000 at December 31,
1999. The securities collateralizing the short-term borrowings have been
delivered to a third-party custodian for safekeeping. Following is a summary of
this type of borrowing for the three previous years:
<TABLE>
<CAPTION>
1999 1998 1997
------------- ---------- -----------
(In Thousands)
<S> <C> <C> <C>
Balance at December 31 $ 44,354 46,261 76,500
- ------------------------------------------------------------- --------- ------ ------
Weighted average interest rate at December 31 4.65% 3.89 5.30
- ------------------------------------------------------------- --------- ------- -------
Maximum amount outstanding at any month end during the year $ 49,189 70,398 125,383
- ------------------------------------------------------------- --------- ------- --------
Average daily balance outstanding during the year $ 43,904 59,638 101,159
- ------------------------------------------------------------- --------- ------- --------
Average annual interest rate paid during the year 4.00% 4.88 5.29
- ------------------------------------------------------------- --------- ------- --------
</TABLE>
CCB has an unsecured $50 million line of credit with a commercial bank. No
draws were outstanding as of December 31, 1999 or outstanding during 1999. The
maximum outstanding during 1998 was $10,000,000. Interest expense on the draw
from the line of credit totaled $72,000 during 1998. The line of credit
currently requires an annual commitment fee of 12 basis points and may be
withdrawn under certain events of default including failure to comply with
covenants, failure to make principal or interest payments within the specified
timeframe or voluntary or involuntary liquidation, reorganization or other
relief with respect to indebtedness. No draws were outstanding as of December
31, 1998 or 1997.
(9) LONG-TERM DEBT
Following is a summary of long-term debt at December 31, 1999 and 1998:
<TABLE>
<CAPTION>
1999 1998
------------ ----------
(In Thousands)
<S> <C> <C>
Federal Home Loan Bank advances maturing through 2017 $ 295,937 183,622
- ---------------------------------------------------------
6.75% subordinated notes 32,985 32,985
- ---------------------------------------------------------
Mortgage payable at 9%, collateralized by bank premises -- 88
- --------------------------------------------------------- --------- -------
Total long-term debt $ 328,922 216,695
- --------------------------------------------------------- --------- -------
</TABLE>
41
<PAGE>
(9) LONG-TERM DEBT -- Continued
The FHLB long-term advances are primarily at fixed rates of up to 6.30%
and are collateralized by liens on first mortgage loans with book values not
less than the outstanding principal balance of the obligations. Interest on the
FHLB long-term advances totaled $10,530,000 in 1999, $7,895,000 in 1998 and
$2,891,000 in 1997.
CCB's 6.75% subordinated notes due December 1, 2003 pay interest
semi-annually and are not redeemable prior to maturity. There is no sinking
fund for the notes. The notes are unsecured and subordinated to all present and
future senior indebtedness of CCB. Interest on the subordinated notes totaled
$2,226,000 in 1999, 1998 and 1997.
Maturities of long-term debt are as follows:
<TABLE>
<CAPTION>
Year Ending December 31 Total Maturities
- ------------------------- -----------------
(In Thousands)
<S> <C>
2000 $ 2,165
- ----------------
2001 194,028
- ----------------
2002 170
- ----------------
2003 29,172
- ----------------
2004 33,148
- ----------------
Thereafter 70,239
- ---------------- ---------
Total $ 328,922
- ---------------- ---------
</TABLE>
(10) EMPLOYEE BENEFIT PLANS
Pension Plan
CCB has a noncontributory, defined benefit pension plan covering
substantially all full-time employees. The pension plan, which makes provisions
for early and delayed retirement as well as normal retirement, provides
participants with retirement benefits based on credited years of service and an
average salary for the five consecutive years within the last ten years
preceding normal retirement that will produce the highest average salary. CCB's
policy is to fund amounts allowable for federal income tax purposes. In 1998
and 1997, CCB contributed $2,614,000 and $2,871,000 respectively, to the
pension plan. No contributions were made in 1999 due to funding limitations.
At December 31, 1999, pension plan assets consist primarily of corporate
stocks, including 64,100 shares of CCB's common stock, corporate bonds, and
obligations of U.S. government agencies and corporations. The plan's assets are
held and administered by CCB Bank's trust department. The change in benefit
obligation, change in plan assets and funded status of the pension plan and the
amounts included in "other liabilities" on the Consolidated Balance Sheets at
December 31, 1999 and 1998 are shown below:
<TABLE>
<CAPTION>
1999 1998
------------ -----------
Change in benefit obligation: (In Thousands)
<S> <C> <C>
Benefit obligation at January 1 $ 75,124 69,834
- ------------------------------------------
Service cost 4,320 3,677
- ------------------------------------------
Interest cost 5,157 4,859
- ------------------------------------------
Actuarial gain (8,840) (899)
- ------------------------------------------
Benefit payments (2,836) (2,347)
- ------------------------------------------ --------- ------
Benefit obligation at December 31 $ 72,925 75,124
- ------------------------------------------ --------- ------
Change in plan assets:
Fair value of plan assets at January 1 $ 89,907 79,161
- ------------------------------------------
Actual return on plan assets 3,275 10,479
- ------------------------------------------
Employer contributions -- 2,614
- ------------------------------------------
Benefit payments (2,836) (2,347)
- ------------------------------------------ --------- ------
Fair value of plan assets at December 31 $ 90,346 89,907
- ------------------------------------------ --------- ------
Funded status:
As of end of year $ 17,421 14,782
- ------------------------------------------
Unrecognized transition asset (211) (250)
- ------------------------------------------
Unrecognized prior-service cost 812 968
- ------------------------------------------
Unrecognized net gain (21,117) (16,672)
- ------------------------------------------ --------- -------
Accrued pension expense $ (3,095) (1,172)
- ------------------------------------------ --------- -------
</TABLE>
42
<PAGE>
(10) EMPLOYEE BENEFIT PLANS -- Continued
Assumptions used in computing the actuarial present value of the projected
benefit obligation were as follows:
<TABLE>
<CAPTION>
1999 1998
---------- ---------
<S> <C> <C>
Discount rate 7.75% 7.00
- ----------------------------------------------------------
Rate of increase in compensation level of employees 4.50% 5.00
- ----------------------------------------------------------
Expected long-term rate of return on pension plan assets 8.00% 8.00
- ----------------------------------------------------------
</TABLE>
The components of pension expense for the years ended December 31, 1999,
1998 and 1997 are shown below:
<TABLE>
<CAPTION>
1999 1998 1997
---------- ----------- -------------
(In Thousands)
<S> <C> <C> <C>
Service cost of benefits earned during the period $ 4,320 3,677 3,576
- ---------------------------------------------------
Interest cost on projected benefit obligation 5,157 4,859 4,569
- ---------------------------------------------------
Expected return on plan assets (7,078) (6,412) (5,395)
- ---------------------------------------------------
Amortization of transition asset (39) (46) (319)
- ---------------------------------------------------
Amortization of prior service cost 155 155 155
- ---------------------------------------------------
Amortization of net gain (592) (523) (1)
- --------------------------------------------------- -------- ------ ---------
Net pension expense $ 1,923 1,710 2,585
- --------------------------------------------------- -------- ------ --------
</TABLE>
Savings and Profit Sharing Plans
CCB has a defined contribution employee benefit plan covering
substantially all employees with one year's service. Under the plan, employee
contributions are partially matched. In addition, CCB may make discretionary
contributions to the plan. Total expense under this plan was $2,259,000,
$2,882,000 and $2,850,000 in 1999, 1998 and 1997, respectively.
Stock Options, Restricted Stock and Other Incentive Plans
CCB's Long-Term Incentive Plan provides up to 2,000,000 shares of common
stock for award as performance-based stock and cash incentives and other
equity-based incentives. As of December 31, 1999, a total of 1,077,346 stock
options to purchase shares of CCB's common stock and 32,718 shares of
restricted stock had been awarded. The options and restricted stock vest over
varying periods, from immediate vesting up to three years.
During 1993, CCB adopted nonstatutory and incentive stock option plans as
part of transactions to acquire financial institutions. The stock options were
granted to the directors and certain officers of the acquired financial
institutions entitling them to purchase shares of common stock. The options are
earned and exercisable over periods of up to ten years. Additionally, CCB
continued in effect nonstatutory and incentive stock option plans existing at
the date of merger with acquired financial institutions. The stock options
under these plans were granted to directors and certain officers of the
respective financial institutions and entitled them to purchase shares of
common stock at an exercise price equal to the fair market value of the stock
on the date of grant. The options granted under these plans were exercisable
for periods of up to ten years and certain of the stock options included
vesting provisions of up to five years. All stock options outstanding at the
time of the respective mergers were converted into options to acquire CCB
common stock. No additional options have been granted under these option plans.
CCB has elected to follow APB No. 25 and related interpretations in
accounting for its employee stock options as permitted under SFAS No. 123. In
accordance with APB No. 25, no compensation expense is recognized when stock
options are granted because the exercise price of the stock options equals the
market price of the underlying stock on the date of grant. Had compensation
expense for the stock option plans been determined consistent with SFAS No.
123, CCB's net income and net income per share for the years ended December 31,
1999, 1998 and 1997 would have been reduced to the pro forma amounts indicated
below. These pro forma amounts may not be representative of the effect on
reported net income in future years since only options granted since December
31, 1994 have been included.
<TABLE>
<CAPTION>
1999 1998 1997
-------------- ----------- ----------
(In Thousands Except Per Share Data)
<S> <C> <C> <C> <C>
Net income As reported $ 150,823 121,212 95,424
- ----------------
Pro forma 148,909 119,815 94,343
Basic EPS As reported 3.77 2.96 2.31
- ----------------
Pro forma 3.73 2.93 2.27
Diluted EPS As reported 3.74 2.93 2.28
- ----------------
Pro forma 3.69 2.89 2.25
</TABLE>
43
<PAGE>
(10) EMPLOYEE BENEFIT PLANS -- Continued
The weighted average fair value of options granted approximated $10.74 in
1999, $10.91 in 1998 and $8.32 in 1997. The fair values of the options granted
in 1999, 1998 and 1997 are estimated on the date of the grants using the
Black-Scholes option-pricing model. Option pricing models require the use of
highly subjective assumptions, including expected stock volatility, which when
changed can materially affect fair value estimates. The fair values were
estimated using the following weighted-average assumptions:
<TABLE>
<CAPTION>
1999 1998 1997
---------- --------- ---------
<S> <C> <C> <C>
Dividend yield 2.66% 2.00 2.00
- ---------------------------
Expected volatility 20.00 15.00 19.51
- ---------------------------
Risk-free interest rate 4.79 5.47 6.68
- ---------------------------
Expected average life 5 years 5 years 5 years
- ---------------------------
</TABLE>
A summary of stock option activity and related information for the years
ended December 31, 1999, 1998 and 1997 follows:
<TABLE>
<CAPTION>
Outstanding Exercisable
---------------------------------- ------------------------------
Option Weighted Average Option Weighted Average
Shares Exercise Price Shares Exercise Price
------------- ------------------ ---------- -----------------
<S> <C> <C> <C> <C>
At December 31, 1996 1,035,746 $ 15.60
- ----------------------------------------------------
Granted 442,166 32.90
- ----------------------------------------------------
Exercised (287,582) 13.66
- ----------------------------------------------------
Forfeited (24,510) 21.00
- ---------------------------------------------------- --------- --------
At December 31, 1997 1,165,820 22.53 749,498 $ 18.22
- ---------------------------------------------------- ------- -------
Granted 348,460 55.72
- ----------------------------------------------------
Exercised (209,313) 18.14
- ----------------------------------------------------
Forfeited (32,448) 42.06
- ---------------------------------------------------- --------- --------
At December 31, 1998 1,272,519 31.81 800,464 $ 22.11
- ---------------------------------------------------- ------- -------
Granted 338,140 55.57
- ----------------------------------------------------
Assumed under acquisition of financial institution 82,059 45.31
- ----------------------------------------------------
Exercised (155,940) 21.48
- ----------------------------------------------------
Forfeited (45,118) 54.60
- ---------------------------------------------------- --------- --------
At December 31, 1999 1,491,660 $ 38.39 979,150 $ 30.75
- ---------------------------------------------------- --------- -------- ------- -------
</TABLE>
Exercise prices for options outstanding as of December 31, 1999 ranged
from $2.60 to $56.75. The following table summarizes information about stock
options outstanding at December 31, 1999:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
------------------------------------------------- ------------------------------
Weighted Weighted Weighted
Range of Number Average Years Average Number Average
Exercise Prices of Options Remaining Exercise Price of Options Exercise Price
- -------------------- ------------ --------------- ---------------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
$2.60 to $25.03 433,627 4.47 $ 16.63 433,627 $ 16.63
- --------------------
$31.46 to $45.31 428,860 7.18 35.11 360,907 34.90
- --------------------
$47.22 to $55.81 334,140 8.96 55.24 71,875 55.24
- --------------------
$55.97 to $56.75 295,033 8.29 56.03 112,741 56.12
- -------------------- ------- ---- -------- ------- --------
$2.60 to $56.75 1,491,660 7.10 $ 38.39 979,150 $ 30.75
- -------------------- --------- ---- -------- ------- --------
</TABLE>
A total of 32,718 shares of restricted stock have been awarded under the
Long-Term Incentive Plan including 3,050 shares, 10,648 shares and 11,202
shares during 1999, 1998 and 1997, respectively. The grants in 1999, 1998 and
1997 were recorded at their fair values of $154,000, $580,000 and $388,000,
respectively, on the dates of grant and had weighted average fair values of
$50.54, $54.52 and $36.56 per share. Of the restricted stock awarded, a total
of 3,780 shares have been forfeited. Forfeited stock totaled $52,000, $95,000
and $29,000 in 1999, 1998 and 1997. The tax benefit resulting from lapsed
restrictions totaled $51,000 in 1998 and $41,000 in 1997. During 1999, 1998 and
1997, $390,000, $195,000, and $176,000, respectively, of compensation expense
was recognized for restricted stock awards.
The Long-Term Incentive Plan includes a Performance Unit Plan that covers
certain senior officers. Eligible participants were awarded performance units
which have a range in value from $0 to $200 each, with a target value of $100
each based on CCB's results as compared to a group of peer banks. As of
December 31, 1999, 1998 and 1997, a total of 10,400, 13,330 and 17,614 units,
respectively, were outstanding and will be deemed earned if and to the extent
CCB meets profit objectives established by the Board of Directors over the
three-year period ended December 31, 2000. Expense for this plan was
$1,305,000, $1,200,000 and $1,100,000 for 1999, 1998 and 1997, respectively.
44
<PAGE>
(10) EMPLOYEE BENEFIT PLANS -- Continued
CCB has a Management Performance Incentive Plan covering certain officers.
The total award is based on a percentage of base salary of the eligible
participants and financial performance of CCB as compared to certain targets
established by the Board of Directors. Total expense under this plan was
$7,304,000, $4,125,000, and $3,278,000 in 1999, 1998 and 1997, respectively.
During 1993, CCB adopted Management Recognition Plans ("MRP") covering
certain officers and directors. Common stock totaling 236,240 shares was
awarded under the MRP and vested over periods of up to five years; all MRP
shares were fully vested in 1998. Total expense under the MRP was $32,000 and
$1,411,000 for 1998 and 1997, respectively.
Postretirement Health and Life Insurance Plan
CCB maintains a defined dollar benefit plan which provides postretirement
health and life insurance for all employees who retire after age 55 with ten
years of service. Benefits are provided through a self-insured plan
administered by an insurance company. The following table sets forth the plan's
change in benefit obligation, funded status and the amounts included in "other
liabilities" on the Consolidated Balance Sheets at December 31, 1999 and 1998:
<TABLE>
<CAPTION>
1999 1998
------------- -----------
(In Thousands)
<S> <C> <C>
Change in benefit obligation:
Benefit obligation at January 1 $ 7,984 7,450
- ----------------------------------------
Service cost 321 285
- ----------------------------------------
Interest cost 554 527
- ----------------------------------------
Actuarial (gain) loss (831) 97
- ----------------------------------------
Benefit payments (428) (375)
- ---------------------------------------- --------- -----
Benefit obligation at December 31 $ 7,600 7,984
- ---------------------------------------- --------- -----
Funded status:
As of end of year $ (7,600) (7,984)
- ----------------------------------------
Unrecognized net loss 994 1,933
- ---------------------------------------- --------- ------
Accrued postretirement benefit expense $ (6,606) (6,051)
- ---------------------------------------- --------- ------
</TABLE>
The accumulated postretirement benefit obligations at December 31, 1999
and 1998 were determined using discount rates of 7.75% and 7.00%, respectively.
Net periodic postretirement benefit expense charged to operations for the
years ended December 31, 1999, 1998 and 1997 included the following components:
<TABLE>
<CAPTION>
1999 1998 1997
-------- ------ -----
(In Thousands)
<S> <C> <C> <C>
Service cost $ 321 285 202
- -------------------------------------
Interest cost 554 527 513
- -------------------------------------
Amortization of net loss 107 103 90
- ------------------------------------- ----- --- ---
Net postretirement benefit expense $ 982 915 805
- ------------------------------------- ----- --- ---
</TABLE>
The health care trend rate was projected to be 5% for 2000 and thereafter.
A 1% change in the assumed health care trend rates would have the following
effects:
<TABLE>
<CAPTION>
1% Increase 1% Decrease
------------- ------------
(In Thousands)
<S> <C> <C>
Effect on total of service and interest cost components of net periodic
postretirement benefit expense $ 27 (24)
- -------------------------------------------------------------------------------
Effect on the accumulated postretirement benefit obligation 389 (343)
- -------------------------------------------------------------------------------
</TABLE>
(11) SHAREHOLDERS' EQUITY
Earnings per Share
The following schedule reconciles the numerators and denominators of the
basic and diluted EPS computations for the years ended December 31, 1999, 1998
and 1997. Diluted common shares arise from the potentially dilutive effect of
CCB's stock options outstanding.
45
<PAGE>
(11) SHAREHOLDERS' EQUITY -- Continued
<TABLE>
<CAPTION>
1999 1998 1997
------------- ------------ ----------
(In Thousands Except Per Share Data)
<S> <C> <C> <C>
Basic EPS:
Average common shares outstanding 39,944 40,898 41,438
- ------------------------------------
Net income $ 150,823 121,212 95,424
- ------------------------------------
Earnings per share 3.77 2.96 2.31
- ------------------------------------ ---------- -------- -------
Diluted EPS:
Average common shares outstanding 40,315 41,409 41,947
- ------------------------------------
Net income $ 150,823 121,212 95,424
- ------------------------------------
Earnings per share 3.74 2.93 2.28
- ------------------------------------ ---------- -------- -------
</TABLE>
Preferred Stock
CCB is authorized to issue up to 10,000,000 shares of serial preferred
stock, of which 800,000 have been designated as Series A Junior Participating
Preferred Stock. No shares of preferred stock have been issued or were
outstanding at December 31, 1999 or 1998.
Rights Plan
In 1990, CCB entered into a Rights Agreement (the "Rights Agreement") with
CCB which provided for a plan (the "Rights Plan") under which preferred stock
purchase rights were authorized (the "Rights"). During 1998, the Rights
Agreement was amended and restated to extend its term and to make other changes
necessary to update the Rights Plan. For use in connection with the Rights
Plan, CCB's Board of Directors has designated a series of preferred stock
designated as Series A Junior Participating Preferred Stock ("Preferred
Shares") consisting of 800,000 shares and having certain special rights for
purposes of dividends and other distributions, voting, dissolution and
liquidation, and in connection with certain mergers or acquisitions of the
common stock of CCB. No Preferred Shares have been issued.
In accordance with the Rights Plan, one Right was distributed during 1990
to CCB's shareholders for each of their shares of common stock. Also under the
Rights Plan, after the date of the Rights Agreement and before the earlier of
the "Distribution Date" (as defined below) or the date of redemption or
expiration of the Rights, each new share of common stock issued after the date
of the Rights Plan also has attached to it one Right.
The Rights currently are not exercisable, but may become so in the future
on a date (the "Distribution Date") which is ten business days after (i) a
public announcement that any person or group has become an "Acquiring Person"
by acquiring beneficial ownership of 15% or more (or 10% in certain
circumstances) of the outstanding common stock of CCB, or (ii) the date of
commencement by any person of, or the announcement by any person of his
intention to commence, a tender or exchange offer which would result in his
becoming an Acquiring Person. However, after the time any person becomes an
Acquiring Person, all Rights held by or transferred to such person (or any
associate or affiliate of such person) shall be void and of no effect.
Until the Distribution Date, each Right will be evidenced by the
certificate evidencing the common share to which it relates and may be
transferred only with such common share, and the surrender for transfer of any
common share certificate also will constitute the transfer of the Rights
related thereto. After the Distribution Date, separate certificates evidencing
each Right will be distributed to the record holders of the common stock to
which such Rights are attached, and each such Right may then be exercised to
purchase one one-hundredth (1/100) of a Preferred Share for a price of $187.50
(the "Purchase Price") (all as adjusted from time to time as described in the
Rights Agreement). In the alternative (and subject to certain exceptions),
after any person becomes an Acquiring Person (i) each Right may be exercised to
purchase the number of shares of CCB's common stock equal to the result
obtained by multiplying the then current Purchase Price by the number of
Preferred Shares interests covered by the Right, and dividing that product by
50% of the "current market price" of a share of CCB's common stock, or (ii)
unless the Acquiring Person has become the beneficial owner of more than 50% of
the outstanding common stock, CCB's Board of Directors at its option may
exchange one share of CCB's common stock, or a number of shares of Preferred
Shares having voting rights equivalent to one share of common stock, for all or
part of the outstanding Rights (all as adjusted from time to time as described
in the Rights Agreement).
If CCB is acquired in a merger or other business combination or if 50% of
its consolidated assets or earning power is sold, each Right will entitle the
holder, other than an Acquiring Person, to purchase securities of the surviving
company equal to the current Purchase Price multiplied by the number of
Preferred Shares interests covered by the Right, and dividing that product by
50% of the "current market price" of a share of the common stock of the
surviving or acquiring company.
46
<PAGE>
(11) SHAREHOLDERS' EQUITY -- Continued
The Rights will expire on October 1, 2008, and may be redeemed by CCB at a
price of $.01 per Right at any time prior to the acquisition by a person or
group of 15% or more (or 10% in certain circumstances) of CCB's outstanding
common stock.
Regulatory Matters
CCB and the Subsidiary Banks are subject to risk-based capital guidelines
requiring minimum capital levels based on the perceived risk of assets and
off-balance sheet instruments. As required by the Federal Deposit Insurance
Corporation Improvement Act, the federal bank regulatory agencies have jointly
issued rules which implement a system of prompt corrective action for financial
institutions. Under capital adequacy guidelines and the regulatory framework
for prompt corrective action, there are minimum ratios of capital to
risk-weighted assets. The capital amounts and classifications are also subject
to qualitative judgments by the regulators about components, risk-weightings
and other factors. Failure to meet minimum capital requirements can initiate
certain mandatory and possibly discretionary actions by regulators that, if
undertaken, could have a material effect on CCB's consolidated financial
statements.
Disclosure about the Subsidiary Banks' capital adequacy are set forth in
the table below. Tier I capital consists of common equity less goodwill and
certain other intangible assets. Tier I excludes the equity impact of adjusting
available for sale securities to market value. Total Capital is comprised of
Tier I and Tier II capital. Tier II capital includes subordinated notes and
loan loss reserves, as defined and limited according to regulatory guidelines.
Balance sheet assets and the credit equivalent amount of off-balance sheet
items per regulatory guidelines are assigned to broad risk categories and a
category risk-weight is then applied. Management believes that as of December
31, 1999, CCB and the Subsidiary Banks met all capital adequacy requirements to
which they were subject.
As of December 31, 1999 (the most recent notification), the Federal
Deposit Insurance Corporation ("FDIC") categorized the Subsidiary Banks as
well-capitalized under the regulatory framework for prompt corrective action.
To be categorized as well-capitalized, the Subsidiary Banks must meet minimum
ratios for total risk-based, Tier I risk-based, and Tier I leverage (the ratio
of Tier I capital to average assets) as set forth in the following table. There
are no conditions or events since the latest notification that management
believes have changed the Subsidiary Banks' category.
The risk-based capital and leverage ratios for CCB Bank, AmFed and CCB-Ga.
as of December 31, 1999 and 1998 are presented below. CCB-Ga.'s high capital
ratios are due to the sale of the majority of its assets (credit card
receivables) without returning excess capital to the Parent Company. It is
anticipated that CCB-Ga. will be dissolved in 2000 with the resulting return of
capital to the Parent Company.
<TABLE>
<CAPTION>
CCB Bank AmFed
----------------------------- -----------------------------
1999 1998 1999 1998
-------------- -------------- -------------- --------------
(In Thousands)
<S> <C> <C> <C> <C>
Tier I capital $590,141 500,016 113,975 105,287
- --------------------------------------------------------------
Total capital 655,394 557,567 124,549 116,807
- --------------------------------------------------------------
Risk-weighted assets 5,330,070 4,848,586 830,670 881,471
- --------------------------------------------------------------
Adjusted quarterly average assets 6,866,296 6,396,674 1,256,837 1,218,405
- --------------------------------------------------------------
Risk-based capital ratios:
Tier I capital to risk-weighted assets:
Actual 11.07 % 10.31 13.72 11.94
- --------------------------------------------------------------
Regulatory minimum 4.00 4.00 4.00 4.00
- --------------------------------------------------------------
Well-capitalized under prompt corrective action provisions 6.00 6.00 6.00 6.00
- --------------------------------------------------------------
Total capital to risk-weighted assets:
Actual 12.30 11.50 14.99 13.25
- --------------------------------------------------------------
Regulatory minimum 8.00 8.00 8.00 8.00
- --------------------------------------------------------------
Well-capitalized under prompt corrective action provisions 10.00 10.00 10.00 10.00
- --------------------------------------------------------------
Leverage ratio:
Actual 8.59 7.82 9.07 8.64
- --------------------------------------------------------------
Regulatory minimum 4.00 4.00 4.00 4.00
- --------------------------------------------------------------
Well-capitalized under prompt corrective action provisions 5.00 5.00 5.00 5.00
- -------------------------------------------------------------- --------- ---------- ---------- ----------
<CAPTION>
CCB-Ga.
----------------------
1999 1998
----------- ----------
(In Thousands)
<S> <C> <C>
Tier I capital 10,067 12,781
- --------------------------------------------------------------
Total capital 10,067 13,577
- --------------------------------------------------------------
Risk-weighted assets 2,190 61,470
- --------------------------------------------------------------
Adjusted quarterly average assets 28,623 88,290
- --------------------------------------------------------------
Risk-based capital ratios:
Tier I capital to risk-weighted assets:
Actual 459.68 20.79
- --------------------------------------------------------------
Regulatory minimum 4.00 4.00
- --------------------------------------------------------------
Well-capitalized under prompt corrective action provisions 6.00 6.00
- --------------------------------------------------------------
Total capital to risk-weighted assets:
Actual 459.68 22.09
- --------------------------------------------------------------
Regulatory minimum 8.00 8.00
- --------------------------------------------------------------
Well-capitalized under prompt corrective action provisions 10.00 10.00
- --------------------------------------------------------------
Leverage ratio:
Actual 35.17 14.48
- --------------------------------------------------------------
Regulatory minimum 4.00 4.00
- --------------------------------------------------------------
Well-capitalized under prompt corrective action provisions 5.00 5.00
- -------------------------------------------------------------- ------- -------
</TABLE>
47
<PAGE>
(12) SUPPLEMENTARY INCOME STATEMENT INFORMATION
Following is a breakdown of the components of "other operating" expenses
on the Consolidated Statements of Income:
<TABLE>
<CAPTION>
Years Ended December 31
--------------------------------
1999 1998 1997
---------- -------- --------
(In Thousands )
<S> <C> <C> <C>
Marketing $ 5,974 7,370 7,303
- -----------------------------------
External data processing services 6,298 5,364 4,446
- -----------------------------------
Deposit and other insurance 2,618 3,415 3,346
- -----------------------------------
Postage and freight 4,449 4,486 4,107
- -----------------------------------
Printing and office supplies 8,017 7,935 6,178
- -----------------------------------
Telecommunications 6,817 6,341 5,765
- -----------------------------------
Legal and professional fees 7,870 10,331 6,340
- -----------------------------------
Amortization of intangible assets 4,150 4,122 4,433
- -----------------------------------
All other 26,494 26,022 23,330
- ----------------------------------- -------- ------ ------
Total other operating expenses $ 72,687 75,386 65,248
- ----------------------------------- -------- ------ ------
</TABLE>
(13) INCOME TAXES
The components of income tax expense for the years ended December 31,
1999, 1998 and 1997 are as follows:
<TABLE>
<CAPTION>
1999 1998 1997
---------- ----------- -----------
(In Thousands)
<S> <C> <C> <C>
Current income taxes:
Federal $ 78,383 66,004 57,809
- ------------------------------
State 4,435 7,552 5,172
- ------------------------------ -------- ------ ------
Total current tax expense 82,818 73,556 62,981
- ------------------------------ -------- ------ ------
Deferred income tax benefit:
Federal (1,334) (4,071) (6,245)
- ------------------------------
State (133) (853) (971)
- ------------------------------ -------- ------ ------
Total deferred tax benefit (1,467) (4,924) (7,216)
- ------------------------------ -------- ------ ------
Total income tax expense $ 81,351 68,632 55,765
- ------------------------------ -------- ------ ------
</TABLE>
During 1999 and 1998, a total of $441,000 and $495,000, respectively, of
income tax benefit was credited to additional paid-in capital as a result of
the exercise of certain stock options and as a result of the lapse of
restrictions on restricted stock.
A reconciliation of income tax expense to the amount computed by
multiplying income before income taxes by the statutory federal income tax rate
follows:
<TABLE>
<CAPTION>
Amount
----------------------------------
1999 1998 1997
---------- ----------- -----------
(In Thousands)
<S> <C> <C> <C>
Tax expense at statutory rate on income before income taxes $ 81,261 66,445 52,916
- -------------------------------------------------------------
State taxes, net of federal benefit 2,797 4,354 2,731
- -------------------------------------------------------------
Increase (reduction) in taxes resulting from:
Tax-exempt interest on investment securities and loans (1,486) (1,370) (1,411)
- -------------------------------------------------------------
Other, net (1,221) (797) 1,529
- ------------------------------------------------------------- -------- ------ ------
Income tax expense $ 81,351 68,632 55,765%
- ------------------------------------------------------------- -------- ------ ------
<CAPTION>
% of Pretax Income
---------------------------------
1999 1998 1997
----------- ---------- ----------
<S> <C> <C> <C>
Tax expense at statutory rate on income before income taxes 35.00% 35.00 35.00
- -------------------------------------------------------------
State taxes, net of federal benefit 1.20 2.29 1.81
- -------------------------------------------------------------
Increase (reduction) in taxes resulting from:
Tax-exempt interest on investment securities and loans ( .64) ( .70) ( .93)
- -------------------------------------------------------------
Other, net ( .52) ( .40) 1.00
- ------------------------------------------------------------- ----- ------ ------
Income tax expense 35.04% 36.19 36.88
- ------------------------------------------------------------- ----- ------ ------
</TABLE>
At December 31, 1999 and 1998, CCB had recorded net deferred tax assets of
$35,582,000 and $16,295,000, respectively, which are included in "other assets"
on the Consolidated Balance Sheets. A valuation allowance is provided when it
is more likely than not that some portion of the deferred tax asset will not be
realized. In management's opinion, it is more likely than not that the results
of future operations will generate sufficient taxable income to realize the
deferred tax assets. In addition, taxes paid during the carryback period exceed
CCB's recorded net deferred tax asset. Consequently, management has determined
that a valuation allowance for deferred tax assets was not required at December
31, 1999 or 1998. In connection with the Stone Street acquisition, CCB acquired
a net deferred tax asset of $900,000 representing tax bases in excess of
financial amounts. The sources and tax effects of cumulative temporary
differences that give rise to significant portions of the net deferred tax
assets at December 31, 1999 and 1998 are shown below:
48
<PAGE>
(13) INCOME TAXES -- Continued
<TABLE>
<CAPTION>
1999 1998
---------- ---------
(In Thousands)
<S> <C> <C>
Deferred tax assets:
Reserve for loan losses $28,784 26,370
- ------------------------------------------------------------------
Postretirement benefits 4,234 2,853
- ------------------------------------------------------------------
Deferred compensation 2,338 2,453
- ------------------------------------------------------------------
Unrealized losses on investment securities available for sale 8,530 --
- ------------------------------------------------------------------
Other 4,918 5,838
- ------------------------------------------------------------------ ------- ------
Total gross deferred tax assets 48,804 37,514
- ------------------------------------------------------------------ ------- ------
Deferred tax liabilities:
Intangible assets 676 1,218
- ------------------------------------------------------------------
Deferred loan fees and costs 4,232 3,333
- ------------------------------------------------------------------
Premises and equipment 2,915 1,542
- ------------------------------------------------------------------
FHLB dividends 2,294 2,581
- ------------------------------------------------------------------
Unrealized gains on investment securities available for sale -- 8,390
- ------------------------------------------------------------------
Mortgage servicing rights gain 1,569 2,724
- ------------------------------------------------------------------
Other 1,536 1,431
- ------------------------------------------------------------------ ------- ------
Total gross deferred tax liabilities 13,222 21,219
- ------------------------------------------------------------------ ------- ------
Net deferred tax asset $35,582 16,295
- ------------------------------------------------------------------ ------- ------
</TABLE>
(14) COMMITMENTS, CONTINGENCIES AND OFF-BALANCE SHEET RISK
Commitments and Contingencies
The Subsidiary Banks lease certain real property and equipment under
long-term operating leases expiring at various dates to 2019. Total rental
expense amounted to $8,601,000 in 1999, $7,467,000 in 1998 and $6,319,000 in
1997. A summary of noncancellable, long-term lease commitments at December 31,
1999 follows:
<TABLE>
<CAPTION>
Type of Property
-----------------------------
Total
Year Ending December 31 Real Property Equipment Commitments
- -------------------------- --------------- ----------- ------------
(In Thousands)
<S> <C> <C> <C>
2000 $ 6,923 3,186 10,109
- ----
2001 6,447 2,637 9,084
- ----
2002 6,050 1,845 7,895
- ----
2003 5,264 276 5,540
- ----
2004 4,213 30 4,243
- ----
Thereafter 31,535 -- 31,535
- ---- -------- ----- ------
Total lease commitments $ 60,432 7,974 68,406
- -------------------------- -------- ----- ------
</TABLE>
Generally, real estate taxes, insurance, and maintenance expenses are
obligations of the Subsidiary Banks. It is expected that in the normal course
of business, leases that expire will be renewed or replaced by leases on other
properties; thus, it is anticipated that future minimum lease commitments will
not be less than the amounts shown for 2000.
Certain legal claims have arisen in the normal course of business in which
CCB and certain of its Subsidiary Banks have been named as defendants. Although
the amount of any ultimate liability with respect to such matters cannot be
determined, in the opinion of management and counsel, any such liability will
have no material effect on CCB's financial position or results of operations.
In addition to legal actions in the normal course of business, AmFed filed
a claim against the United States of America in the Court of Federal Claims in
1995. The complaint seeks compensation for exclusion of supervisory goodwill
from the calculation of AmFed's regulatory capital requirements as a result of
enactment of the Financial Institution Reform, Recovery and Enforcement Act of
1989 ("FIRREA"). During the 1980's, healthy thrift institutions were encouraged
to buy troubled thrifts through the regulatory agencies allowing the thrifts to
count supervisory goodwill as regulatory capital on their balance sheets and
amortize the purchase over several decades. Supervisory goodwill represented
the difference between the purchase price and the actual value of an insolvent
thrift's tangible assets. However, when the FIRREA legislation was enacted in
1989, the acquiring thrifts were required to write-off their supervisory
goodwill more rapidly, effectively wiping out a significant part of their
regulatory capital. Over 100 lawsuits have been filed by the acquiring thrifts
seeking compensation from the United States for the losses suffered from
capital restrictions. AmFed's supervisory goodwill arose from acquisitions in
1982. CCB is vigorously pursuing this litigation. The amount of recovery, if
any, which could result if AmFed were to prevail in its suit cannot be
determined at this time. Legal expenses incurred in pursuit of the claim have
been nominal.
49
<PAGE>
(14) COMMITMENTS, CONTINGENCIES AND OFF-BALANCE SHEET RISK -- Continued
Commitments to extend credit are agreements to lend to customers as long
as there is no violation of any condition established in the contract. These
commitments generally have fixed expiration dates or other termination clauses
and may require payment of a fee. Since many of these commitments are expected
to expire without being drawn upon, the total commitment amounts do not
necessarily represent future cash requirements. Each customer's credit
worthiness is evaluated on a case-by-case basis and collateral, primarily real
estate or business assets, is generally obtained. At December 31, 1999 and
1998, the Subsidiary Banks had commitments to extend credit of approximately
$1.7 billion and $1.8 billion. These amounts include unused revolving credit
lines and home mortgage equity lines of $94 million and $496 million,
respectively, at December 31, 1999 and $403 million and $416 million,
respectively, at December 31, 1998.
Standby letters of credit are commitments issued by the Subsidiary Banks
to guarantee the performance of a customer to a third party. The standby
letters of credit are generally secured by non-depreciable assets. The
Subsidiary Banks had approximately $39 million and $31 million in outstanding
standby letters of credit at December 31, 1999 and 1998.
Off-Balance Sheet Risk
The Subsidiary Banks are parties to financial instruments with off-balance
sheet risk in the normal course of business to meet the financial needs of
their customers and to reduce their own exposure to fluctuations in interest
rates. These financial instruments include commitments to extend credit,
standby letters of credit and interest rate contracts. These instruments
involve, to varying degrees, elements of credit and interest rate risk in
excess of the amounts recognized in the Consolidated Balance Sheets. The
contract or notional amount of these instruments reflects the extent of
involvement that the Subsidiary Banks have in classes of financial instruments.
The Subsidiary Banks use the same credit policies in making commitments to
extend credit that are used for on-balance sheet instruments. For standby
letters of credit, the Subsidiary Banks use a more strict credit policy due to
the nature of the instruments. CCB's exposure to credit loss for commitments to
extend credit and standby letters of credit in the event of the other party's
nonperformance is represented by the contract amount of the instrument and is
essentially the same as that involved in extensions of loans with collateral
being obtained if deemed necessary.
For interest rate contracts, the contract or notional amounts do not
represent amounts to be exchanged between parties and are not a measure of
financial risks, but only provide the basis for calculating interest payments
between the counterparties. Potential credit risk on these contracts arises
from the counterparty's inability to meet the terms of the contract. With
management's policy of settling interest payments quarterly, the risk of loss
from nonperformance is decreased. Management considers the credit risk of these
contracts to be minimal and manages this risk through routine review of the
counterparty's financial ratings.
As of December 31, 1999, CCB had off-balance sheet derivative financial
instruments in the form of interest rate swaps (basis swaps) with notional
principal of $200 million. The interest rate swaps were entered into in July
1999 and April 1998 with two-year terms; the counterparties are large financial
institutions. The purpose of entering into the interest rate swaps was to
synthetically convert CCB's U.S. Treasury-based liabilities (certain types of
deposit accounts) into prime rate-based liabilities and lock-in a favorable
spread between the two indices. Payments or receipts of interest are computed
by netting (1) payment of the notional amount times the prime rate, as adjusted
by the terms of the basis swaps, and (2) receipt of the notional amount times
the 91-day weekly Treasury Bill rate. Consequently, if the Treasury Bill rate
increases more than the prime rate increases, CCB receives a greater net
interest payment. Therefore, the negative impact of paying higher rates on the
portions of the deposit base tied to the U.S. Treasury rates while earning
"lower" yields on prime-based earning assets (loans), is decreased. Net
interest payments received on these financial instruments had a positive impact
on interest expense in 1999 of $353,000 and a negative impact of $105,000 in
1998. CCB was party to another basis swap for $100 million that expired during
1999 and was replaced by the basis swap entered into in July 1999. Since
inception, the cumulative impact of the three interest rate swaps as of
December 31, 1999 was to decrease deposit interest expense by $272,000. CCB's
interest rate swaps provide for the quarterly exchange of interest payments
between counterparties. At December 31, 1999, interest receivable on these
contracts totaled $78,000.
(15) DIVIDEND RESTRICTIONS
Certain restrictions exist regarding the ability of the Subsidiary Banks
to transfer funds to CCB in the form of cash dividends. Regulatory capital
requirements must be met by the Subsidiary Banks as well as restrictions under
the General Statutes of North Carolina in regard to CCB Bank. Under these
requirements, the Subsidiary Banks have approximately $283,903,000 in retained
earnings at December 31, 1999 that can be transferred to CCB in the form of
cash dividends. Total dividends declared by the Subsidiary Banks to CCB in 1999
were $88,900,000.
50
<PAGE>
(15) DIVIDEND RESTRICTIONS -- Continued
As a result of the above requirements, consolidated net assets of the
Subsidiary Banks amounting to approximately $493,034,000 at December 31, 1999
were restricted from transfer to CCB.
(16) CCB FINANCIAL CORPORATION (PARENT COMPANY)
CCB Financial Corporation's principal asset is the investment in its
Subsidiary Banks and its principal source of income is dividends from the
Subsidiary Banks. The Parent Company's Condensed Balance Sheets at December 31,
1999 and 1998 and the related Condensed Statements of Income and Cash Flows for
the three-years ended December 31, 1999 are as follows:
Condensed Balance Sheets
As of December 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
-------------- ----------
(In Thousands)
<S> <C> <C>
Cash and short-term investments $ 185,840 177,036
- ----------------------------------------------
Loans 75,096 65,653
- ----------------------------------------------
Less reserve for loan losses 792 792
- ---------------------------------------------- ----------- -------
Net loans 74,304 64,861
- ----------------------------------------------
Investment in subsidiaries 727,631 658,951
- ----------------------------------------------
Other assets 19,969 17,772
- ---------------------------------------------- ----------- -------
Total assets $ 1,007,744 918,620
- ---------------------------------------------- ----------- -------
Master notes $ 174,748 128,482
- ----------------------------------------------
Note payable to subsidiary 60,000 52,000
- ----------------------------------------------
Subordinated notes 32,985 32,985
- ----------------------------------------------
Other liabilities 20,050 17,259
- ---------------------------------------------- ----------- -------
Total liabilities 287,783 230,726
- ----------------------------------------------
Shareholders' equity 719,961 687,894
- ---------------------------------------------- ----------- -------
Total liabilities and shareholders' equity $ 1,007,744 918,620
- ---------------------------------------------- ----------- -------
</TABLE>
CONDENSED INCOME STATEMENTS
Years Ended December 31, 1999, 1998 and 1997
<TABLE>
<CAPTION>
1999 1998 1997
------------- ----------- ---------
(In Thousands)
<S> <C> <C> <C>
Dividends from subsidiaries $ 88,900 151,700 32,100
- ------------------------------------------------------------------
Interest income 11,413 10,909 9,811
- ------------------------------------------------------------------
Other income 48 66 8
- ------------------------------------------------------------------ --------- ------- ------
Total operating income 100,361 162,675 41,919
- ------------------------------------------------------------------ --------- ------- ------
Interest expense 11,714 10,188 8,881
- ------------------------------------------------------------------
Provision for loan losses -- -- 102
- ------------------------------------------------------------------
Merger-related expense -- -- 3,873
- ------------------------------------------------------------------
Management fees 589 563 150
- ------------------------------------------------------------------
Other operating expenses 889 1,303 870
- ------------------------------------------------------------------ --------- ------- ------
Total operating expenses 13,192 12,054 13,876
- ------------------------------------------------------------------ --------- ------- ------
Income before income taxes 87,169 150,621 28,043
- ------------------------------------------------------------------
Income taxes (606) (377) (910)
- ------------------------------------------------------------------ --------- ------- ------
Income before equity in undistributed net income of subsidiaries 87,775 150,998 28,953
- ------------------------------------------------------------------
Equity in undistributed net income (loss) of subsidiaries 63,048 (29,786) 66,471
- ------------------------------------------------------------------ --------- ------- ------
Net income $ 150,823 121,212 95,424
- ------------------------------------------------------------------ --------- ------- ------
</TABLE>
51
<PAGE>
(16) CCB FINANCIAL CORPORATION (PARENT COMPANY) -- Continued
Condensed Statements of Cash Flows
Years Ended December 31, 1999, 1998 and 1997
<TABLE>
<CAPTION>
1999 1998 1997
------------- ------------ -------------
(In Thousands)
<S> <C> <C> <C>
Net cash provided by operating activities $ 88,980 153,493 26,347
- ------------------------------------------------------ --------- ------- -------
Investment in subsidiaries (32,683) -- 2,598
- ------------------------------------------------------
Net decrease in loans to subsidiaries -- 10,000 --
- ------------------------------------------------------
Net increase in loans (9,443) (4,776) (7,835)
- ------------------------------------------------------
Other, net (69) (24) (4)
- ------------------------------------------------------ --------- ------- ---------
Net cash provided (used) by investing activities (42,195) 5,200 (5,241)
- ------------------------------------------------------ --------- ------- --------
Increase in master notes 46,266 11,110 32,505
- ------------------------------------------------------
Proceeds from issuance of debt to subsidiaries 8,000 3,000 4,800
- ------------------------------------------------------
Proceeds from stock issuance in acquisition 26,295 -- --
- ------------------------------------------------------
Purchase and retirement of common stock (74,996) (76,601) --
- ------------------------------------------------------
Cash dividends (43,797) (40,398) (36,750)
- ------------------------------------------------------
Other, net 251 1,959 3,417
- ------------------------------------------------------ --------- ------- ---------
Net cash provided (used) by financing activities (37,981) (100,930) 3,972
- ------------------------------------------------------ --------- -------- ---------
Net increase in cash and short-term investments 8,804 57,763 25,078
- ------------------------------------------------------
Cash and short-term investments at beginning of year 177,036 119,273 94,195
- ------------------------------------------------------ --------- -------- ---------
Cash and short-term investments at end of year $ 185,840 177,036 119,273
- ------------------------------------------------------ --------- -------- ---------
</TABLE>
(17) QUARTERLY FINANCIAL DATA (UNAUDITED)
Summarized consolidated quarterly financial data for the years ended
December 31, 1999 and 1998 follows:
<TABLE>
<CAPTION>
1999
-----------------------------------------------
4th Qtr. 3rd Qtr. 2nd Qtr. 1st Qtr.
-------------- ---------- ---------- ----------
(In Thousands Except Per Share Data)
<S> <C> <C> <C> <C>
Interest income $ 154,344 146,486 145,796 142,973
- -----------------------------------------------------
Interest expense 69,620 63,741 62,071 62,115
- ----------------------------------------------------- ---------- ------- ------- -------
Net interest income 84,724 82,745 83,725 80,858
- -----------------------------------------------------
Provision for loan losses 3,525 3,284 5,676 1,811
- ----------------------------------------------------- ---------- ------- ------- -------
Net interest income after provision for loan losses 81,199 79,461 78,049 79,047
- -----------------------------------------------------
Gain on sale of credit card receivables -- -- 32,837 --
- -----------------------------------------------------
Other income 32,476 28,549 32,551 32,041
- -----------------------------------------------------
Other expenses 62,765 60,453 61,596 59,222
- ----------------------------------------------------- ---------- ------- ------- -------
Income before income taxes 50,910 47,557 81,841 51,866
- -----------------------------------------------------
Income taxes 17,470 16,012 29,756 18,113
- ----------------------------------------------------- ---------- ------- ------- -------
Net income $ 33,440 31,545 52,085 33,753
- ----------------------------------------------------- ---------- ------- ------- -------
Net income per share:
Basic $ .84 .80 1.30 .84
- -----------------------------------------------------
Diluted .83 .79 1.29 .83
- ----------------------------------------------------- ---------- ------- -------- -------
<CAPTION>
1998
------------------------------------------
4th Qtr. 3rd Qtr. 2nd Qtr. 1st Qtr.
---------- ---------- ---------- ---------
(In Thousands Except Per Share Data)
<S> <C> <C> <C> <C>
Interest income 145,517 145,683 144,562 141,637
- -----------------------------------------------------
Interest expense 62,756 64,604 64,234 62,968
- ----------------------------------------------------- ------- ------- ------- -------
Net interest income 82,761 81,079 80,328 78,669
- -----------------------------------------------------
Provision for loan losses 4,320 4,778 3,646 3,140
- ----------------------------------------------------- ------- ------- ------- -------
Net interest income after provision for loan losses 78,441 76,301 76,682 75,529
- -----------------------------------------------------
Gain on sale of credit card receivables -- -- -- --
- -----------------------------------------------------
Other income 30,275 28,588 29,508 24,737
- -----------------------------------------------------
Other expenses 58,313 58,894 58,918 54,092
- ----------------------------------------------------- ------- ------- ------- -------
Income before income taxes 50,403 45,995 47,272 46,174
- -----------------------------------------------------
Income taxes 18,814 15,632 17,296 16,890
- ----------------------------------------------------- ------- ------- ------- -------
Net income 31,589 30,363 29,976 29,284
- ----------------------------------------------------- ------- ------- ------- -------
Net income per share:
Basic .78 .75 .73 .70
- -----------------------------------------------------
Diluted .77 .74 .72 .70
- ----------------------------------------------------- ------- ------- ------- -------
</TABLE>
(18) FAIR VALUE OF FINANCIAL INSTRUMENTS
Disclosure of fair value estimates of on- and off-balance sheet financial
instruments is required under SFAS No. 107. Certain financial instruments and
all non-financial instruments are excluded from its disclosure requirements.
Fair value estimates are based on existing financial instruments without
attempting to estimate the value of anticipated future business. Significant
assets and liabilities that are not considered financial instruments include
premises and equipment, intangible assets, negative goodwill, the trust
department and mortgage banking operations. In addition, the tax ramifications
resulting from the realization of the unrealized gains and losses of the
financial instruments would have a significant impact on the fair value
estimates presented and have not been considered in any of the fair value
estimates. Accordingly, the aggregate fair value amounts presented below do not
represent the underlying value of CCB. Estimated fair values of certain on- and
off-balance sheet financial instruments at December 31, 1999 and 1998 are
presented below (in thousands):
52
<PAGE>
(18) FAIR VALUE OF FINANCIAL INSTRUMENTS -- Continued
<TABLE>
<CAPTION>
1999 1998
------------------------- -------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
------------ ------------ ------------ ------------
(In Thousands)
<S> <C> <C> <C> <C>
Financial assets:
Cash, time deposits in other banks and other short-term investments $ 400,989 400,989 740,451 740,451
- ---------------------------------------------------------------------
Investment securities 1,636,490 1,638,568 1,364,387 1,369,475
- ---------------------------------------------------------------------
Net loans 5,876,918 5,912,856 5,414,155 5,527,581
- ---------------------------------------------------------------------
Financial liabilities:
Deposits 6,717,025 6,705,433 6,459,764 6,475,689
- ---------------------------------------------------------------------
Short-term borrowings 329,670 329,670 288,256 288,256
- ---------------------------------------------------------------------
Long-term debt 328,922 320,295 216,695 219,236
- ---------------------------------------------------------------------
Off-balance sheet financial instruments:
Interest rate swaps 78 100 26 (430)
- --------------------------------------------------------------------- ---------- --------- --------- ---------
</TABLE>
Fair value estimations are made at a point in time based on relevant
market information and the characteristics of the on- and off-balance sheet
financial instruments being valued. The estimated fair value presented does not
represent the gain or loss that could result if CCB chose to liquidate all of
its holdings of a financial instrument. Because no market exists for a large
portion of CCB's financial instruments, fair value estimates are based on
management's judgments about expected loss experience, current economic
conditions, the risk characteristics of the individual financial instruments
and other factors. Accordingly, these estimates are subjective in nature and
involve a high degree of judgment and cannot be determined with a high degree
of precision. Changes in assumptions and/or the methodology used could
significantly impact the fair values presented above.
Financial Assets
The fair value of cash, time deposits in other banks and other short-term
investments is equal to their carrying value due to the nature of those
instruments. The fair value of investment securities is based on published
market values. The fair value of net loans is based on the discounting of
scheduled cash flows through estimated maturity using market rates and
management's judgment about the credit risk inherent in the different segments
of the loan portfolio. Estimates of maturity, except for residential mortgage
loans, are based on the stated term of the loan or CCB's estimates of
prepayments considering current economic and lending conditions. Estimates of
maturity for residential mortgage loans are based on prepayments estimated by
secondary market sources.
Financial Liabilities
The fair value of noninterest-bearing deposits, savings and NOW accounts
and money market accounts is the amount payable on demand at December 31, 1999
and 1998. The fair value of time deposits is estimated based on the discounted
value of contractual cash flows using the currently offered rate for deposits
with similar remaining maturities. Short-term borrowings are generally due
within 90 days, and, accordingly, the carrying amount of these instruments is
considered to be a reasonable approximation of their fair value. The estimated
fair value of long-term debt is based on quoted market rates for the same or
similar issues or is based on the market rates for debt of the same remaining
maturities.
Off-Balance Sheet Financial Instruments
The estimated fair value of commitments to extend credit and standby
letters of credit are equal to their carrying value due to the majority of
these off-balance sheet instruments having relatively short terms to maturity
and being written at variable rates. The carrying amounts of commitments to
extend credit and standby letters of credit are comprised of unamortized fee
income, if any. These amounts are not material to CCB. The carrying amounts are
reasonable estimates of the fair value of these off-balance sheet financial
instruments due to their maturity and repricing terms.
53
<PAGE>
REPORT OF MANAGEMENT REGARDING RESPONSIBILITY FOR FINANCIAL STATEMENTS
Management is responsible for the content of the financial information
included in this annual report. The financial statements from which the
financial information has been drawn are prepared in accordance with generally
accepted accounting principles. Other information in this report is consistent
with the financial statements.
In meeting its responsibility, management relies on the system of internal
accounting control and related control systems. Elements of these systems
include selection and training of qualified personnel, establishment and
communication of accounting and administrative policies and procedures,
appropriate segregation of responsibilities, and programs of internal audits.
These systems are designed to provide reasonable assurance that financial
records are reliable for preparing financial statements and maintaining
accountability for assets, and that assets are safeguarded against unauthorized
use or disposition. Such assurance cannot be absolute because of inherent
limitations in any system of internal control. The concept of reasonable
assurance recognizes that the cost of a system of internal control should not
exceed the benefit derived and that the evaluation of such cost and benefit
necessarily requires estimates and judgments.
KPMG LLP, independent auditors, audited CCB's consolidated financial
statements in accordance with generally accepted auditing standards. These
standards include a study and evaluation of internal control for the purpose of
establishing a basis for reliance thereon relative to the determination of the
scope of their audits.
The voting members of the Audit Committee of the Board of Directors
consist solely of outside Directors. The Audit Committee meets periodically
with management, CCB's internal auditors and the independent auditors to
discuss audit, financial reporting, and related matters. KPMG LLP and the
internal auditors have direct access to the Audit Committee.
/s/ ERNEST C. ROESSLER
----------------------------------------------------
ERNEST C. ROESSLER
Chairman, President and Chief Executive Officer
/s/ SHELDON M. FOX
----------------------------------------------------
SHELDON M. FOX
Executive Vice President and Chief Financial Officer
/s/ W. HAROLD PARKER, JR.
----------------------------------------------------
W. HAROLD PARKER, JR.
Senior Vice President and Controller
January 20, 2000
54
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
CCB Financial Corporation
We have audited the consolidated balance sheets of CCB Financial
Corporation and subsidiaries as of December 31, 1999 and 1998, and the related
consolidated statements of income, shareholders' equity and comprehensive
income, and cash flows for each of the years in the three-year period ended
December 31, 1999. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of CCB
Financial Corporation and subsidiaries at December 31, 1999 and 1998, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1999 in conformity with generally accepted
accounting principles.
/s/ KPMG LLP
- -----------------------
Raleigh, North Carolina
January 20, 2000
55
<PAGE>
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON FINANCIAL AND
ACCOUNTING DISCLOSURE
There have been no disagreements with accountants on accounting and
financial disclosures.
PART III.
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by Item 10 is incorporated herein by reference to
CCB Financial Corporation's definitive Proxy Statement dated March 17, 2000
(the "Proxy Statement"), under the heading "Proposal 1. Election of Directors"
or appears under the heading "Executive Officers of the Registrant" in Part I.
of this Annual Report on Form 10-K.
Item 11. EXECUTIVE COMPENSATION
The information required by Item 11 is incorporated herein by reference to
the Proxy Statement, under the headings "Compensation Committee Report",
"Executive Compensation", "Pension Plan" and "Changes in Control and Employment
Arrangements".
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by Item 12 is incorporated herein by reference to
the Proxy Statement, under the heading "Amount and Nature of Beneficial
Ownership of Voting Securities".
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by Item 13 is incorporated herein by reference to
the Proxy Statement, under the heading "Transactions with Management".
PART IV.
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. and 2.
The financial statements and supplementary data listed in the index set
forth in Item 8 of this Annual Report are filed as part of this Annual Report.
All schedules are omitted because of the absence of the condition under
which they are required or because the required information is included in the
financial statements or related notes.
(a) 3.
Exhibits are listed in the Exhibit Index beginning on page 57 of this
Annual Report.
56
<PAGE>
DESCRIPTION OF EXHIBITS
Amended and Restated Articles of Incorporation of Registrant
Articles of Amendment to the Amended and Restated Articles of Incorporation of
Registrant
Amended and Restated Bylaws of Registrant
Specimen of Common Stock of Registrant
Amended and Restated Rights Agreement dated October 1, 1998 between Registrant
and Central Carolina Bank and Trust Company
Form of Indenture dated as of November 1, 1993, between Registrant and Bank of
New York as successor to Wachovia Bank of North Carolina, N.A., Trustee,
pursuant to which Registrant's Subordinated Notes are issued and held
Description of Management Performance Incentive Plan of Central Carolina Bank
and Trust Company
1993 Nonstatutory Stock Option Plan for CCB Savings Bank of Lenoir, Inc., SSB
Amendment No. 1 to 1993 Nonstatutory Stock Option Plan for CCB Savings Bank of
Lenoir, Inc., SSB
1993 Incentive Stock Option Plan of Registrant
Long-Term Incentive Plan of Registrant
Security Capital Omnibus Stock Ownership and Long-Term Incentive Plan, as
assumed by the Registrant
Salem Trust Bank 1986 Incentive Stock Option Plan, as assumed by the Registrant
American Federal Bank, FSB Amended and Restated 1988 Stock Option and Incentive
Plan, as assumed by the Registrant
1995 Directors Performance Plan of American Federal Bank, FSB, as assumed by
the Registrant
Employment and Amended and Restated Change of Control Agreement between
Registrant, Central Carolina Bank and Trust Company and Ernest C. Roessler
Employment and Amended and Restated Change of Control Agreement between
Registrant, Central Carolina Bank and Trust Company and Richard L. Furr
Employment and Amended and Restated Change of Control Agreement between
Registrant, Central Carolina Bank and Trust Company and J. Scott Edwards
Amended and Restated Employment Agreement between Registrant, Central Carolina
Bank and Trust Company and Sheldon M. Fox
Plan for Severance Compensation after a Change in Control dated October 21,
1997 and amended October 19, 1998 and April 27, 1999
Amended and Restated Employment Agreement by and between Registrant, Central
Carolina Bank and Trust Company and David B. Jordan
Amended and Restated Employment Agreement by and between Registrant and William
L. Abercrombie, Jr.
Amended and Restated Employment Agreement between American Federal Bank, FSB
and William L. Abercrombie, Jr.
Stone Street Bancorp, Inc. Stock Option Plan, as assumed by the Registrant
Subsidiaries of Registrant
Consent of KPMG LLP
Financial Data Schedule
Registrant's Proxy Statement to Shareholders for the 2000 Annual Meeting of
Shareholders
COPIES OF EXHIBITS ARE AVAILABLE UPON WRITTEN REQUEST TO
W. HAROLD PARKER, JR., SENIOR VICE PRESIDENT AND CONTROLLER
OF CCB FINANCIAL CORPORATION
57
<PAGE>
(THIS PAGE INTENTIONALLY LEFT BLANK)
<PAGE>
<PAGE>
Form 10-K 5172-2 (3/00)
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
CCB FINANCIAL CORPORATION
By: /s/ ERNEST C. ROESSLER
-------------------------------------
Ernest C. Roessler
Chairman, President and Chief Executive Officer
Date: March 14, 2000
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- ---------------------------------- -------------------------- ---------------
<S> <C>
/s/ ERNEST C. ROESSLER Chairman and President March 14, 2000
- ---------------------------------- (Chief Executive Officer)
Ernest C. Roessler
/s/ William L. Abercrombie, Jr. Vice Chairman March 14, 2000
- ----------------------------------
William L. Abercrombie, Jr.
/s/ J. Harper Beall, III Director March 14, 2000
- ----------------------------------
J. Harper Beall, III
/s/ James B. Brame, Jr. Director March 14, 2000
- ----------------------------------
James B. Brame, Jr.
/s/ Timothy B. Burnett Director March 14, 2000
- ----------------------------------
Timothy B. Burnett
/s/ Blake P. Garrett, Jr. Director March 14, 2000
- ----------------------------------
Blake P. Garrett, Jr.
/s/ Edward S. Holmes Director March 14, 2000
- ----------------------------------
Edward S. Holmes
/s/ David B. Jordan Vice Chairman March 14, 2000
- ----------------------------------
David B. Jordan
/s/ C. Dan Joyner Director March 14, 2000
- ----------------------------------
C. Dan Joyner
/s/ Owen G. Kenan Director March 14, 2000
- ----------------------------------
Owen G. Kenan
/s/ Eugene J. McDonald Executive Vice Chairman March 14, 2000
- ----------------------------------
Eugene J. McDonald
/s/ Hamilton W. McKay, Jr., M.D. Director March 14, 2000
- ----------------------------------
Hamilton W. McKay, Jr., M.D.
/s/ George J. Morrow Director March 14, 2000
- ----------------------------------
George J. Morrow
</TABLE>
58
<PAGE>
<TABLE>
<CAPTION>
Signature Title Date
- ----------------------------------- -------------------------- ---------------
<S> <C> <C>
/s/ Eric B. Munson Director March 14, 2000
- ----------------------------------
Eric B. Munson
/s/ David E. Shi Director March 14, 2000
- ----------------------------------
Dr. David E. Shi
/s/ Jimmy K. Stegall Director March 14, 2000
- ----------------------------------
Jimmy K. Stegall
/s/ H. Allen Tate, Jr. Director March 14, 2000
- ----------------------------------
H. Allen Tate, Jr.
/s/ James L. Williamson Director March 14, 2000
- ----------------------------------
James L. Williamson
/s/ Phail Wynn, Jr. Director March 14, 2000
- ----------------------------------
Dr. Phail Wynn, Jr.
/s/ Sheldon M. Fox Executive Vice President March 14, 2000
- ---------------------------------- and Chief Financial
Sheldon M. Fox Officer
/s/ W. Harold Parker, Jr. Senior Vice President March 14, 2000
- ---------------------------------- and Controller (Chief
W. Harold Parker, Jr. Accounting Officer)
</TABLE>
59
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Number
per Item 601 of
Regulation S-K Description Exhibit No.
- ---------------- ------------------------------------------------------------------------------------- ------------
<S> <C> <C> <C>
(3) Articles of Incorporation and Bylaws.
a. Registrant's Amended and Restated Articles of Incorporation are incorporated *
herein by reference from Exhibit 3 of Registrant's Form 8-K dated May 19,
1995.
b. Registrant's Articles of Amendment to its Amended and Restated Articles of *
Incorporation are incorporated herein by reference from Exhibit 3 of
Registrant's Quarterly Report on Form 10-Q for the period ended June 30,
1997.
c. Registrant's Articles of Amendment to its Amended and Restated Articles of *
Incorporation are incorporated herein by reference from Exhibit 3 of
Registrant's Quarterly Report on Form 10-Q for the period ended June 30,
1998.
d. Registrant's Articles of Amendment to its Amended and Restated Articles of *
Incorporation are incorporated herein by reference from Exhibit 3 of
Registrant's Current Report on Form 8-K dated October 1, 1998.
e. Registrant's Amended and Restated Bylaws dated April 28, 1998 are *
incorporated by reference from Exhibit 3 of Registrant's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1999.
(4) Instruments defining the rights of security holders, including indentures.
a. Specimen of Common Stock of Registrant is incorporated herein by reference *
from Exhibit 4.1 of Registrant's Current Report on Form 8-K dated
October 1, 1998.
b. Amended and Restated Rights Agreement dated October 1, 1998 between *
Registrant and Central Carolina Bank and Trust Company is incorporated
herein by reference from Exhibit 4.2 of Registrant's Current Report on Form
8-K dated October 1, 1998.
c. Form of indenture dated November 1, 1993 between Registrant and Bank of *
New York as successor to Wachovia Bank of North Carolina, N.A., Trustee,
pursuant to which Registrant's Subordinated Notes are issued and held is
incorporated herein by reference from Exhibit 4.2 of the Registrant's
Registration Statement No. 33-50793 on Form S-3.
(10) Material contracts.
a. Description of Management Performance Incentive Plan of Central Carolina *
Bank and Trust Company is incorporated herein by reference from
Registrant's 1988 Annual Report on Form 10-K.
b. 1993 Nonstatutory Stock Option Plan for CCB Savings Bank of Lenoir, Inc., *
SSB is incorporated herein by reference from Exhibit 28 of Registrant's
Registration Statement No. 33-61268 on Form S-8.
c. Amendment No. 1 to the 1993 Nonstatutory Stock Option Plan for CCB *
Savings Bank of Lenoir, Inc., SSB is incorporated herein by reference from
Exhibit 10(G) of Registrant's Annual Report on Form 10-K for the year
ended December 31, 1993.
d. 1993 Incentive Stock Option Plan of Registrant is incorporated herein by *
reference from Exhibit 28 of Registrant's Registration Statement
No. 33-61270 on Form S-8.
e. Long-Term Incentive Plan of Registrant is incorporated herein by reference *
from Exhibit 99 of Registrant's Registration Statement No. 33-54645 on
Form S-8.
f. Security Capital Omnibus Stock Ownership and Long-Term Incentive Plan, *
as assumed by Registrant, is incorporated herein by reference from Exhibit 99
of Registrant's Registration Statement No. 33-61791 on Form S-8.
g. Salem Trust Bank 1986 Incentive Stock Option Plan, as assumed by *
Registrant, is incorporated herein by reference from Exhibit 99 of Registrant's
Registration Statement No. 333-22031 on Form S-8.
</TABLE>
60
<PAGE>
<TABLE>
<CAPTION>
Exhibit Number
per Item 601 of
Regulation S-K Description Exhibit No.
- ---------------- ----------------------------------------------------------------------------------- ----------------
<S> <C> <C> <C>
h. American Federal Bank, FSB Amended and Restated 1988 Stock Option and *
Incentive Plan, as assumed by Registrant, is incorporated herein by reference
from Exhibit 99 of Registrant's Registration Statement No. 333-34207 on
Form S-8.
i. 1995 Directors Performance Plan of American Federal Bank, FSB, as *
assumed by Registrant, is incorporated herein by reference from Exhibit 99 of
Registrant's Registration Statement No. 333-34231 on Form S-8.
j. Employment and Amended and Restated Change of Control Agreement 10.1
dated January 12, 1998 an amended August 1, 1999 between Registrant,
Central Carolina Bank and Trust Company and Ernest C. Roessler.
k. Employment and Amended and Restated Change of Control Agreement 10.2
dated January 21, 1998 and amended August 1, 1999 between Registrant,
Central Carolina Bank and Trust Company and J. Scott Edwards.
l. Employment and Amended and Restated Change of Control Agreement 10.3
dated January 27, 1998 and amended August 1, 1999 between Registrant,
Central Carolina Bank and Trust Company and Richard L. Furr.
m. Amended and Restated Employment Agreement dated August 1, 1999 10.4
between Registrant, Central Carolina Bank and Trust Company and
Sheldon M. Fox.
n. Registrant's Plan for Severance Compensation After a Change in Control *
dated October 21, 1997 and amended October 19, 1998.
o. Amendment I to Registrant's Plan for Severance Compensation After a 10.5
Change in Control dated April 27, 1999.
p. Amended and Restated Employment Agreement by and between Registrant, *
Central Carolina Bank and Trust Company and David B. Jordan dated
May 19, 1995 is incorporated herein by reference from Exhibit 10.1 of
Registrant's Form 8-K dated May 19, 1995.
q. Amended and Restated Employment Agreement by and between Registrant 10.6
and William L. Abercrombie, Jr. dated October 15, 1999.
r. Amended and Restated Employment Agreement by and between American 10.7
Federal Bank, FSB and William L. Abercrombie, Jr. dated October 15, 1999.
s. Stone Street Bancorp, Inc. Stock Option Plan, as assumed by Registrant, is *
incorporated herein by reference from Exhibit 99 of Registrant's Registration
Statement No. 333-91581 on Form S-8.
(21) Subsidiaries of Registrant.
A listing of the direct and indirect subsidiaries of Registrant is included in Note
1 to the Consolidated Financial Statements of Registrant included in this
Form 10-K.
(23) Consents of experts and counsel.
Consent of KPMG LLP. 23
(27) Financial Data Schedule. 27
(99) Additional exhibits.
Proxy Statement for 2000 Annual Meeting of Shareholders to be held Not Required to
on April 18, 2000. be Re-filed
</TABLE>
* Previously filed
61
Exhibit 10.1
EMPLOYMENT AND AMENDED AND
RESTATED CHANGE OF CONTROL AGREEMENT
(AS AMENDED)
THIS EMPLOYMENT AND AMENDED AND RESTATED CHANGE OF CONTROL AGREEMENT
(AS AMENDED) (this "Agreement") was made and entered into this 12th day of
January, 1998 by and among CCB Financial Corporation, a North Carolina
corporation ("CCBF"), Central Carolina Bank and Trust Company, a North Carolina
commercial bank ("CCB Bank"), and Ernest C. Roessler ("Executive"), and is
amended hereby as of August 1, 1999.
BACKGROUND
----------
WHEREAS, Executive is the Chairman of the Board of Directors, President
and Chief Executive Officer of CCBF and of CCB Bank, the primary banking
subsidiary of CCBF; and
WHEREAS, the expertise and experience of Executive, his knowledge of
the affairs of CCBF and its direct and indirect subsidiaries (the
"Subsidiaries"), and his relationships and reputation in the financial
institutions industry are extremely valuable to CCBF, CCB Bank and the other
Subsidiaries; and
WHEREAS, it is in the best interests of CCBF, its Subsidiaries and its
shareholders to maintain an experienced and sound executive management team to
manage CCBF, CCB Bank and the other Subsidiaries and to further CCBF's overall
strategies to protect and enhance the value of its shareholders' investments;
and
WHEREAS, CCBF, CCB Bank and Executive entered into this Agreement to
establish the scope, terms and conditions of Executive's employment by CCBF and
CCB Bank;
WHEREAS, CCB Bank and Executive amended and restated herein the Change
of Control Agreement dated July 17, 1996 between CCB Bank and Executive in order
to continue the provision of security to, and to continue to insure the loyalty
of, Executive in the event of a change in control of CCBF or CCB Bank, and CCBF
became obligated, jointly and severally with CCB Bank, under the provisions of
such agreement as amended and restated herein; and
WHEREAS, CCBF, CCB Bank and Executive desire to amend this Agreement.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements set forth herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
1. Effective Date. The effective time and date of this Agreement shall
be deemed to be 12:00:01 o'clock, a.m., on January 12, 1998 (the "Effective
Date").
2. Definitions. The following defined terms are defined in the
referenced Sections of this Agreement.
<PAGE>
Term Section
---- -------
Accrued Obligations Section 8(a)(i)(A)
Additional Payment Section 10(a)
Base Salary Section 6(a)
Bank Board Section 3(b)
Benefit Plans Section 6(c)
Cause Section 7(b)
CCBF Board Section 3(b)
Change of Control Section 9(b)
Change of Control Termination Section 9(a)
Change of Control Termination Date Section 9(a)
Code Section 8(c)
Collateral Assignment Section 6(e)
Competitor Section 13(a)
Continuing Period Section 9(c)(iv)
Commissioner Section 15(d)
Date of Termination Section 7(e)
Disability Section 7(a)
Disability Effective Date Section 7(a)
Effective Date Section 1
EMIP Section 6(b)(i)
Employment Period Section 4
Excise Tax Section 10(a)
FDIC Section 15(d)
Good Reason Section 7(c)
Group Section 9(b)
Incumbent Directors Section 9(b)
Insurance Policy Section 6(e)
Insurance Policy Buy-Out Option Section 8(a)(vi)
IRS Section 10(a)
ISOs Section 8(c)
LTIP Section 6(b)(ii)
1934 Act Section 9(b)
Notice of Termination Section 7(d)
Other Benefits Section 8(a)(iv)
Options Section 8(a)(v)
Payment Section 10(a)
Person Section 9(b)
Remaining Employment Period Section 8(a)(i)(B)
Restricted Period Section 8(a)(vii)
Split Dollar Agreement Section 6(e)
Subsidiaries Preamble
Target EMIP Bonus Section 8(a)(i)(A)
Target LTIP Award Section 8(a)(ii)
Welfare Benefit Plans Section 6(d)
3. Employment.
2
<PAGE>
(a) Executive Positions. Executive will be employed as the
President and Chief Executive Officer of each of CCBF and CCB Bank. Executive's
responsibilities, duties, prerogatives and authority in such executive offices,
and the clerical, administrative and other support staff and office facilities
provided to him, shall be those customary for the principal executive officer of
publicly held corporations generally and of holding companies and financial
institutions that are a part of the financial institution industry specifically.
In his executive capacities Executive shall report to the Boards of Directors of
CCBF and CCB Bank, as applicable.
(b) Director Positions. The Board of Directors of CCBF (the
"CCBF Board") shall nominate and use its best efforts to secure the election of
Executive as a director of CCBF during the term of this Agreement. The CCBF
Board shall also cause CCBF to vote the outstanding shares of CCB Bank and
CCBF's other direct Subsidiaries to elect Executive as a member of the Board of
Directors of CCB Bank (the "Bank Board") and of the Boards of Directors of those
of the other direct Subsidiaries of CCBF as would be useful to Executive in the
performance of his duties. The Bank Board shall cause CCB to vote the
outstanding shares of its direct Subsidiaries to elect Executive as a director
of such Subsidiaries as would be useful in the performance of his duties. At all
times the Executive serves as a director of CCBF and CCB Bank pursuant to this
Section 2(b), he shall be appointed to the Executive Committees of the CCBF
Board and the Bank Board.
4. Employment Period. Unless earlier terminated in accordance with
Sections 7 or 9 hereof, Executive's employment shall be for a renewing five (5)
year term (the "Employment Period"), beginning at the Effective Date. The
Employment Period shall, without further action by Executive, CCBF or CCB Bank,
be extended for an additional one (1) year on each anniversary of the Effective
Date, such that the remaining term of the Employment Period shall continue to be
five (5) years; provided, further, however, that CCBF and CCB Bank or Executive
may, by notice to the other, cause the Employment Period to cease to extend
automatically as of a specific anniversary of the Effective Date. Such notice
must be given and received at least eleven (11) months and thirty-one (31) days
prior to the anniversary of the Effective Date on which it is to be effective.
Upon the effectiveness of such notice, the Employment Period shall be fixed at
five (5) years, and the Employment Period shall terminate upon the expiration of
such five-year period.
5. Extent of Service. During the Employment Period, and excluding any
periods of vacation, sick or other leave to which Executive is entitled under
this Agreement, Executive agrees to devote reasonable attention and time during
normal business hours to the business and affairs of CCBF and CCB Bank, and, to
the extent necessary to discharge the responsibilities assigned to Executive
hereunder, to use Executive's reasonable best efforts to perform faithfully and
efficiently his responsibilities and duties under this Agreement. During the
Employment Period it shall not be a violation of this Agreement for Executive to
(i) devote reasonable periods of time to charitable, trade association,
community and similar activities, and/or (ii) manage personal business interests
and investments, so long as such activities do not interfere with the
performance of Executive's responsibilities and duties under this Agreement. It
is expressly understood and agreed that to the extent that any such activities
have been conducted by Executive prior to the Effective Date, the continued
conduct of such activities (or the conduct of activities similar in nature and
scope thereto) subsequent to the Effective Date shall not thereafter be deemed
to interfere with the performance of Executive's responsibilities and duties
hereunder.
6. Compensation and Benefits.
3
<PAGE>
(a) Base Salary. For the 1999 fiscal year CCBF will pay to
Executive a base salary in the amount of $600,000 per year ("Base Salary"), less
normal withholdings, payable in equal monthly or more frequent installments as
are customary under CCB Bank's payroll practices from time to time. The
Compensation Committee of the CCBF Board shall review Executive's total
compensation annually and in its sole discretion may adjust Executive's Base
Salary from year to year, but during the Employment Period neither the
Compensation Committee, the CCBF Board nor the Bank Board may decrease
Executive's Base Salary below $600,000, and periodic increases, once granted,
shall not be subject to revocation. The annual review of Executive's total
compensation by the Compensation Committee will consider, among other things,
changes in the cost of living, Executive's own performance and CCBF's
consolidated performance.
(b) Incentive Plans. During the Employment Period,
Executive shall be entitled:
(i) to participate in CCBF's Executive Management
Incentive Plan ("EMIP"), and any successor or
substitute plan to the EMIP, in at least as favorable
a manner as any other senior executive employee
participant. Executive shall recommend annually to
the Compensation Committee appropriate minimum,
target and maximum performance objectives, and
appropriate measures and weights for the components
of the performance objectives, for the EMIP generally
and shall also recommend minimum, target and maximum
bonus levels for the executive employee participants
in the EMIP (taking into consideration any
contractual rights of any such participants).
Executive's annual minimum, target and maximum bonus
levels under the EMIP shall be 0%, 60%, and 120% of
Executive's Base Salary for such year or such greater
levels as the Compensation Committee may determine
Executive's individual performance warrants or as are
necessary to satisfy the provisions of the first
sentence of this item (i); and
(ii) to participate in CCBF's Long-Term Incentive Plan
("LTIP"), and any successor or substitute plan to the
LTIP, in at least as favorable a manner as any other
senior executive employee participant.
(c) Savings and Retirement Plans. During the Employment
Period, Executive shall be entitled to participate in all savings, pension and
retirement plans (including supplemental retirement plans), practices, policies
and programs applicable generally to senior executive employees of CCBF or CCB
Bank (the "Benefit Plans"), and on at least as favorable a basis as any other
senior executive employee participant. Without limiting the foregoing, Benefit
Plans shall include the CCB Financial Corporation Retirement Plan, the CCB
Financial Corporation Retirement Savings Plan, the CCB Financial Corporation
Retirement Income Equity Plan, the CCB Financial Corporation Retirement Savings
Equity Plan and any substitute and successor plan to any of the foregoing.
(d) Welfare Benefit Plans. During the Employment Period,
Executive and/or Executive's family, as the case may be, shall be eligible for
participation in and shall receive all benefits under all welfare benefit plans,
practices, policies and programs provided by CCBF or CCB Bank (including,
without limitation, medical, hospitalization, prescription, dental, disability,
employee life, group life, accidental death and dismemberment, and travel
accident insurance plans and programs) to the extent applicable generally to
senior executive employees of CCBF or CCB Bank ("Welfare Benefit Plans").
4
<PAGE>
(e) Life Insurance. During the Employment Period, CCBF and CCB
Bank shall maintain a split-dollar life insurance agreement with Executive (the
"Split Dollar Agreement") and, together with Executive, maintain a related life
insurance policy to be owned by Executive (the "Insurance Policy") and
collaterally assigned to CCBF and/or CCB Bank (the "Collateral Assignment"),
providing coverage on the life of Executive for the benefit of Executive's
estate, beneficiaries designated by him, and/or trusts created by him. The
amount of life insurance coverage provided to, and the terms, provisions and
conditions of the coverage maintained for, Executive shall be at least as much
and at least as favorable to Executive as the amount, terms, provisions and
conditions of coverage provided and maintained, as applicable, under
split-dollar insurance agreements and policies maintained for other senior
executive employees of CCBF and/or CCB Bank (taking into consideration
differences in age and health). Any exercise of the Insurance Policy Buy-Out
Option (as defined below) by Executive shall release CCBF and CCB Bank from any
further obligation to maintain the Split Dollar Agreement or the Insurance
Policy.
(f) Expenses. During the Employment Period, Executive shall be
entitled to receive prompt reimbursement for all reasonable expenses incurred by
Executive in accordance with the policies, practices and procedures of CCBF and
CCB Bank to the extent applicable generally to other senior executive employees
of CCBF or CCB Bank.
(g) Fringe and Similar Benefits. During the Employment Period,
Executive shall be entitled to fringe benefits in accordance with the plans,
practices, programs and policies of CCBF and CCB Bank in effect for senior
executive employees of CCBF or CCB Bank. In addition to, and not in lieu of, any
other provision of this Agreement, Executive shall receive annually an allowance
equal to three percent (3%) of his Base Salary for such fiscal year under CCB
Bank's "Senior Officer Perquisites" policy, payable and available for such uses
as are set forth in such policy.
(h) Vacation, Sick and Other Leave. During the Employment
Period, Executive shall be entitled annually to a minimum of twenty (20)
business days of paid vacation and shall be entitled to those number of business
days of paid disability, sick and other leave specified in the employment
policies of CCBF or CCB Bank.
(i) Allocation. CCBF and CCB Bank may allocate between them
for accounting and taxation purposes the payment of compensation to Executive
under this Agreement on the basis of such factors as they deem relevant and
appropriate; provided, however, that CCBF and CCB Bank shall be jointly and
severally liable and obligated to fulfill all obligations to Executive under
this Agreement.
7. Termination of Employment (Other Than In Connection With A Change Of
Control).
(a) Death or Disability. Executive's employment with CCBF and
CCB Bank shall terminate automatically upon Executive's death during the
Employment Period. If the CCBF Board and the Bank Board determine in good faith
that the Disability of Executive has occurred during the Employment Period
(pursuant to the definition of Disability set forth below), they may give to
Executive written notice in accordance with Section 7(d) and 16(g) of this
Agreement of their intention to terminate Executive's employment. In such event,
Executive's employment with CCBF and CCB Bank shall terminate effective on the
60th day after receipt of such written notice by Executive (the "Disability
Effective Date"), provided that, within the 30 days after such receipt,
Executive shall not have returned to full-time performance of Executive's
duties. For purposes of this Agreement, "Disability" shall mean the absence of
Executive from Executive's duties with CCBF and CCB Bank on a full-time basis
for 180 consecutive business days as a result of incapacity due to mental or
physical illness or injury which is determined to be total and permanent by a
physician selected by the CCBF Board and the Bank Board, or
5
<PAGE>
the insurers of CCBF and CCB Bank, and acceptable to Executive or Executive's
legal representative, which acceptance shall not be unreasonably withheld,
subject to (i) CCBF's and CCB Bank's obligations, and Executive's rights, under
(A) the Americans With Disabilities Act, 42 U.S.C. ss.ss.1210 ET SEQ., and (B)
the Family and Medical Leave Act, 29 U.S.C. ss.ss.2601 ET SEQ. (and the
regulations promulgated under the foregoing Acts), and (ii) the exclusion from
such 180 business day calculation of any business days constituting vacation
days under Section 6(h) and any business days which an employee is permitted to
be absent under the disability, sick or other leave policies of CCBF or CCB
Bank.
(b) Cause. CCBF and CCB Bank may terminate Executive's
employment with CCBF and CCB Bank for Cause. For purposes of this Agreement,
"Cause" shall mean:
(i) the willful and continued failure of Executive to
perform substantially Executive's duties with CCBF
and CCB Bank, other than any such failure resulting
from Disability, after a written demand for
substantial performance is jointly delivered to
Executive by the CCBF Board and the Bank Board which
specifically identifies the manner in which the CCBF
Board and the Bank Board believe that Executive has
not substantially performed Executive's duties, or
(ii) the willful engaging by Executive in illegal conduct
or gross misconduct which is materially and
demonstrably injurious to CCBF and CCB Bank.
For purposes of this provision, no act or failure to act on the part of
Executive shall be considered "willful" unless it is done, or omitted to be
done, by Executive in bad faith or without reasonable belief that Executive's
action or omission was in the best interests of CCBF and CCB Bank. Any act, or
failure to act, based upon authority given pursuant to resolutions duly adopted
by the CCBF Board or the Bank Board or based upon the advice of counsel for CCBF
or CCB Bank shall be conclusively presumed to be done, or omitted to be done, by
Executive in good faith and in the best interests of CCBF and CCB Bank. The
cessation of employment of Executive shall not be deemed to be for Cause unless
and until there shall have been delivered to Executive copies of resolutions
duly adopted by the affirmative votes of not less than three-quarters (3/4) of
the entire membership of each of the CCBF Board and the Bank Board at meetings
of such Boards called and held for such purpose (after reasonable notice is
provided to Executive and Executive is given an opportunity, together with
counsel, to be heard before the CCBF Board and the Bank Board), finding that, in
the good faith opinion of each such Board, Executive is guilty of the conduct
described in items (i) or (ii) above, and specifying the particulars thereof in
detail.
(c) Good Reason. Executive's employment may be terminated by
Executive for Good Reason. For purposes of this Agreement, "Good Reason" shall
mean:
(i) the assignment to Executive of any duties or
responsibilities inconsistent in any respect with
Executive's positions (including status, offices,
titles, and reporting requirements), authority,
duties, prerogatives or responsibilities as
contemplated by Section 3(a) of this Agreement, or
any other action by CCBF or CCB Bank which results in
a diminution in such positions, authority, duties,
prerogatives or responsibilities, excluding for this
purposes an isolated, insubstantial and inadvertent
action not taken in bad faith and which is remedied
by CCBF or CCB Bank, as applicable, promptly after
receipt of notice thereof given by Executive;
(ii) any failure by CCBF or CCB Bank to comply with any of
the provisions of Section 6 of this Agreement, other
than an isolated, insubstantial and inadvertent
6
<PAGE>
failure not occurring in bad faith and which is
remedied by CCBF or CCB Bank, as applicable, promptly
after receipt of notice thereof given by Executive;
(iii) the requirement by CCBF and/or CCB Bank that
Executive, without his consent, be based or conduct
on an on-going basis more than ten percent (10%) of
his activities under this Agreement at any office or
location more than 35 mile (by most direct highway
route) from the location of the headquarters building
of CCBF and CCB Bank in Durham, North Carolina as of
the Effective Date;
(iv) any purported termination of Executive's employment
under this Agreement otherwise than as expressly
permitted by this Agreement; or
(v) any failure by CCBF and/or CCB Bank to comply with
and satisfy Section 14(b) of this Agreement.
For purposes of this Section 7(c), any good faith determination of "Good Reason"
made by Executive shall be conclusive.
(d) Notice of Termination. Any termination by CCBF and CCB
Bank for Disability or Cause or by Executive for Good Reason shall be
communicated by Notice of Termination to the other party thereto given in
accordance with Section 16(g) of this Agreement. For purposes of this Agreement,
a "Notice of Termination" means a written notice which (i) indicates the
specific termination provision in this Agreement relied upon, (ii) to the extent
applicable, sets forth in reasonable detail the facts and circumstances claimed
to provide a basis for termination of Executive's employment under the provision
so indicated, and (iii) if the Date of Termination (as defined below) is other
than the date of receipt of such notice, specifies the termination date (which
date shall be not more than 30 days after the giving of such notice except as
otherwise provided in Section 7(a)). The failure by Executive or CCBF and CCB
Bank to set forth in the Notice of Termination any fact or circumstance which
contributes to a showing of Disability, Cause or Good Reason shall not waive any
right of Executive or CCBF and CCB Bank hereunder or preclude Executive or CCBF
and CCB Bank from asserting such fact or circumstance in enforcing Executive's
or CCBF's and CCB Bank's rights hereunder.
(e) Date of Termination. "Date of Termination" means (i) if
Executive's employment is terminated by CCBF and CCB Bank for Cause or by
Executive for Good Reason, the date of receipt of the Notice of Termination or
any later date specified therein, as the case may be, (ii) if Executive's
employment is terminated by CCBF and CCB Bank other than for Cause or Disability
or other than by reason of death, the date of receipt of the Notice of
Termination, and (iii) if Executive's employment is terminated by reason of
death or Disability, the Date of Termination shall be the date of death of
Executive or the Disability Effective Date, as the case may be.
8. Obligations of CCBF and CCB Bank Upon Termination (Other Than In
Connection With A Change Of Control).
(a) Other Than For Cause, Death or Disability. If, during the
Employment Period, CCBF shall terminate Executive's employment other than for
Cause, death or Disability, or Executive shall terminate his employment for Good
Reason (and, in each case, other than in connection with a Change of Control),
then in consideration of Executive's services rendered prior to such
termination;
7
<PAGE>
(i) CCBF and CCB Bank shall pay to Executive a lump sum
in cash within 30 days after the Date of Termination
the aggregate of the following amounts:
A. the sum of (1) Executive's Base Salary
through the Date of Termination to the
extent not theretofore paid, (2) the product
of (x) Executive's "target" bonus for the
then current fiscal year under the EMIP as
described in Section 6(b)(i) above ("Target
EMIP Bonus"), and (y) a fraction, the
numerator of which is the number of days in
the current fiscal year through the Date of
Termination, and the denominator of which is
365, and (3) any compensation previously
deferred by Executive (together with any
accrued interest or earnings thereon) and
any accrued vacation pay, in each case to
the extent not theretofore paid (the sum of
the amounts described in clauses (1), (2),
and (3) shall be hereinafter referred to as
the "Accrued Obligations"); and
B. the amount equal to the product of (1) the
number of days remaining in the Employment
Period from and after the Date of
Termination (the "Remaining Employment
Period"), and (2) Executive's Base Salary
divided by 365; and
C. the amount equal to the product of (1) the
number of days in the Remaining Employment
Period, and (2) Executive's Target EMIP
Bonus divided by 365; and
D. an amount equal to the excess of (a) the
actuarial equivalent of Executive's benefits
under the Benefit Plans that are qualified
defined benefit retirement plans (utilizing
actuarial assumptions no less favorable to
Executive than those in effect under the CCB
Financial Corporation Retirement Plan on the
Date of Termination) and any Benefit Plans
that are excess or supplemental retirement
plans in which Executive participates which
Executive would receive if Executive's
employment continued throughout the
Remaining Employment Period, assuming for
this purpose that all accrued benefits are
fully vested and assuming that Executive's
compensation in each remaining year of the
Employment Period is the Base Salary plus
the Target EMIP Bonus, over (b) the
actuarial equivalent of Executive's actual
benefits (paid or payable), if any, under
such Benefit Plans as of the Date of
Termination; and
(ii) CCBF shall immediately grant, if not theretofore
granted for the fiscal year in which the Date of
Termination occurs, an award under the LTIP of the
same type and in the same quantitive amount as
Executive's "target" award under the LTIP for the
current fiscal year ("Target LTIP Award"), which
award shall be vested and non-forfeitable as of the
Date of Termination (assuming for calculation
purposes that the LTIP's superior performance
objective for such fiscal year has been met) and
shall be exercisable on and after the first day
subsequent to the six (6) months following the date
of grant; and
(iii) for the Remaining Employment Period, or such longer
period as may be provided by the terms of the
appropriate plan, program, practice or policy, CCBF
and CCB
8
<PAGE>
Bank shall continue to provide benefits toExecutive
and/or Executive's family at least equal to those
which would have been provided to them in accordance
with the Welfare Benefit Plans described in Section
6(d) of this Agreement if Executive's employment had
not been terminated; provided, however, that if
Executive becomes re-employed with another employer
and is eligible to receive substantially the same
benefits under the other employer's plans as
Executive would receive under the Welfare Benefit
Plans under this item (iii), the benefits under the
Welfare Benefit Plans shall be secondary to those
provided under such other employer's plans during
such applicable period of eligibility. For purposes
of determining eligibility and years-of-service
credit (but not the time of commencement of benefits)
of Executive for retiree benefits pursuant to such
Welfare Benefit Plans, Executive shall be considered
to have remained employed throughout the Remaining
Employment Period and to have retired on the last day
of such period; and
(iv) to the extent not theretofore paid or provided, CCBF
and CCB Bank shall timely pay or provide to Executive
any other amounts or benefits required to be paid or
provided herein or which Executive is eligible to
receive under any Welfare Benefit Plan or any other
plan, program, policy or practice or contract or
agreement of CCBF or CCB Bank (such other amounts and
benefits shall be hereinafter referred to as the
"Other Benefits"); and
(v) all options to acquire capital stock of CCBF
("Options") previously granted to Executive,
including those awarded under item (ii) above, that
are unvested on the Date of Termination shall be
deemed vested, fully exercisable and non-forfeitable
as of the Date of Termination and all previously
granted Options that are vested, but unexercised, on
the Date of Termination shall remain exercisable, in
each case for the period during which they would have
been exercisable absent the termination of
Executive's employment; and
(vi) during the Remaining Employment Period, CCBF and CCB
Bank shall maintain the Split Dollar Agreement and
continue to pay all premiums due under the Split
Dollar Agreement and the Insurance Policy; provided,
however, that upon or at any time prior to the
expiration of the Remaining Employment Period,
Executive or the then owner of the Insurance Policy
may terminate the Split Dollar Agreement and the
Collateral Assignment by paying to CCBF and/or CCB
Bank an amount equal to the total amount of the
premiums advanced by CCBF and/or CCB Bank in
accordance with the Split Dollar Agreement as of the
date of the termination of the Split Dollar
Agreement, minus any withdrawals of cash value or
loans proceeds received by CCBF and/or CCB Bank from
the cash value of the Insurance Policy and which were
made to CCBF and/or CCB Bank as of the date of the
termination of the Split Dollar Agreement (such
payment may, in the discretion of Executive or other
owner of the policy, be made in cash or may be
accomplished by means of a loan or withdrawal of cash
values of the Insurance Policy which is authorized by
the Executive or such other owner of the Insurance
Policy) (the "Insurance Policy Buy-Out Option");
(vii) provided, however, that notwithstanding any provision
of this Agreement to the contrary, Executive shall
forfeit his right to receive, or, to the extent such
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amounts have previously been paid to Executive, shall
repay in full to CCBF or CCB Bank, as applicable,
with interest at 8% per annum within 30 days of a
final determination of Executive's liability therefor
as set forth below, the sum of the amounts described
in Section 8(a)(i)(B) and (C) of this Agreement if
any time during the Employment Period or the
Remaining Employment Period (the "Restricted Period")
Executive violates the restrictive covenants set
forth in Section 13 of this Agreement. Any
determination of whether Executive has violated such
covenants shall be made by arbitration in Durham,
North Carolina under the Rules of Commercial
Arbitration (the "Rules") of the American Arbitration
Association, which Rules are deemed to be
incorporated by reference herein.
(b) Death. If Executive's employment is terminated by reason
of Executive's death during the Employment Period, this Agreement shall
terminate without further obligations to Executive's legal representatives under
this Agreement, except that; (i) Accrued Obligations shall timely be paid as
provided below; (ii) Other Benefits shall be timely paid or provided as
described below; (iii) all Options previously granted to Executive that vested
at or prior to the Date of Termination shall remain exercisable for the longer
of twelve (12) months and the exercise period in effect immediately prior to the
Date of Termination; (iv) all Options previously granted to Executive and
scheduled to vest in the year of death shall immediately vest and be exercisable
for the exercise period set forth in the applicable grants; and (v) Executive's
rights to all benefits under all Benefit Plans that are "non-qualified" plans
shall be 100% vested, regardless of Executive's age or years of service, at the
time of Executive's death. Accrued Obligations shall be paid to Executive's
estate or beneficiary, as applicable, in a lump sum in cash within 30 days of
the Date of Termination. With respect to the provision of Other Benefits, the
term Other Benefits as utilized in this Section 8(b) shall include, without
limitation, and Executive's estate and/or beneficiaries shall be entitled to
receive, all benefits under CCBF's and CCB Bank's plans, programs, practices and
policies relating to death benefits, if any, as are applicable generally to
senior executive employees of CCBF or CCB Bank and their beneficiaries, and on
the same basis as such senior executive employees and their beneficiaries.
Without limiting the foregoing, for one (1) year after Executive's death, CCBF
and CCB Bank shall pay any premium required for any "qualified beneficiary" to
continue his or her health care coverage in accordance with Title I, Part 6 of
the Employee Retirement Security Act of 1974, as amended.
(c) Disability. If Executive's employment is terminated by
reason of Executive's Disability during the Employment Period, this Agreement
shall terminate without further obligations to Executive, except that: (i)
Accrued Obligations shall be timely paid as provided below; (ii) Other Benefits
shall be timely paid or provided as described below; (iii) all Options that are"
incentive stock options" ("ISOs"), as described in Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"), and that vested at or prior to
the Date of Termination shall remain exercisable for the lesser of twelve (12)
months and the period of exercise in effect immediately prior to the Date of
Termination; (iv) all Options previously granted and scheduled to vest in the
year in which the Date of Termination occurs shall immediately vest and be
exercisable (A) in the case of ISOs, for twelve (12) months from the Date of
Termination, and (B) in the case of Options that are not ISOs, for the exercise
period set forth in the applicable grant; (v) all other Options that vested at
or prior to the Date of Termination shall remain exercisable for the period of
exercise in effect immediately prior to the Date of Termination; and (vi)
Executive may exercise his Insurance Plan Buy-Out Option on the Date of
Termination. Accrued Obligations shall be paid to Executive in a lump sum in
cash within 30 days of the Date of Termination. With respect to the provision of
Other Benefits, the term Other Benefits as utilized in this Section 8(c) shall
include, without limitation, and Executive shall be entitled after the Date of
Termination to receive,
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all disability and other benefits under all Welfare Benefit Plans and all other
plans, programs, practices, and policies of CCBF and CCB Bank relating to
disability, if any, as are applicable generally to senior executive employees of
CCBF and CCB Bank and their families, and on the same basis as such senior
executive employees and their families.
(d) Cause. If Executive's employment shall be terminated for
Cause during the Employment Period, this Agreement shall terminate without
further obligations to Executive, except that (i) the Accrued Obligations shall
be paid in a lump sum in cash within 30 days of the Date of Termination, and
(ii) Other Benefits shall be paid or provided in a timely manner, in each case
to the extent theretofore unpaid; provided, however, that Executive's right to
continue to participate in Welfare Benefit Plans shall terminate on the 30th day
following the Date of Termination, subject to his rights under the Consolidated
Omnibus Budget Reconciliation Act of 1985, 29 U.S.C. ss.1161 ET SEQ.
9. Termination In Connection With a Change of Control.
(a) Change of Control Termination. In the event that during
the Employment Period, CCBF and CCB Bank terminate Executive's employment other
than for Cause or Disability or Executive terminates such employment for Good
Reason, in any of the foregoing cases within one (1) year after a Change of
Control (each a "Change of Control Termination"), Executive shall be entitled to
receive the payments and benefits specified in this Section 9. The date on which
CCBF and CCB Bank or Executive receives notice in accordance with Section 16(g)
of a Change of Control Termination shall be deemed the Change of Control
Termination Date.
(b) Definition of Change of Control. A Change of Control shall
be deemed to have occurred upon: (i) any "Person" or "Group" (as defined in or
pursuant to Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended (the "1934 Act"), but not including CCBF, CCB Bank, any other Subsidiary
or any "employee benefit plan" (as defined in or pursuant to the Employee
Retirement Income Security Act of 1974, 29 U.S.C. ss.1002(3), and as used herein
"Person" or "Group") becoming the "beneficial owner" (as defined in Rule 13d-3
under the 1934 Act) or otherwise acquiring control, directly or indirectly, of
securities of CCBF representing twenty-five percent (25%) or more of the voting
power of CCBF's then outstanding securities; (ii) the acquisition by any Person
or Group in any manner of the ability to elect, or to control the election, of a
majority of the directors of CCBF or CCB Bank; (iii) the merger of CCBF or CCB
Bank into another entity, the merger of any entity into CCBF or CCB Bank or the
acquisition of assets by CCBF or CCB Bank, in any such case with the result that
the beneficial owners of CCBF's and CCB Bank's outstanding securities
immediately prior to such transaction do not beneficially own more than sixty
percent (60%) of CCBF's and CCB Bank's outstanding securities after the
consummation of such transaction; (iv) the sale or other transfer of more than
fifty percent (50%) of the assets of CCBF or CCB Bank to any entity not
controlled by CCBF; (v) the consummation of any transaction by CCBF or CCB Bank
that results (A) in the majority of the Boards of Directors of CCBF and CCB Bank
after the consummation of such transaction not being composed of Incumbent
Directors, or (B) the beneficial owners of CCBF's outstanding securities
immediately prior to the consummation of such a transaction not beneficially
owning more than sixty percent (60%) of CCBF's outstanding securities after such
transaction; or (vi) the occurrence of any other event or circumstance which is
not described in the foregoing provisions of this Section 9(b) but which the
CCBF Board determines affects control of CCBF and/or CCB Bank and constitutes a
Change of Control for purposes of this Agreement. The term "Incumbent Director"
shall mean any director who as of the Effective Date was a member of the CCBF
Board or the Bank Board, or any individual becoming a member of the CCBF Board
or the Bank Board subsequent to the Effective Date whose election by CCBF
shareholders or by the shareholder of
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CCB Bank, as applicable, was recommended by at least two-thirds (2/3) of the
then Incumbent Directors on the CCBF Board or the Bank Board, as applicable.
Notwithstanding the foregoing, a Change of Control shall not include
any transaction to which Executive consents in a writing specifically noting
this provision of this Agreement.
(c) Change of Control Payments and Benefits. Upon a
Change of Control Termination:
(i) CCBF and CCB Bank shall pay to Executive in
a lump sum in cash within 30 days after the
date of the Change In Control Termination
Date the aggregate of the following amounts:
(A) the sum of the Accrued Obligations;
and
(B) an amount equal to 2.99 times the
total of Executive's Base Salary and
Target EMIP Bonus; and
(C) an amount equal to the excess of (a)
the actuarial equivalent of the
benefits under CCBF's Benefit Plans
that are qualified defined benefit
retirement plans (utilizing
actuarial assumptions no less
favorable to Executive than those in
effect under the CCB Financial
Corporation Retirement Plan on the
Change of Control Termination Date)
and any Benefit Plan that are excess
or supplemental retirement plans in
which Executive participates which
Executive would receive if
Executive's employment continued
throughout the Remaining Employment
Period, assuming for this purpose
that all accrued benefits are fully
vested, and, assuming that
Executive's compensation in each
remaining year of the Employment
Period is the Base Salary plus the
Target EMIP Bonus, over (b) the
actuarial equivalent of Executive's
actual benefits (paid or payable),
if any, under such Benefit Plans as
of the Change of Control Termination
Date; and
(ii) Unless the relevant Change of Control is a
merger of CCBF or CCB Bank with another
Person or entity which is intended to be
accounted for under the pooling-of-interests
method and which has been approved by the
vote of such number of Incumbent Directors
as comprised a majority of the CCBF Board or
the Bank Board, as applicable, CCBF shall
immediately grant, if not theretofore
granted for the fiscal year in which the
Change of Control Termination Date occurs,
an award under the LTIP of the same type and
in the same quantitive amount as the Target
LTIP Award, which award shall be vested and
non-forfeitable as of the Change of Control
Termination Date (assuming for calculation
purposes that the LTIP's superior
performance objective for such fiscal year
has been met) and shall be exercisable on
and after the first day subsequent to the
six (6) months following the date of grant;
and
(iii) CCBF shall immediately grant, if not
theretofore granted for the fiscal year in
which the Date of Termination occurs, an
award under the EMIP of the same type and in
the same quantitive amount as the Target
EMIP
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Bonus, which award shall be distributed as
of the Change of Control Termination Date
(assuming for calculation purposes that the
EMIP's maximum performance objective for
such fiscal year has been met); and
(iv) for the number of days remaining in the
Employment Period from and after the Change
of Control Termination Date (the "Continuing
Period"), or such longer period as may be
provided by the terms of the appropriate
plan, program, practice or policy, CCBF and
CCB Bank shall continue benefits to
Executive and/or Executive's family at least
equal to those which would have been
provided to them in accordance with the
Welfare Benefit Plans described in Section
6(d) of this Agreement if Executive's
employment had not been terminated;
provided, however, that if Executive becomes
re-employed with another employer and is
eligible to receive substantially the same
benefits under the other employer's plans as
Executive would receive under the Welfare
Benefit Plans under this item (iv), the
benefits under the Welfare Benefit Plans
shall be secondary to those provided under
such other plans during such applicable
period of eligibility. For purposes of
determining eligibility and years-of-service
credit (but not the time of commencement of
benefits) of Executive for retiree benefits
pursuant to such Welfare Benefit Plans,
Executive shall be considered to have
remained employed through the Continuing
Period and to have retired on the last day
of such period; and
(v) all Options previously granted to Executive
that are unvested as of the Change of
Control Termination Date shall be deemed
vested, fully exercisable and
non-forfeitable as of the Change of Control
Termination Date (provided, however, that
Options granted less than six (6) months
before the Change of Control Termination
Date shall not be exercisable until the
first day subsequent to the six (6) months
following their dates of grant) and all
previously granted Options that are vested,
but unexercised, on the Change of Control
Termination Date shall remain exercisable,
in each case for the period during which
they would have been exercisable absent the
termination of Executive's employment; and
(vi) Executive's benefits under all Benefit Plans
that are non-qualified plans shall be 100%
vested, regardless of Executive's age or
years of service, as of the Change of
Control Termination Date; and
(vii) CCBF and CCB Bank shall maintain and
continue to pay during the Continuing Period
all premiums due under the Split Dollar
Agreement and the Insurance Policy;
provided, however, that upon or at any time
prior to the expiration of the Continuing
Period, Executive may exercise his Insurance
Policy Buy-Out Option.
10. Additional Payments
(a) Amount of Additional Payments. Anything in this Agreement
seemingly to the contrary notwithstanding, in the event it shall be determined
that any or the aggregate of all payments, distributions, accelerations of
vesting, awards and provisions of benefits by CCBF and/or CCB Bank to or
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for the benefit of the Executive (whether paid or payable, distributed or
distributable, accelerated, awarded or provided pursuant to the terms of this
Agreement or otherwise) (a "Payment") would constitute an "excess parachute
payment" within the meaning of Section 280G of the Code and subject to the
excise tax imposed by Section 4999 of the Code (the "Excise Tax"), then prior to
the making of any Payment to the Executive, a calculation shall be made of the
amount of the Excise Tax and an additional cash payment (the "Additional
Payment") shall be promptly made to the Executive in the sum of (i) the Excise
Tax and (ii) the total of any Excise Tax and income tax or any other tax payable
on the amounts specified in item (i) and this item (ii). In addition, if it
shall be determined at any time by reference to Internal Revenue Service ("IRS")
regulations or rulings, as a consequence IRS audits or assessments of Executive
(or in settlement thereof), by reference to the terms of the final judgment of a
court or other judicial body of competent jurisdiction or as a result of other
similar events requiring Executive to pay an Excise Tax or any income or other
excise tax on the amounts specified in this Section 10(a), that an Additional
Payment made was less than the sums specified in items (i) and (ii) above, CCBF
and CCB Bank promptly shall make a further cash payment to Executive in the sum
of (x) such deficit and (y) any Excise Tax and any income tax or any other tax
on such further cash payment.
(b) Determination of Excise Tax and Other Amounts. The
determination of whether an Excise Tax would be imposed, the amount of such
Excise Tax, and the calculation of the amounts referred to in Section 10(a)
shall be made by CCBF's and CCB Bank's regular independent accounting firm or,
at the election of Executive, another nationally recognized independent
accounting firm (either, the "Accounting Firm") which shall provide detailed
supporting analyses and calculations. All fees and expenses of the Accounting
Firm shall be borne solely by CCBF and CCB Bank. Any determination by the
Accounting Firm shall be binding upon CCBF, CCB Bank and Executive.
11. Non-Exclusivity of Rights. Nothing in this Agreement shall prevent
or limit Executive's continuing or future participation in any plan, program,
policy, or practice provided by CCBF, CCB Bank or any other Subsidiary and for
which Executive may qualify, nor, subject to Section 14(e), shall anything
herein limit or otherwise affect such rights as Executive may have under any
contract or agreement with CCBF, CCB Bank or any other Subsidiary. Amounts which
are vested benefits or which Executive is otherwise entitled to receive under
any plan, policy, practice or program of or any contract or agreement with CCBF,
CCB Bank or other Subsidiary at or subsequent to a Date of Termination or Change
of Control Termination Date shall be payable in accordance with such plan,
policy, practice or program or such contract or agreement except as explicitly
modified by this Agreement.
12. Full Settlement. CCBF's and CCB Bank's obligation to make the
payments provided for in this Agreement and otherwise to perform their
obligations hereunder shall not be affected by any set-off, counterclaim,
recoupment, defense or other claim, right or action which CCBF or CCB Bank may
have against Executive or others. In no event shall Executive be obligated to
seek other employment or take any other action by way of mitigation of the
amounts payable to Executive under any of the provisions of this Agreement;
provided, however, that Executive's right to receive benefits under Welfare
Benefit Plans to the extent that Executive obtains other employment shall be
limited as provided in Sections 8(a)(iv) and 9(c)(iv). CCBF and CCB Bank agree
to pay as incurred, to the full extent permitted by law, all legal fees and
expenses which Executive may reasonably incur as a result of any contest
(regardless of the outcome thereof) by CCBF and CCB Bank, Executive or others of
the validity or enforceability of, or liability under, any provision of this
Agreement or any guarantee of performance thereof (including as a result of any
contest by Executive about the amount of any payment pursuant to this
Agreement), plus in each case interest on any delayed payment at the "applicable
federal rate" provided for in Section 7872(f)(2)(A) of the Code.
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13. Covenants.
(a) Covenant Not to Compete. During the Restricted Period,
Executive shall not, within the States of North Carolina and South Carolina,
directly or indirectly, in any capacity, render his services, or engage or have
a financial interest in, any business that shall be competitive with any of
those business activities in which CCBF or any of its Subsidiaries that are
financial institutions, is engaged as of the date of this Agreement (a
"Competition"), which business activities include the provision of banking
services (collectively, the "Business"); provided, however, that Executive's
ownership of less than three percent (3%) of the outstanding securities of any
Competitor that has a class of securities listed on a securities exchange or
qualified for quotation on any over-the-counter market shall not be a violation
of the foregoing. If a court determines that the foregoing restrictions are too
broad or otherwise unreasonable under applicable law, including with respect to
time, scope or territory, the court is hereby requested and authorized by the
parties hereto to revise the foregoing restrictions to include the maximum
restrictions allowable under applicable law.
(b) Covenant No to Solicit Customers. During the Restricted
Period, Executive shall not, directly or indirectly, individually or on behalf
of any other person or entity (other than CCBF or a Subsidiary), solicit the
provision of banking services to any person, partnership, corporation or other
entity who is or was (i) a customer of any Subsidiary during any part of the
twelve (12) month period immediately prior to the Date of Termination, or (ii) a
potential customer to whom any Subsidiary solicited the provision of banking
services during any part of the twelve (12) month period immediately prior to
the Date of Termination.
(c) Covenant Not to Solicit Employees. During the Restricted
Period, Executive shall not, directly or indirectly, individually or on behalf
of any other person or entity, solicit, recruit or entice, directly or
indirectly, any employee of CCBF or any Subsidiary to leave the employment of
CCBF or such Subsidiary to work with Executive or with any person, partnership,
corporation or other entity with whom Executive is or becomes affiliated or
associated.
(d) Reasonableness of Scope and Duration. The parties hereto
agree that the covenants and agreements contained in this Section 13 are
reasonable in their time, territory and scope, and they intend that they be
enforced, and no party shall raise any issue of the reasonableness of the time,
territory or scope of any such covenants in any proceeding to enforce any such
covenants.
(e) Enforceability. Executive agrees that monetary damages
would not be a sufficient remedy for any breach or threatened breach of the
provisions of this Section 13, and that in addition to all other rights and
remedies available to CCBF, CCBF shall be entitled to specific performance and
injunctive or other equitable relief as a remedy for any such breach or
threatened breach.
(f) Separate Covenants and Severability. The covenants and
agreements contained in this Section 13 shall be construed as separate and
independent covenants. Should any part or provision of any such covenant or
agreement be held invalid, void or unenforceable in any court of competent
jurisdiction, no other part or provision of this Agreement shall be rendered
invalid, void or unenforceable by a court of competent jurisdiction, no other
part or provision of this Agreement shall be rendered invalid, void or
unenforceable as a result. If any portion of the foregoing provisions is found
to be invalid or unenforceable by a court of competent jurisdiction unless
modified, it is the intent of the parties that the otherwise invalid or
unreasonable term shall be reformed, or a new enforceable term provided, so as
to most closely effectuate the provisions as is validly possible.
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(g) Inapplicability. The provisions of this Section 13 shall
not be operative upon, or be in any way enforceable against Executive at or
after, a Change of Control Termination or a termination of Executive's
employment by CCBF and CCB Bank other than for Cause, death or Disability (i.e.,
a termination without Cause).
14. Assignment and Successors.
(a) Executive. This Agreement is personal to Executive and
without the prior written consent of CCBF and CCB Bank shall not be assignable
by Executive otherwise than by will or the laws of descent and distribution.
This Agreement shall inure to the benefit of and be enforceable by Executive's
legal representatives.
(b) CCBF and CCB Bank. This Agreement shall inure to the
benefit of and be binding upon CCBF and CCB Bank and their respective successors
and assigns. Each of CCBF and CCB Bank will require any successor to it (whether
direct or indirect, by stock or asset purchase, merger, consolidation or
otherwise) to all or substantially all of its business or more than fifty
percent (50%) of its assets to assume expressly and agree to perform this
Agreement in the same manner and to the same extent it would be required to
perform it if no such succession had taken place. As used in this Agreement,
"CCBF" and "CCB Bank" shall mean CCBF and CCB Bank as hereinbefore defined and
any successor to their respective businesses and/or assets as aforesaid which
assumes and agrees to perform this Agreement by operation of law, or otherwise.
15. Regulatory Intervention. Notwithstanding anything in this Agreement
to the contrary, the obligations of CCBF and CCB Bank under this Agreement are
subject to the following terms and conditions:
(a) If the Executive is suspended and/or temporarily
prohibited from participating in the conduct of CCBF's or CCB Bank's affairs by
a notice served under Section 8(e)(3) or (g)(1) of the Federal Deposit Insurance
Act (12 U.S.C. ss.1818 (e)(3) and (g)(1)), CCBF's or CCB Bank's obligations
hereunder, as applicable, shall be suspended as of the date of service unless
stayed by appropriate proceedings. If the charges in the notice are dismissed,
all of CCBF's or CCB Bank's obligations, as applicable, which were suspended
shall be reinstated.
(b) If Executive is removed and/or permanently prohibited from
participating in the conduct of CCBF's or CCB Bank's affairs by an order issued
under Section 8(e)(4) or (g)(1) of the Federal Deposit Insurance Act (12 U.S.C.
ss.1818 (e)(4) and (g)(1)), all obligations of CCBF or CCB Bank, as applicable,
under this Agreement shall terminate as of the effective date of the order, but
vested rights of the parties shall not be affected.
(c) If CCB Bank is in default (as defined in Section 3(x)(1)
of the Federal Deposit Insurance Act (12 U.S. C. ss.1813 (x)(1)), all
obligations of CCB Bank under this Agreement shall terminate as of the date of
default, but any vested rights of Executive shall not be affected.
(d) All obligations of CCB Bank under this Agreement shall be
terminated, except to the extent determined that continuation of the contract is
necessary for the continued operation of CCB Bank, if so ordered by the North
Carolina Commissioner of Banks (the "Commissioner") at the time the Federal
Deposit Insurance Corporation ("FDIC") enters into an agreement to provide
assistance to or on behalf of CCB Bank under the authority contained in Section
13(c) of the Federal Deposit Insurance Act
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(12 U.S.C. ss.1823 (c)), or if so ordered by the Commissioner at the time the
FDIC approves a supervisory merger to resolve problems related to operation of
CCB Bank or when CCB Bank is determined by the Commissioner to be in an unsafe
or unsound condition. Any rights of Executive that shall have vested under this
Agreement shall not be affected by such action.
(e) With regard to the provisions of this Section 15(a)
through (d):
(i) CCBF and CCB Bank agree to use their best efforts to
oppose any such notice of charges as to which there
are reasonable defenses;
(ii) In the event the notice of charges is dismissed or
otherwise resolved in a manner that will permit CCBF
and/or CCB Bank to resume their obligations to pay
compensation hereunder, CCBF and/or CCB Bank will
promptly make such payment hereunder; and
(iii) During any period of suspension under Section 15(a),
the vested rights of Executive shall not be affected
except to the extent precluded by such notice.
(f) CCB Bank's obligations to provide compensation or other
benefits to Executive under this Agreement shall be terminated or limited to the
extent required by the provisions of any final regulation or order of the FDIC
promulgated under Section 18(k) of the Federal Deposit Insurance Act (12 U.S.C.
ss.1828(k)) limiting or prohibiting any "golden parachute payment" as defined
therein, but only to the extent that the compensation or payments to be provided
by CCB Bank under this Agreement are so prohibited or limited.
(g) It is intended by CCBF, CCB Bank and Executive that if
only one of CCBF and CCB Bank is prohibited from fulfilling its obligations
under this Agreement in any of the circumstances described in the above
provisions of this Section 15 (whether for a period or permanently), the other
shall remain obligated to fulfill all obligations of CCBF and CCB Bank under
this Agreement.
16. Miscellaneous.
(a) No Mitigation. Executive shall not be required to mitigate
the amount of any payment provided for in this Agreement by seeking other
employment or otherwise and, except as provided in Sections 8(a)(iv) and
9(c)(iv), no such payment shall be offset or reduced by the amount of any
compensation or benefits provided to Executive in any subsequent employment.
(b) Waiver. Failure of either part to insist, in one or more
instances, on performance by the other in strict accordance with the terms and
conditions of this Agreement shall not be deemed a waiver or relinquishment of
any right granted in this Agreement or of the future performance of any such
term or condition or of any other term or condition of this Agreement, unless
such waiver is contained in a writing signed by the party making the waiver.
(c) Severability. If any provision or covenant, of any part
thereof, of this Agreement should be held by any court to be invalid, illegal or
unenforceable, either in whole or in part, such invalidity, illegality or
unenforceability shall not affect the validity, legality or enforceability of
the remaining provisions or covenants, or any part thereof, of this Agreement,
all of which shall remain in full force and effect.
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(d) Other Agents. Nothing in this Agreement is to be
interpreted as limiting CCBF or CCB Bank from employing other personnel on such
terms and conditions as may be satisfactory to it.
(e) Entire Agreement. Except as provided herein, this
Agreement contains the entire agreement among CCBF, CCB Bank and Executive, with
respect to the subject matter hereof and supersedes and invalidates any previous
employment and severance agreements or contracts with Executive, including,
without limitation, that certain Change of Control Agreement, dated July 17,
1995, by and between CCB Bank and Executive which is amended and restated
herein. No representations, inducements, promises or agreements, oral or
otherwise, which are not embodied herein, shall be of any force or effect.
(f) Governing Law. Except to the extent preempted by federal
law, the laws of the State of North Carolina shall govern this Agreement in all
respects, whether as to its validity, construction, capacity, performance or
otherwise.
(g) Notices. All notices, requests, demands and other
communications required or permitted hereunder shall be in writing and shall be
deemed to have been duly given if delivered or seven (7) days after mailing if
mailed, first class, certified mail, postage prepaid:
To CCBF and CCB Bank:
CCB Financial Corporation
111 Corcoran Street
Durham, North Carolina 27702-0931
Attention: Chairman of the Board
To Executive:
Ernest C. Roessler
3710 Northhampton Road
Durham, North Carolina 27707-5080
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Any party may change the address to which notices, requests, demands and other
communications shall be delivered or mailed by giving notice thereof to the
other party in the same manner provided herein.
(h) Amendments and Modifications. This Agreement may be
amended or modified only by a writing signed by all parties hereto, which makes
specific reference to this Agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Employment and Amended and Restated Change of Control Agreement (As
Amended) as of August 1, 1999.
CCB FINANCIAL CORPORATION
By:/s/ E.J. MCDONALD
--------------------------------------
Title: Executive Vice Chairman
-----------------------------------
CENTRAL CAROLINA BANK AND
TRUST COMPANY
By: /s/ E.J. MCDONALD
--------------------------------------
Title: Executive Vice Chairman
-----------------------------------
EXECUTIVE:
/s/ ERNEST C. ROESSLER
-----------------------------------------
Ernest C. Roessler
19
Exhibit 10.2
EMPLOYMENT AND AMENDED AND
RESTATED CHANGE OF CONTROL AGREEMENT
(AS AMENDED)
THIS EMPLOYMENT AND AMENDED AND RESTATED CHANGE OF CONTROL AGREEMENT
(AS AMENDED) (this "Agreement") was made and entered into this 21st day of
January, 1998 by and among CCB Financial Corporation, a North Carolina
corporation ("CCBF"), Central Carolina Bank and Trust Company, a North Carolina
commercial bank ("CCB Bank"), and J. Scott Edwards ("Executive"), and is amended
hereby as of August 1, 1999.
BACKGROUND
----------
WHEREAS, Executive is a Senior Executive Vice President of CCBF and of
CCB Bank, the primary banking subsidiary of CCBF; and
WHEREAS, the expertise and experience of Executive, his knowledge of
the affairs of CCBF and its direct and indirect subsidiaries (the
"Subsidiaries"), and his relationships and reputation in the financial
institutions industry are extremely valuable to CCBF, CCB Bank and the other
Subsidiaries; and
WHEREAS, it is in the best interests of CCBF, its Subsidiaries and its
shareholders to maintain an experienced and sound executive management team to
manage CCBF, CCB Bank and the other Subsidiaries and to further CCBF's overall
strategies to protect and enhance the value of its shareholders' investments;
and
WHEREAS, CCBF, CCB Bank and Executive entered into this Agreement to
establish the scope, terms and conditions of Executive's employment by CCBF and
CCB Bank;
WHEREAS, CCB Bank and Executive amended and restated herein the Change
of Control Agreement dated July 17, 1996 between CCB Bank and Executive in order
to continue the provision of security to, and to continue to insure the loyalty
of, Executive in the event of a change in control of CCBF or CCB Bank, and CCBF
became obligated, jointly and severally with CCB Bank, under the provisions of
such agreement as amended and restated herein; and
WHEREAS, CCBF, CCB Bank and Executive desire to amend this Agreement.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements set forth herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
1. Effective Date. The effective time and date of this Agreement shall
be deemed to be 12:00:01 o'clock, a.m., on January 21, 1998 (the "Effective
Date").
2. Definitions. The following defined terms are defined in the
referenced Sections of this Agreement.
1
<PAGE>
Term Section
---- -------
Accrued Obligations Section 8(a)(i)(A)
Additional Payment Section 10(a)
Base Salary Section 6(a)
Bank Board Section 6(a)
Benefit Plans Section 6(c)
Cause Section 7(b)
CCBF Board Section 3
Change of Control Section 9(b)
Change of Control Termination Section 9(a)
Change of Control Termination Date Section 9(a)
Code Section 8(c)
Collateral Assignment Section 6(e)
Competitor Section 13(a)
Continuing Period Section 9(c)(iv)
Commissioner Section 15(d)
Date of Termination Section 7(e)
Disability Section 7(a)
Disability Effective Date Section 7(a)
Effective Date Section 1
EMIP Section 6(b)(i)
Employment Period Section 4
Excise Tax Section 10(a)
FDIC Section 15(d)
Good Reason Section 7(c)
Group Section 9(b)
Incumbent Directors Section 9(b)
Insurance Policy Section 6(e)
Insurance Policy Buy-Out Option Section 8(a)(vi)
IRS Section 10(a)
ISOs Section 8(c)
LTIP Section 6(b)(ii)
1934 Act Section 9(b)
Notice of Termination Section 7(d)
Other Benefits Section 8(a)(iv)
Options Section 8(a)(v)
Payment Section 10(a)
Person Section 9(b)
Remaining Employment Period Section 8(a)(i)(B)
Restricted Period Section 8(a)(vii)
Split Dollar Agreement Section 6(e)
Subsidiaries Preamble
Target EMIP Bonus Section 8(a)(i)(A)
Target LTIP Award Section 8(a)(ii)
Welfare Benefit Plans Section 6(d)
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<PAGE>
3. Employment. Executive will be employed as the Senior Executive Vice
President in charge of the Administrative Group of each of CCBF and CCB Bank.
Executive's responsibilities, duties, prerogatives and authority in such
executive offices, and the clerical, administrative and other support staff and
office facilities provided to him, shall be those customary for the principal
executive officer of publicly held corporations generally and of holding
companies and financial institutions that are a part of the financial
institution industry specifically. In his executive capacities Executive shall
report to the President and Chief Executive Officer of CCBF and CCB Bank, as
applicable.
4. Employment Period. Unless earlier terminated in accordance with
Sections 7 or 9 hereof, Executive's employment shall be for a renewing three (3)
year term (the "Employment Period"), beginning at the Effective Date. The
Employment Period shall, without further action by Executive, CCBF or CCB Bank,
be extended for an additional one (1) year on each anniversary of the Effective
Date, such that the remaining term of the Employment Period shall continue to be
three (3) years; provided, further, however, that CCBF and CCB Bank or Executive
may, by notice to the other, cause the Employment Period to cease to extend
automatically as of a specific anniversary of the Effective Date. Such notice
must be given and received at least eleven (11) months and thirty-one (31) days
prior to the anniversary of the Effective Date on which it is to be effective.
Upon the effectiveness of such notice, the Employment Period shall be fixed at
three (3) years, and the Employment Period shall terminate upon the expiration
of such three-year period.
5. Extent of Service. During the Employment Period, and excluding any
periods of vacation, sick or other leave to which Executive is entitled under
this Agreement, Executive agrees to devote reasonable attention and time during
normal business hours to the business and affairs of CCBF and CCB Bank, and, to
the extent necessary to discharge the responsibilities assigned to Executive
hereunder, to use Executive's reasonable best efforts to perform faithfully and
efficiently his responsibilities and duties under this Agreement. During the
Employment Period it shall not be a violation of this Agreement for Executive to
(i) devote reasonable periods of time to charitable, trade association,
community and similar activities, and/or (ii) manage personal business interests
and investments, so long as such activities do not interfere with the
performance of Executive's responsibilities and duties under this Agreement. It
is expressly understood and agreed that to the extent that any such activities
have been conducted by Executive prior to the Effective Date, the continued
conduct of such activities (or the conduct of activities similar in nature and
scope thereto) subsequent to the Effective Date shall not thereafter be deemed
to interfere with the performance of Executive's responsibilities and duties
hereunder.
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6. Compensation and Benefits.
(a) Base Salary. For the 1999 fiscal year CCBF will pay to
Executive a base salary in the amount of $313,200 per year ("Base Salary"), less
normal withholdings, payable in equal monthly or more frequent installments as
are customary under CCB Bank's payroll practices from time to time. The
Compensation Committee of the CCBF Board shall review Executive's total
compensation annually and in its sole discretion may adjust Executive's Base
Salary from year to year, but during the Employment Period neither the
Compensation Committee, the CCBF Board nor the Board of Directors of CCB Bank
(the "Bank Board") may decrease Executive's Base Salary below $313,200, and
periodic increases, once granted, shall not be subject to revocation. The annual
review of Executive's total compensation by the Compensation Committee will
consider, among other things, changes in the cost of living, Executive's own
performance and CCBF's consolidated performance.
(b) Incentive Plans. During the Employment Period,
Executive shall be entitled:
(i) to participate in CCBF's Executive Management
Incentive Plan ("EMIP"), and any successor or
substitute plan to the EMIP, in at least as favorable
a manner as any other participant of the same rank.
The President and Chief Executive Officer of CCBF and
CCB Bank shall recommend annually to the Compensation
Committee with respect to the Executive appropriate
minimum, target and maximum performance objectives,
and appropriate measures and weights for the
components of the performance objectives, for the
EMIP generally and shall also recommend minimum,
target and maximum bonus levels for the executive
employee participants in the EMIP (taking into
consideration any contractual rights of any such
participants). Executive's annual minimum, target and
maximum bonus levels under the EMIP shall be 0%, 50%,
and 100% of Executive's Base Salary for such year or
such greater levels as the Compensation Committee may
determine Executive's individual performance warrants
or as are necessary to satisfy the provisions of the
first sentence of this item (i); and
(ii) to participate in CCBF's Long-Term Incentive Plan
("LTIP"), and any successor or substitute plan to the
LTIP, in at least as favorable a manner as any other
participant of the same rank.
(c) Savings and Retirement Plans. During the Employment
Period, Executive shall be entitled to participate in all savings, pension and
retirement plans (including supplemental retirement plans), practices, policies
and programs applicable generally to senior executive employees of CCBF or CCB
Bank (the "Benefit Plans"), and on at least as favorable a basis as any other
participant of the same rank. Without limiting the foregoing, Benefit Plans
shall include the CCB Financial Corporation Retirement Plan, the CCB Financial
Corporation Retirement Savings Plan, the CCB Financial Corporation Retirement
Income Equity Plan, the CCB Financial Corporation Retirement Savings Equity Plan
and any substitute and successor plan to any of the foregoing.
(d) Welfare Benefit Plans. During the Employment Period,
Executive and/or Executive's family, as the case may be, shall be eligible for
participation in and shall receive all benefits under all welfare benefit plans,
practices, policies and programs provided by CCBF or CCB Bank (including,
without limitation, medical, hospitalization, prescription, dental, disability,
employee life, group life, accidental death and dismemberment, and travel
accident insurance plans and programs) to the
4
<PAGE>
extent applicable generally to senior executive employees of CCBF or CCB Bank
("Welfare Benefit Plans").
(e) Life Insurance. During the Employment Period, CCBF and CCB
Bank shall maintain a split-dollar life insurance agreement with Executive (the
"Split Dollar Agreement") and, together with Executive, maintain a related life
insurance policy to be owned by Executive (the "Insurance Policy") and
collaterally assigned to CCBF and/or CCB Bank (the "Collateral Assignment"),
providing coverage on the life of Executive for the benefit of Executive's
estate, beneficiaries designated by him, and/or trusts created by him. The
amount of life insurance coverage provided to, and the terms, provisions and
conditions of the coverage maintained for, Executive shall be at least as much
and at least as favorable to Executive as the amount, terms, provisions and
conditions of coverage provided and maintained, as applicable, under
split-dollar insurance agreements and policies maintained for other employees of
CCBF and/or CCB Bank of the same rank (taking into consideration differences in
age and health). Any exercise of the Insurance Policy Buy-Out Option (as defined
below) by Executive shall release CCBF and CCB Bank from any further obligation
to maintain the Split Dollar Agreement or the Insurance Policy.
(f) Expenses. During the Employment Period, Executive shall be
entitled to receive prompt reimbursement for all reasonable expenses incurred by
Executive in accordance with the policies, practices and procedures of CCBF and
CCB Bank to the extent applicable generally to other senior executive employees
of CCBF or CCB Bank.
(g) Fringe and Similar Benefits. During the Employment Period,
Executive shall be entitled to fringe benefits in accordance with the plans,
practices, programs and policies of CCBF and CCB Bank in effect for senior
executive employees of CCBF or CCB Bank. In addition to, and not in lieu of, any
other provision of this Agreement, Executive shall receive annually an allowance
equal to three percent (3%) of his Base Salary for such fiscal year under CCB
Bank's "Senior Officer Perquisites" policy, payable and available for such uses
as are set forth in such policy.
(h) Vacation, Sick and Other Leave. During the Employment
Period, Executive shall be entitled annually to a minimum of twenty (20)
business days of paid vacation and shall be entitled to those number of business
days of paid disability, sick and other leave specified in the employment
policies of CCBF or CCB Bank.
(i) Allocation. CCBF and CCB Bank may allocate between them
for accounting and taxation purposes the payment of compensation to Executive
under this Agreement on the basis of such factors as they deem relevant and
appropriate; provided, however, that CCBF and CCB Bank shall be jointly and
severally liable and obligated to fulfill all obligations to Executive under
this Agreement.
7. Termination of Employment (Other Than In Connection With A Change Of
Control).
(a) Death or Disability. Executive's employment with CCBF and
CCB Bank shall terminate automatically upon Executive's death during the
Employment Period. If the CCBF Board and the Bank Board determine in good faith
that the Disability of Executive has occurred during the Employment Period
(pursuant to the definition of Disability set forth below), they may give to
Executive written notice in accordance with Section 7(d) and 16(g) of this
Agreement of their intention to terminate Executive's employment. In such event,
Executive's employment with CCBF and CCB Bank shall terminate effective on the
60th day after receipt of such written notice by Executive (the "Disability
5
<PAGE>
Effective Date"), provided that, within the 30 days after such receipt,
Executive shall not have returned to full-time performance of Executive's
duties. For purposes of this Agreement, "Disability" shall mean the absence of
Executive from Executive's duties with CCBF and CCB Bank on a full-time basis
for 180 consecutive business days as a result of incapacity due to mental or
physical illness or injury which is determined to be total and permanent by a
physician selected by the CCBF Board and the Bank Board, or the insurers of CCBF
and CCB Bank, and acceptable to Executive or Executive's legal representative,
which acceptance shall not be unreasonably withheld, subject to (i) CCBF's and
CCB Bank's obligations, and Executive's rights, under (A) the Americans With
Disabilities Act, 42 U.S.C. ss.ss.1210 ET SEQ., and (B) the Family and Medical
Leave Act, 29 U.S.C. ss.ss.2601 ET SEQ. (and the regulations promulgated under
the foregoing Acts), and (ii) the exclusion from such 180 business day
calculation of any business days constituting vacation days under Section 6(h)
and any business days which an employee is permitted to be absent under the
disability, sick or other leave policies of CCBF or CCB Bank.
(b) Cause. CCBF and CCB Bank may terminate Executive's
employment with CCBF and CCB Bank for Cause. For purposes of this Agreement,
"Cause" shall mean:
(i) the willful and continued failure of Executive to
perform substantially Executive's duties with CCBF
and CCB Bank, other than any such failure resulting
from Disability, after a written demand for
substantial performance is jointly delivered to
Executive by the CCBF Board and the Bank Board which
specifically identifies the manner in which the CCBF
Board and the Bank Board believe that Executive has
not substantially performed Executive's duties, or
(ii) the willful engaging by Executive in illegal conduct
or gross misconduct which is materially and
demonstrably injurious to CCBF and CCB Bank.
For purposes of this provision, no act or failure to act on the part of
Executive shall be considered "willful" unless it is done, or omitted to be
done, by Executive in bad faith or without reasonable belief that Executive's
action or omission was in the best interests of CCBF and CCB Bank. Any act, or
failure to act, based upon authority given pursuant to resolutions duly adopted
by the CCBF Board or the Bank Board or based upon the advice of counsel for CCBF
or CCB Bank shall be conclusively presumed to be done, or omitted to be done, by
Executive in good faith and in the best interests of CCBF and CCB Bank. The
cessation of employment of Executive shall not be deemed to be for Cause unless
and until there shall have been delivered to Executive copies of resolutions
duly adopted by the affirmative votes of not less than three-quarters (3/4) of
the entire membership of each of the CCBF Board and the Bank Board at meetings
of such Boards called and held for such purpose (after reasonable notice is
provided to Executive and Executive is given an opportunity, together with
counsel, to be heard before the CCBF Board and the Bank Board), finding that, in
the good faith opinion of each such Board, Executive is guilty of the conduct
described in items (i) or (ii) above, and specifying the particulars thereof in
detail.
(c) Good Reason. Executive's employment may be terminated by
Executive for Good Reason. For purposes of this Agreement, "Good Reason" shall
mean:
(i) the assignment to Executive of any duties or
responsibilities inconsistent in any respect with
Executive's position (including status, offices,
titles, and reporting requirements), authority,
duties, prerogatives or responsibilities as
contemplated by Section 3 of this Agreement, or any
other action by CCBF or CCB Bank which results in a
diminution in such positions, authority, duties,
prerogatives or responsibilities, excluding for this
purposes an isolated, insubstantial and
6
<PAGE>
inadvertent action not taken in bad faith and which
is remedied by CCBF or CCB Bank, as applicable,
promptly after receipt of notice thereof given by
Executive;
(ii) any failure by CCBF or CCB Bank to comply with any of
the provisions of Section 6 of this Agreement, other
than an isolated, insubstantial and inadvertent
failure not occurring in bad faith and which is
remedied by CCBF or CCB Bank, as applicable, promptly
after receipt of notice thereof given by Executive;
(iii) the requirement by CCBF and/or CCB Bank that
Executive, without his consent, be based or conduct
on an on-going basis more than ten percent (10%) of
his activities under this Agreement at any office or
location more than 35 mile (by most direct highway
route) from the location of the headquarters building
of CCBF and CCB Bank in Durham, North Carolina as of
the Effective Date;
(iv) any purported termination of Executive's employment
under this Agreement otherwise than as expressly
permitted by this Agreement; or
(v) any failure by CCBF and/or CCB Bank to comply with
and satisfy Section 14(b) of this Agreement.
For purposes of this Section 7(c), any good faith determination of "Good Reason"
made by Executive shall be conclusive.
(d) Notice of Termination. Any termination by CCBF and CCB
Bank for Disability or Cause or by Executive for Good Reason shall be
communicated by Notice of Termination to the other party thereto given in
accordance with Section 16(g) of this Agreement. For purposes of this Agreement,
a "Notice of Termination" means a written notice which (i) indicates the
specific termination provision in this Agreement relied upon, (ii) to the extent
applicable, sets forth in reasonable detail the facts and circumstances claimed
to provide a basis for termination of Executive's employment under the provision
so indicated, and (iii) if the Date of Termination (as defined below) is other
than the date of receipt of such notice, specifies the termination date (which
date shall be not more than 30 days after the giving of such notice except as
otherwise provided in Section 7(a)). The failure by Executive or CCBF and CCB
Bank to set forth in the Notice of Termination any fact or circumstance which
contributes to a showing of Disability, Cause or Good Reason shall not waive any
right of Executive or CCBF and CCB Bank hereunder or preclude Executive or CCBF
and CCB Bank from asserting such fact or circumstance in enforcing Executive's
or CCBF's and CCB Bank's rights hereunder.
(e) Date of Termination. "Date of Termination" means (i) if
Executive's employment is terminated by CCBF and CCB Bank for Cause or by
Executive for Good Reason, the date of receipt of the Notice of Termination or
any later date specified therein, as the case may be, (ii) if Executive's
employment is terminated by CCBF and CCB Bank other than for Cause or Disability
or other than by reason of death, the date of receipt of the Notice of
Termination, and (iii) if Executive's employment is terminated by reason of
death or Disability, the Date of Termination shall be the date of death of
Executive or the Disability Effective Date, as the case may be.
8. Obligations of CCBF and CCB Bank Upon Termination (Other Than In
Connection With A Change Of Control).
7
<PAGE>
(a) Other Than For Cause, Death or Disability. If, during the
Employment Period, CCBF shall terminate Executive's employment other than for
Cause, death or Disability, or Executive shall terminate his employment for Good
Reason (and, in each case, other than in connection with a Change of Control),
then in consideration of Executive's services rendered prior to such
termination;
(i) CCBF and CCB Bank shall pay to Executive a lump sum
in cash within 30 days after the Date of Termination
the aggregate of the following amounts:
A. the sum of (1) Executive's Base Salary
through the Date of Termination to the
extent not theretofore paid, (2) the product
of (x) Executive's "target" bonus for the
then current fiscal year under the EMIP as
described in Section 6(b)(i) above ("Target
EMIP Bonus"), and (y) a fraction, the
numerator of which is the number of days in
the current fiscal year through the Date of
Termination, and the denominator of which is
365, and (3) any compensation previously
deferred by Executive (together with any
accrued interest or earnings thereon) and
any accrued vacation pay, in each case to
the extent not theretofore paid (the sum of
the amounts described in clauses (1), (2),
and (3) shall be hereinafter referred to as
the "Accrued Obligations"); and
B. the amount equal to the product of (1) the
number of days remaining in the Employment
Period from and after the Date of
Termination (the "Remaining Employment
Period"), and (2) Executive's Base Salary
divided by 365; and
C. the amount equal to the product of (1) the
number of days in the Remaining Employment
Period, and (2) Executive's Target EMIP
Bonus divided by 365; and
D. an amount equal to the excess of (a) the
actuarial equivalent of Executive's benefits
under the Benefit Plans that are qualified
defined benefit retirement plans (utilizing
actuarial assumptions no less favorable to
Executive than those in effect under the CCB
Financial Corporation Retirement Plan on the
Date of Termination) and any Benefit Plans
that are excess or supplemental retirement
plans in which Executive participates which
Executive would receive if Executive's
employment continued throughout the
Remaining Employment Period, assuming for
this purpose that all accrued benefits are
fully vested and assuming that Executive's
compensation in each remaining year of the
Employment Period is the Base Salary plus
the Target EMIP Bonus, over (b) the
actuarial equivalent of Executive's actual
benefits (paid or payable), if any, under
such Benefit Plans as of the Date of
Termination; and
(ii) CCBF shall immediately grant, if not theretofore
granted for the fiscal year in which the Date of
Termination occurs, an award under the LTIP of the
same type and in the same quantitive amount as
Executive's "target" award under the LTIP for the
current fiscal year ("Target LTIP Award"), which
award shall be vested and non-forfeitable as of the
Date of Termination (assuming for calculation
purposes that the LTIP's superior performance
objective for such fiscal year has
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been met) and shall be exercisable on and after the
first day subsequent to the six (6) months following
the date of grant; and
(iii) for the Remaining Employment Period, or such longer
period as may be provided by the terms of the
appropriate plan, program, practice or policy, CCBF
and CCB Bank shall continue to provide benefits to
Executive and/or Executive's family at least equal to
those which would have been provided to them in
accordance with the Welfare Benefit Plans described
in Section 6(d) of this Agreement if Executive's
employment had not been terminated; provided,
however, that if Executive becomes re-employed with
another employer and is eligible to receive
substantially the same benefits under the other
employer's plans as Executive would receive under the
Welfare Benefit Plans under this item (iii), the
benefits under the Welfare Benefit Plans shall be
secondary to those provided under such other
employer's plans during such applicable period of
eligibility. For purposes of determining eligibility
and years-of-service credit (but not the time of
commencement of benefits) of Executive for retiree
benefits pursuant to such Welfare Benefit Plans,
Executive shall be considered to have remained
employed throughout the Remaining Employment Period
and to have retired on the last day of such period;
and
(iv) to the extent not theretofore paid or provided, CCBF
and CCB Bank shall timely pay or provide to Executive
any other amounts or benefits required to be paid or
provided herein or which Executive is eligible to
receive under any Welfare Benefit Plan or any other
plan, program, policy or practice or contract or
agreement of CCBF or CCB Bank (such other amounts and
benefits shall be hereinafter referred to as the
"Other Benefits"); and
(v) all options to acquire capital stock of CCBF
("Options") previously granted to Executive,
including those awarded under item (ii) above, that
are unvested on the Date of Termination shall be
deemed vested, fully exercisable and non-forfeitable
as of the Date of Termination and all previously
granted Options that are vested, but unexercised, on
the Date of Termination shall remain exercisable, in
each case for the period during which they would have
been exercisable absent the termination of
Executive's employment; and
(vi) during the Remaining Employment Period, CCBF and CCB
Bank shall maintain the Split Dollar Agreement and
continue to pay all premiums due under the Split
Dollar Agreement and the Insurance Policy; provided,
however, that upon or at any time prior to the
expiration of the Remaining Employment Period,
Executive or the then owner of the Insurance Policy
may terminate the Split Dollar Agreement and the
Collateral Assignment by paying to CCBF and/or CCB
Bank an amount equal to the total amount of the
premiums advanced by CCBF and/or CCB Bank in
accordance with the Split Dollar Agreement as of the
date of the termination of the Split Dollar
Agreement, minus any withdrawals of cash value or
loans proceeds received by CCBF and/or CCB Bank from
the cash value of the Insurance Policy and which were
made to CCBF and/or CCB Bank as of the date of the
termination of the Split Dollar Agreement (such
payment may, in the discretion of Executive or other
owner of the policy, be made in cash or may be
accomplished by means of a loan or withdrawal of cash
values of the Insurance
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Policy which is authorized by the Executive or such
other owner of the Insurance Policy) (the "Insurance
Policy Buy-Out Option");
(vii) provided, however, that notwithstanding any provision
of this Agreement to the contrary, Executive shall
forfeit his right to receive, or, to the extent such
amounts have previously been paid to Executive, shall
repay in full to CCBF or CCB Bank, as applicable,
with interest at 8% per annum within 30 days of a
final determination of Executive's liability therefor
as set forth below, the sum of the amounts described
in Section 8(a)(i)(B) and (C) of this Agreement if
any time during the Employment Period or the
Remaining Employment Period (the "Restricted Period")
Executive violates the restrictive covenants set
forth in Section 13 of this Agreement. Any
determination of whether Executive has violated such
covenants shall be made by arbitration in Durham,
North Carolina under the Rules of Commercial
Arbitration (the "Rules") of the American Arbitration
Association, which Rules are deemed to be
incorporated by reference herein.
(b) Death. If Executive's employment is terminated by reason
of Executive's death during the Employment Period, this Agreement shall
terminate without further obligations to Executive's legal representatives under
this Agreement, except that; (i) Accrued Obligations shall timely be paid as
provided below; (ii) Other Benefits shall be timely paid or provided as
described below; (iii) all Options previously granted to Executive that vested
at or prior to the Date of Termination shall remain exercisable for the longer
of twelve (12) months and the exercise period in effect immediately prior to the
Date of Termination; (iv) all Options previously granted to Executive and
scheduled to vest in the year of death shall immediately vest and be exercisable
for the exercise period set forth in the applicable grants; and (v) Executive's
rights to all benefits under all Benefit Plans that are "non-qualified" plans
shall be 100% vested, regardless of Executive's age or years of service, at the
time of Executive's death. Accrued Obligations shall be paid to Executive's
estate or beneficiary, as applicable, in a lump sum in cash within 30 days of
the Date of Termination. With respect to the provision of Other Benefits, the
term Other Benefits as utilized in this Section 8(b) shall include, without
limitation, and Executive's estate and/or beneficiaries shall be entitled to
receive, all benefits under CCBF's and CCB Bank's plans, programs, practices and
policies relating to death benefits, if any, as are applicable generally to
senior executive employees of CCBF or CCB Bank and their beneficiaries, and on
the same basis as such senior executive employees and their beneficiaries.
Without limiting the foregoing, for one (1) year after Executive's death, CCBF
and CCB Bank shall pay any premium required for any "qualified beneficiary" to
continue his or her health care coverage in accordance with Title I, Part 6 of
the Employee Retirement Security Act of 1974, as amended.
(c) Disability. If Executive's employment is terminated by
reason of Executive's Disability during the Employment Period, this Agreement
shall terminate without further obligations to Executive, except that: (i)
Accrued Obligations shall be timely paid as provided below; (ii) Other Benefits
shall be timely paid or provided as described below; (iii) all Options that are"
incentive stock options" ("ISOs"), as described in Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"), and that vested at or prior to
the Date of Termination shall remain exercisable for the lesser of twelve (12)
months and the period of exercise in effect immediately prior to the Date of
Termination; (iv) all Options previously granted and scheduled to vest in the
year in which the Date of Termination occurs shall immediately vest and be
exercisable (A) in the case of ISOs, for twelve (12) months from the Date of
Termination, and (B) in the case of Options that are not ISOs, for the exercise
period set forth in the applicable grant; (v) all other Options that vested at
or prior to the Date of Termination shall remain
10
<PAGE>
exercisable for the period of exercise in effect immediately prior to the Date
of Termination; and (vi) Executive may exercise his Insurance Plan Buy-Out
Option on the Date of Termination. Accrued Obligations shall be paid to
Executive in a lump sum in cash within 30 days of the Date of Termination. With
respect to the provision of Other Benefits, the term Other Benefits as utilized
in this Section 8(c) shall include, without limitation, and Executive shall be
entitled after the Date of Termination to receive, all disability and other
benefits under all Welfare Benefit Plans and all other plans, programs,
practices, and policies of CCBF and CCB Bank relating to disability, if any, as
are applicable generally to senior executive employees of CCBF and CCB Bank and
their families, and on the same basis as such senior executive employees and
their families.
(d) Cause. If Executive's employment shall be terminated for
Cause during the Employment Period, this Agreement shall terminate without
further obligations to Executive, except that (i) the Accrued Obligations shall
be paid in a lump sum in cash within 30 days of the Date of Termination, and
(ii) Other Benefits shall be paid or provided in a timely manner, in each case
to the extent theretofore unpaid; provided, however, that Executive's right to
continue to participate in Welfare Benefit Plans shall terminate on the 30th day
following the Date of Termination, subject to his rights under the Consolidated
Omnibus Budget Reconciliation Act of 1985, 29 U.S.C. ss.1161 ET SEQ.
9. Termination In Connection With a Change of Control.
(a) Change of Control Termination. In the event that during
the Employment Period, CCBF and CCB Bank terminate Executive's employment other
than for Cause or Disability or Executive terminates such employment for Good
Reason, in any of the foregoing cases within one (1) year after a Change of
Control (each a "Change of Control Termination"), Executive shall be entitled to
receive the payments and benefits specified in this Section 9. The date on which
CCBF and CCB Bank or Executive receives notice in accordance with Section 16(g)
of a Change of Control Termination shall be deemed the Change of Control
Termination Date.
(b) Definition of Change of Control. A Change of Control shall
be deemed to have occurred upon: (i) any "Person" or "Group" (as defined in or
pursuant to Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended (the "1934 Act"), but not including CCBF, CCB Bank, any other Subsidiary
or any "employee benefit plan" (as defined in or pursuant to the Employee
Retirement Income Security Act of 1974, 29 U.S.C. ss.1002(3), and as used herein
"Person" or "Group") becoming the "beneficial owner" (as defined in Rule 13d-3
under the 1934 Act) or otherwise acquiring control, directly or indirectly, of
securities of CCBF representing twenty-five percent (25%) or more of the voting
power of CCBF's then outstanding securities; (ii) the acquisition by any Person
or Group in any manner of the ability to elect, or to control the election, of a
majority of the directors of CCBF or CCB Bank; (iii) the merger of CCBF or CCB
Bank into another entity, the merger of any entity into CCBF or CCB Bank or the
acquisition of assets by CCBF or CCB Bank, in any such case with the result that
the beneficial owners of CCBF's and CCB Bank's outstanding securities
immediately prior to such transaction do not beneficially own more than sixty
percent (60%) of CCBF's and CCB Bank's outstanding securities after the
consummation of such transaction; (iv) the sale or other transfer of more than
fifty percent (50%) of the assets of CCBF or CCB Bank to any entity not
controlled by CCBF; (v) the consummation of any transaction by CCBF or CCB Bank
that results (A) in the majority of the Boards of Directors of CCBF and CCB Bank
after the consummation of such transaction not being composed of Incumbent
Directors, or (B) the beneficial owners of CCBF's outstanding securities
immediately prior to the consummation of such a transaction not beneficially
owning more than sixty percent (60%) of CCBF's outstanding securities after such
transaction; or (vi) the occurrence of any other event or circumstance which is
not described in the foregoing provisions of this Section 9(b) but which the
CCBF Board determines affects
11
<PAGE>
control of CCBF and/or CCB Bank and constitutes a Change of Control for purposes
of this Agreement. The term "Incumbent Director" shall mean any director who as
of the Effective Date was a member of the CCBF Board or the Bank Board, or any
individual becoming a member of the CCBF Board or the Bank Board subsequent to
the Effective Date whose election by CCBF shareholders or by the shareholder of
CCB Bank, as applicable, was recommended by at least two-thirds (2/3) of the
then Incumbent Directors on the CCBF Board or the Bank Board, as applicable.
Notwithstanding the foregoing, a Change of Control shall not include
any transaction to which Executive consents in a writing specifically noting
this provision of this Agreement.
(c) Change of Control Payments and Benefits. Upon a
Change of Control Termination:
(i) CCBF and CCB Bank shall pay to Executive in
a lump sum in cash within 30 days after the
date of the Change In Control Termination
Date the aggregate of the following amounts:
(A) the sum of the Accrued Obligations;
and
(B) an amount equal to 2.99 times the
total of Executive's Base Salary and
Target EMIP Bonus; and
(C) an amount equal to the excess of (a)
the actuarial equivalent of the
benefits under CCBF's Benefit Plans
that are qualified defined benefit
retirement plans (utilizing
actuarial assumptions no less
favorable to Executive than those in
effect under the CCB Financial
Corporation Retirement Plan on the
Change of Control Termination Date)
and any Benefit Plan that are excess
or supplemental retirement plans in
which Executive participates which
Executive would receive if
Executive's employment continued
throughout the Remaining Employment
Period, assuming for this purpose
that all accrued benefits are fully
vested, and, assuming that
Executive's compensation in each
remaining year of the Employment
Period is the Base Salary plus the
Target EMIP Bonus, over (b) the
actuarial equivalent of Executive's
actual benefits (paid or payable),
if any, under such Benefit Plans as
of the Change of Control Termination
Date; and
(ii) Unless the relevant Change of Control is a
merger of CCBF or CCB Bank with another
Person or entity which is intended to be
accounted for under the pooling-of-interests
method and which has been approved by the
vote of such number of Incumbent Directors
as comprised a majority of the CCBF Board or
the Bank Board, as applicable, CCBF shall
immediately grant, if not theretofore
granted for the fiscal year in which the
Change of Control Termination Date occurs,
an award under the LTIP of the same type and
in the same quantitive amount as the Target
LTIP Award, which award shall be vested and
non-forfeitable as of the Change of Control
Termination Date (assuming for calculation
purposes that the LTIP's superior
performance objective for such fiscal year
has been met) and shall be exercisable on
and after the first day subsequent to the
six (6) months following the date of grant;
and
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<PAGE>
(iii) CCBF shall immediately grant, if not
theretofore granted for the fiscal year in
which the Date of Termination occurs, an
award under the EMIP of the same type and in
the same quantitive amount as the Target
EMIP Bonus, which award shall be distributed
as of the Change of Control Termination Date
(assuming for calculation purposes that the
EMIP's maximum performance objective for
such fiscal year has been met); and
(iv) for the number of days remaining in the
Employment Period from and after the Change
of Control Termination Date (the "Continuing
Period"), or such longer period as may be
provided by the terms of the appropriate
plan, program, practice or policy, CCBF and
CCB Bank shall continue benefits to
Executive and/or Executive's family at least
equal to those which would have been
provided to them in accordance with the
Welfare Benefit Plans described in Section
6(d) of this Agreement if Executive's
employment had not been terminated;
provided, however, that if Executive becomes
re-employed with another employer and is
eligible to receive substantially the same
benefits under the other employer's plans as
Executive would receive under the Welfare
Benefit Plans under this item (iv), the
benefits under the Welfare Benefit Plans
shall be secondary to those provided under
such other plans during such applicable
period of eligibility. For purposes of
determining eligibility and years-of-service
credit (but not the time of commencement of
benefits) of Executive for retiree benefits
pursuant to such Welfare Benefit Plans,
Executive shall be considered to have
remained employed through the Continuing
Period and to have retired on the last day
of such period; and
(v) all Options previously granted to Executive
that are unvested as of the Change of
Control Termination Date shall be deemed
vested, fully exercisable and
non-forfeitable as of the Change of Control
Termination Date (provided, however, that
Options granted less than six (6) months
before the Change of Control Termination
Date shall not be exercisable until the
first day subsequent to the six (6) months
following their dates of grant) and all
previously granted Options that are vested,
but unexercised, on the Change of Control
Termination Date shall remain exercisable,
in each case for the period during which
they would have been exercisable absent the
termination of Executive's employment; and
(vi) Executive's benefits under all Benefit Plans
that are non-qualified plans shall be 100%
vested, regardless of Executive's age or
years of service, as of the Change of
Control Termination Date; and
(vii) CCBF and CCB Bank shall maintain and
continue to pay during the Continuing Period
all premiums due under the Split Dollar
Agreement and the Insurance Policy;
provided, however, that upon or at any time
prior to the expiration of the Continuing
Period, Executive may exercise his Insurance
Policy Buy-Out Option.
10. Additional Payments
13
<PAGE>
(a) Amount of Additional Payments. Anything in this Agreement
seemingly to the contrary notwithstanding, in the event it shall be determined
that any or the aggregate of all payments, distributions, accelerations of
vesting, awards and provisions of benefits by CCBF and/or CCB Bank to or for the
benefit of the Executive (whether paid or payable, distributed or distributable,
accelerated, awarded or provided pursuant to the terms of this Agreement or
otherwise) (a "Payment") would constitute an "excess parachute payment" within
the meaning of Section 280G of the Code and subject to the excise tax imposed by
Section 4999 of the Code (the "Excise Tax"), then prior to the making of any
Payment to the Executive, a calculation shall be made of the amount of the
Excise Tax and an additional cash payment (the "Additional Payment") shall be
promptly made to the Executive in the sum of (i) the Excise Tax and (ii) the
total of any Excise Tax and income tax or any other tax payable on the amounts
specified in item (i) and this item (ii). In addition, if it shall be determined
at any time by reference to Internal Revenue Service ("IRS") regulations or
rulings, as a consequence IRS audits or assessments of Executive (or in
settlement thereof), by reference to the terms of the final judgment of a court
or other judicial body of competent jurisdiction or as a result of other similar
events requiring Executive to pay an Excise Tax or any income or other excise
tax on the amounts specified in this Section 10(a), that an Additional Payment
made was less than the sums specified in items (i) and (ii) above, CCBF and CCB
Bank promptly shall make a further cash payment to Executive in the sum of (x)
such deficit and (y) any Excise Tax and any income tax or any other tax on such
further cash payment.
(b) Determination of Excise Tax and Other Amounts. The
determination of whether an Excise Tax would be imposed, the amount of such
Excise Tax, and the calculation of the amounts referred to in Section 10(a)
shall be made by CCBF's and CCB Bank's regular independent accounting firm or,
at the election of Executive, another nationally recognized independent
accounting firm (either, the "Accounting Firm") which shall provide detailed
supporting analyses and calculations. All fees and expenses of the Accounting
Firm shall be borne solely by CCBF and CCB Bank. Any determination by the
Accounting Firm shall be binding upon CCBF, CCB Bank and Executive.
11. Non-Exclusivity of Rights. Nothing in this Agreement shall prevent
or limit Executive's continuing or future participation in any plan, program,
policy, or practice provided by CCBF, CCB Bank or any other Subsidiary and for
which Executive may qualify, nor, subject to Section 14(e), shall anything
herein limit or otherwise affect such rights as Executive may have under any
contract or agreement with CCBF, CCB Bank or any other Subsidiary. Amounts which
are vested benefits or which Executive is otherwise entitled to receive under
any plan, policy, practice or program of or any contract or agreement with CCBF,
CCB Bank or other Subsidiary at or subsequent to a Date of Termination or Change
of Control Termination Date shall be payable in accordance with such plan,
policy, practice or program or such contract or agreement except as explicitly
modified by this Agreement.
12. Full Settlement. CCBF's and CCB Bank's obligation to make the
payments provided for in this Agreement and otherwise to perform their
obligations hereunder shall not be affected by any set-off, counterclaim,
recoupment, defense or other claim, right or action which CCBF or CCB Bank may
have against Executive or others. In no event shall Executive be obligated to
seek other employment or take any other action by way of mitigation of the
amounts payable to Executive under any of the provisions of this Agreement;
provided, however, that Executive's right to receive benefits under Welfare
Benefit Plans to the extent that Executive obtains other employment shall be
limited as provided in Sections 8(a)(iv) and 9(c)(iv). CCBF and CCB Bank agree
to pay as incurred, to the full extent permitted by law, all legal fees and
expenses which Executive may reasonably incur as a result of any contest
(regardless of the outcome thereof) by CCBF and CCB Bank, Executive or others of
the validity or enforceability of, or liability under, any provision of this
Agreement or any guarantee of performance
14
<PAGE>
thereof (including as a result of any contest by Executive about the amount of
any payment pursuant to this Agreement), plus in each case interest on any
delayed payment at the "applicable federal rate" provided for in Section
7872(f)(2)(A) of the Code.
13. Covenants.
(a) Covenant Not to Compete. During the Restricted Period,
Executive shall not, within the States of North Carolina and South Carolina,
directly or indirectly, in any capacity, render his services, or engage or have
a financial interest in, any business that shall be competitive with any of
those business activities in which CCBF or any of its Subsidiaries that are
financial institutions, is engaged as of the date of this Agreement (a
"Competition"), which business activities include the provision of banking
services (collectively, the "Business"); provided, however, that Executive's
ownership of less than three percent (3%) of the outstanding securities of any
Competitor that has a class of securities listed on a securities exchange or
qualified for quotation on any over-the-counter market shall not be a violation
of the foregoing. If a court determines that the foregoing restrictions are too
broad or otherwise unreasonable under applicable law, including with respect to
time, scope or territory, the court is hereby requested and authorized by the
parties hereto to revise the foregoing restrictions to include the maximum
restrictions allowable under applicable law.
(b) Covenant No to Solicit Customers. During the Restricted
Period, Executive shall not, directly or indirectly, individually or on behalf
of any other person or entity (other than CCBF or a Subsidiary), solicit the
provision of banking services to any person, partnership, corporation or other
entity who is or was (i) a customer of any Subsidiary during any part of the
twelve (12) month period immediately prior to the Date of Termination, or (ii) a
potential customer to whom any Subsidiary solicited the provision of banking
services during any part of the twelve (12) month period immediately prior to
the Date of Termination.
(c) Covenant Not to Solicit Employees. During the Restricted
Period, Executive shall not, directly or indirectly, individually or on behalf
of any other person or entity, solicit, recruit or entice, directly or
indirectly, any employee of CCBF or any Subsidiary to leave the employment of
CCBF or such Subsidiary to work with Executive or with any person, partnership,
corporation or other entity with whom Executive is or becomes affiliated or
associated.
(d) Reasonableness of Scope and Duration. The parties hereto
agree that the covenants and agreements contained in this Section 13 are
reasonable in their time, territory and scope, and they intend that they be
enforced, and no party shall raise any issue of the reasonableness of the time,
territory or scope of any such covenants in any proceeding to enforce any such
covenants.
(e) Enforceability. Executive agrees that monetary damages
would not be a sufficient remedy for any breach or threatened breach of the
provisions of this Section 13, and that in addition to all other rights and
remedies available to CCBF, CCBF shall be entitled to specific performance and
injunctive or other equitable relief as a remedy for any such breach or
threatened breach.
(f) Separate Covenants and Severability. The covenants and
agreements contained in this Section 13 shall be construed as separate and
independent covenants. Should any part or provision of any such covenant or
agreement be held invalid, void or unenforceable in any court of competent
jurisdiction, no other part or provision of this Agreement shall be rendered
invalid, void or unenforceable by a court of competent jurisdiction, no other
part or provision of this Agreement shall be rendered invalid, void or
unenforceable as a result. If any portion of the foregoing provisions is found
to be invalid or unenforceable by a court of competent jurisdiction unless
modified, it is the intent of the parties that
15
<PAGE>
the otherwise invalid or unreasonable term shall be reformed, or a new
enforceable term provided, so as to most closely effectuate the provisions as is
validly possible.
(g) Inapplicability. The provisions of this Section 13 shall
not be operative upon, or be in any way enforceable against Executive at or
after, a Change of Control Termination or a termination of Executive's
employment by CCBF and CCB Bank other than for Cause, death or Disability (i.e.,
a termination without Cause).
14. Assignment and Successors.
(a) Executive. This Agreement is personal to Executive and
without the prior written consent of CCBF and CCB Bank shall not be assignable
by Executive otherwise than by will or the laws of descent and distribution.
This Agreement shall inure to the benefit of and be enforceable by Executive's
legal representatives.
(b) CCBF and CCB Bank. This Agreement shall inure to the
benefit of and be binding upon CCBF and CCB Bank and their respective successors
and assigns. Each of CCBF and CCB Bank will require any successor to it (whether
direct or indirect, by stock or asset purchase, merger, consolidation or
otherwise) to all or substantially all of its business or more than fifty
percent (50%) of its assets to assume expressly and agree to perform this
Agreement in the same manner and to the same extent it would be required to
perform it if no such succession had taken place. As used in this Agreement,
"CCBF" and "CCB Bank" shall mean CCBF and CCB Bank as hereinbefore defined and
any successor to their respective businesses and/or assets as aforesaid which
assumes and agrees to perform this Agreement by operation of law, or otherwise.
15. Regulatory Intervention. Notwithstanding anything in this Agreement
to the contrary, the obligations of CCBF and CCB Bank under this Agreement are
subject to the following terms and conditions:
(a) If the Executive is suspended and/or temporarily
prohibited from participating in the conduct of CCBF's or CCB Bank's affairs by
a notice served under Section 8(e)(3) or (g)(1) of the Federal Deposit Insurance
Act (12 U.S.C. ss.1818 (e)(3) and (g)(1)), CCBF's or CCB Bank's obligations
hereunder, as applicable, shall be suspended as of the date of service unless
stayed by appropriate proceedings. If the charges in the notice are dismissed,
all of CCBF's or CCB Bank's obligations, as applicable, which were suspended
shall be reinstated.
(b) If Executive is removed and/or permanently prohibited from
participating in the conduct of CCBF's or CCB Bank's affairs by an order issued
under Section 8(e)(4) or (g)(1) of the Federal Deposit Insurance Act (12 U.S.C.
ss.1818 (e)(4) and (g)(1)), all obligations of CCBF or CCB Bank, as applicable,
under this Agreement shall terminate as of the effective date of the order, but
vested rights of the parties shall not be affected.
(c) If CCB Bank is in default (as defined in Section 3(x)(1)
of the Federal Deposit Insurance Act (12 U.S. C. ss.1813 (x)(1)), all
obligations of CCB Bank under this Agreement shall terminate as of the date of
default, but any vested rights of Executive shall not be affected.
(d) All obligations of CCB Bank under this Agreement shall be
terminated, except to the extent determined that continuation of the contract is
necessary for the continued operation of CCB Bank, if so ordered by the North
Carolina Commissioner of Banks (the "Commissioner") at the time the
16
<PAGE>
Federal Deposit Insurance Corporation ("FDIC") enters into an agreement to
provide assistance to or on behalf of CCB Bank under the authority contained in
Section 13(c) of the Federal Deposit Insurance Act (12 U.S.C. ss.1823 (c)), or
if so ordered by the Commissioner at the time the FDIC approves a supervisory
merger to resolve problems related to operation of CCB Bank or when CCB Bank is
determined by the Commissioner to be in an unsafe or unsound condition. Any
rights of Executive that shall have vested under this Agreement shall not be
affected by such action.
(e) With regard to the provisions of this Section 15(a)
through (d):
(i) CCBF and CCB Bank agree to use their best efforts to
oppose any such notice of charges as to which there
are reasonable defenses;
(ii) In the event the notice of charges is dismissed or
otherwise resolved in a manner that will permit CCBF
and/or CCB Bank to resume their obligations to pay
compensation hereunder, CCBF and/or CCB Bank will
promptly make such payment hereunder; and
(iii) During any period of suspension under Section 15(a),
the vested rights of Executive shall not be affected
except to the extent precluded by such notice.
(f) CCB Bank's obligations to provide compensation or other
benefits to Executive under this Agreement shall be terminated or limited to the
extent required by the provisions of any final regulation or order of the FDIC
promulgated under Section 18(k) of the Federal Deposit Insurance Act (12 U.S.C.
ss.1828(k)) limiting or prohibiting any "golden parachute payment" as defined
therein, but only to the extent that the compensation or payments to be provided
by CCB Bank under this Agreement are so prohibited or limited.
(g) It is intended by CCBF, CCB Bank and Executive that if
only one of CCBF and CCB Bank is prohibited from fulfilling its obligations
under this Agreement in any of the circumstances described in the above
provisions of this Section 15 (whether for a period or permanently), the other
shall remain obligated to fulfill all obligations of CCBF and CCB Bank under
this Agreement.
16. Miscellaneous.
(a) No Mitigation. Executive shall not be required to mitigate
the amount of any payment provided for in this Agreement by seeking other
employment or otherwise and, except as provided in Sections 8(a)(iv) and
9(c)(iv), no such payment shall be offset or reduced by the amount of any
compensation or benefits provided to Executive in any subsequent employment.
(b) Waiver. Failure of either part to insist, in one or more
instances, on performance by the other in strict accordance with the terms and
conditions of this Agreement shall not be deemed a waiver or relinquishment of
any right granted in this Agreement or of the future performance of any such
term or condition or of any other term or condition of this Agreement, unless
such waiver is contained in a writing signed by the party making the waiver.
(c) Severability. If any provision or covenant, of any part
thereof, of this Agreement should be held by any court to be invalid, illegal or
unenforceable, either in whole or in part, such invalidity, illegality or
unenforceability shall not affect the validity, legality or enforceability of
the
17
<PAGE>
remaining provisions or covenants, or any part thereof, of this Agreement, all
of which shall remain in full force and effect.
(d) Other Agents. Nothing in this Agreement is to be
interpreted as limiting CCBF or CCB Bank from employing other personnel on such
terms and conditions as may be satisfactory to it.
(e) Entire Agreement. Except as provided herein, this
Agreement contains the entire agreement among CCBF, CCB Bank and Executive, with
respect to the subject matter hereof and supersedes and invalidates any previous
employment and severance agreements or contracts with Executive, including,
without limitation, that certain Change of Control Agreement, dated July 17,
1995, by and between CCB Bank and Executive which is amended and restated
herein. No representations, inducements, promises or agreements, oral or
otherwise, which are not embodied herein, shall be of any force or effect.
(f) Governing Law. Except to the extent preempted by federal
law, the laws of the State of North Carolina shall govern this Agreement in all
respects, whether as to its validity, construction, capacity, performance or
otherwise.
(g) Notices. All notices, requests, demands and other
communications required or permitted hereunder shall be in writing and shall be
deemed to have been duly given if delivered or seven (7) days after mailing if
mailed, first class, certified mail, postage prepaid:
To CCBF and CCB Bank:
CCB Financial Corporation
111 Corcoran Street
Durham, North Carolina 27702-0931
Attention: Chairman of the Board
To Executive:
J. Scott Edwards
2323 Trail Woods Drive
Durham, North Carolina 27705
Any party may change the address to which notices, requests, demands and other
communications shall be delivered or mailed by giving notice thereof to the
other party in the same manner provided herein.
(h) Amendments and Modifications. This Agreement may be
amended or modified only by a writing signed by all parties hereto, which makes
specific reference to this Agreement.
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IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Employment and Amended and Restated Change of Control Agreement (As
Amended) as of August 1, 1999.
CCB FINANCIAL CORPORATION
By:/s/ ERNEST C. ROESSLER
------------------------------------
Title: Chairman and President
---------------------------------
CENTRAL CAROLINA BANK AND
TRUST COMPANY
By:/s/ ERNEST C. ROESSLER
------------------------------------
Title: Chairman and President
---------------------------------
EXECUTIVE:
/s/ J. SCOTT EDWARDS
---------------------------------------
J. Scott Edwards
19
Exhibit 10.3
EMPLOYMENT AND AMENDED AND
RESTATED CHANGE OF CONTROL AGREEMENT
(AS AMENDED)
THIS EMPLOYMENT AND AMENDED AND RESTATED CHANGE OF CONTROL AGREEMENT
(AS AMENDED) (this "Agreement") was made and entered into this 27th day of
January, 1998 by and among CCB Financial Corporation, a North Carolina
corporation ("CCBF"), Central Carolina Bank and Trust Company, a North Carolina
commercial bank ("CCB Bank"), and Richard L. Furr ("Executive"), and is amended
hereby as of August 1, 1999.
BACKGROUND
----------
WHEREAS, Executive is a Senior Executive Vice President of CCBF and of
CCB Bank, the primary banking subsidiary of CCBF; and
WHEREAS, the expertise and experience of Executive, his knowledge of
the affairs of CCBF and its direct and indirect subsidiaries (the
"Subsidiaries"), and his relationships and reputation in the financial
institutions industry are extremely valuable to CCBF, CCB Bank and the other
Subsidiaries; and
WHEREAS, it is in the best interests of CCBF, its Subsidiaries and its
shareholders to maintain an experienced and sound executive management team to
manage CCBF, CCB Bank and the other Subsidiaries and to further CCBF's overall
strategies to protect and enhance the value of its shareholders' investments;
and
WHEREAS, CCBF, CCB Bank and Executive entered into this Agreement to
establish the scope, terms and conditions of Executive's employment by CCBF and
CCB Bank;
WHEREAS, CCB Bank and Executive amended and restated herein the Change
of Control Agreement dated July 17, 1996 between CCB Bank and Executive in order
to continue the provision of security to, and to continue to insure the loyalty
of, Executive in the event of a change in control of CCBF or CCB Bank, and CCBF
became obligated, jointly and severally with CCB Bank, under the provisions of
such agreement as amended and restated herein; and
WHEREAS, CCBF, CCB Bank and Executive desire to amend this Agreement.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements set forth herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
1. Effective Date. The effective time and date of this Agreement shall
be deemed to be 12:00:01 o'clock, a.m., on January 21, 1998 (the "Effective
Date").
2. Definitions. The following defined terms are defined in the
referenced Sections of this Agreement.
1
<PAGE>
Term Section
---- -------
Accrued Obligations Section 8(a)(i)(A)
Additional Payment Section 10(a)
Base Salary Section 6(a)
Bank Board Section 6(a)
Benefit Plans Section 6(c)
Cause Section 7(b)
CCBF Board Section 3
Change of Control Section 9(b)
Change of Control Termination Section 9(a)
Change of Control Termination Date Section 9(a)
Code Section 8(c)
Collateral Assignment Section 6(e)
Competitor Section 13(a)
Continuing Period Section 9(c)(iv)
Commissioner Section 15(d)
Date of Termination Section 7(e)
Disability Section 7(a)
Disability Effective Date Section 7(a)
Effective Date Section 1
EMIP Section 6(b)(i)
Employment Period Section 4
Excise Tax Section 10(a)
FDIC Section 15(d)
Good Reason Section 7(c)
Group Section 9(b)
Incumbent Directors Section 9(b)
Insurance Policy Section 6(e)
Insurance Policy Buy-Out Option Section 8(a)(vi)
IRS Section 10(a)
ISOs Section 8(c)
LTIP Section 6(b)(ii)
1934 Act Section 9(b)
Notice of Termination Section 7(d)
Other Benefits Section 8(a)(iv)
Options Section 8(a)(v)
Payment Section 10(a)
Person Section 9(b)
Remaining Employment Period Section 8(a)(i)(B)
Restricted Period Section 8(a)(vii)
Split Dollar Agreement Section 6(e)
Subsidiaries Preamble
Target EMIP Bonus Section 8(a)(i)(A)
Target LTIP Award Section 8(a)(ii)
Welfare Benefit Plans Section 6(d)
3. Employment. Executive will be employed as the Senior Executive Vice
President in charge of the Banking Group of each of CCBF and CCB Bank.
Executive's responsibilities, duties,
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prerogatives and authority in such executive offices, and the clerical,
administrative and other support staff and office facilities provided to him,
shall be those customary for the principal executive officer of publicly held
corporations generally and of holding companies and financial institutions that
are a part of the financial institution industry specifically. In his executive
capacities Executive shall report to the President and Chief Executive Officer
of CCBF and CCB Bank, as applicable.
4. Employment Period. Unless earlier terminated in accordance with
Sections 7 or 9 hereof, Executive's employment shall be for a renewing three (3)
year term (the "Employment Period"), beginning at the Effective Date. The
Employment Period shall, without further action by Executive, CCBF or CCB Bank,
be extended for an additional one (1) year on each anniversary of the Effective
Date, such that the remaining term of the Employment Period shall continue to be
three (3) years; provided, further, however, that CCBF and CCB Bank or Executive
may, by notice to the other, cause the Employment Period to cease to extend
automatically as of a specific anniversary of the Effective Date. Such notice
must be given and received at least eleven (11) months and thirty-one (31) days
prior to the anniversary of the Effective Date on which it is to be effective.
Upon the effectiveness of such notice, the Employment Period shall be fixed at
three (3) years, and the Employment Period shall terminate upon the expiration
of such three-year period.
5. Extent of Service. During the Employment Period, and excluding any
periods of vacation, sick or other leave to which Executive is entitled under
this Agreement, Executive agrees to devote reasonable attention and time during
normal business hours to the business and affairs of CCBF and CCB Bank, and, to
the extent necessary to discharge the responsibilities assigned to Executive
hereunder, to use Executive's reasonable best efforts to perform faithfully and
efficiently his responsibilities and duties under this Agreement. During the
Employment Period it shall not be a violation of this Agreement for Executive to
(i) devote reasonable periods of time to charitable, trade association,
community and similar activities, and/or (ii) manage personal business interests
and investments, so long as such activities do not interfere with the
performance of Executive's responsibilities and duties under this Agreement. It
is expressly understood and agreed that to the extent that any such activities
have been conducted by Executive prior to the Effective Date, the continued
conduct of such activities (or the conduct of activities similar in nature and
scope thereto) subsequent to the Effective Date shall not thereafter be deemed
to interfere with the performance of Executive's responsibilities and duties
hereunder.
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6. Compensation and Benefits.
(a) Base Salary. For the 1999 fiscal year, CCBF will pay to
Executive a base salary in the amount of $325,800 per year ("Base Salary"), less
normal withholdings, payable in equal monthly or more frequent installments as
are customary under CCB Bank's payroll practices from time to time. The
Compensation Committee of the CCBF Board shall review Executive's total
compensation annually and in its sole discretion may adjust Executive's Base
Salary from year to year, but during the Employment Period neither the
Compensation Committee, the CCBF Board nor the Board of Directors of CCB Bank
(the "Bank Board") may decrease Executive's Base Salary below $325,800, and
periodic increases, once granted, shall not be subject to revocation. The annual
review of Executive's total compensation by the Compensation Committee will
consider, among other things, changes in the cost of living, Executive's own
performance and CCBF's consolidated performance.
(b) Incentive Plans. During the Employment Period,
Executive shall be entitled:
(i) to participate in CCBF's Executive Management
Incentive Plan ("EMIP"), and any successor or
substitute plan to the EMIP, in at least as favorable
a manner as any other participant of the same rank.
The President and Chief Executive Officer of CCBF and
CCB Bank shall recommend annually to the Compensation
Committee with respect to the Executive appropriate
minimum, target and maximum performance objectives,
and appropriate measures and weights for the
components of the performance objectives, for the
EMIP generally and shall also recommend minimum,
target and maximum bonus levels for the executive
employee participants in the EMIP (taking into
consideration any contractual rights of any such
participants). Executive's annual minimum, target and
maximum bonus levels under the EMIP shall be 0%, 50%,
and 100% of Executive's Base Salary for such year or
such greater levels as the Compensation Committee may
determine Executive's individual performance warrants
or as are necessary to satisfy the provisions of the
first sentence of this item (i); and
(ii) to participate in CCBF's Long-Term Incentive Plan
("LTIP"), and any successor or substitute plan to the
LTIP, in at least as favorable a manner as any other
participant of the same rank.
(c) Savings and Retirement Plans. During the Employment
Period, Executive shall be entitled to participate in all savings, pension and
retirement plans (including supplemental retirement plans), practices, policies
and programs applicable generally to senior executive employees of CCBF or CCB
Bank (the "Benefit Plans"), and on at least as favorable a basis as any other
participant of the same rank. Without limiting the foregoing, Benefit Plans
shall include the CCB Financial Corporation Retirement Plan, the CCB Financial
Corporation Retirement Savings Plan, the CCB Financial Corporation Retirement
Income Equity Plan, the CCB Financial Corporation Retirement Savings Equity Plan
and any substitute and successor plan to any of the foregoing.
(d) Welfare Benefit Plans. During the Employment Period,
Executive and/or Executive's family, as the case may be, shall be eligible for
participation in and shall receive all benefits under all welfare benefit plans,
practices, policies and programs provided by CCBF or CCB Bank (including,
without limitation, medical, hospitalization, prescription, dental, disability,
employee life, group life, accidental death and dismemberment, and travel
accident insurance plans and programs) to the
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extent applicable generally to senior executive employees of CCBF or CCB Bank
("Welfare Benefit Plans").
(e) Life Insurance. During the Employment Period, CCBF and CCB
Bank shall maintain a split-dollar life insurance agreement with Executive (the
"Split Dollar Agreement") and, together with Executive, maintain a related life
insurance policy to be owned by Executive (the "Insurance Policy") and
collaterally assigned to CCBF and/or CCB Bank (the "Collateral Assignment"),
providing coverage on the life of Executive for the benefit of Executive's
estate, beneficiaries designated by him, and/or trusts created by him. The
amount of life insurance coverage provided to, and the terms, provisions and
conditions of the coverage maintained for, Executive shall be at least as much
and at least as favorable to Executive as the amount, terms, provisions and
conditions of coverage provided and maintained, as applicable, under
split-dollar insurance agreements and policies maintained for other employees of
CCBF and/or CCB Bank of the same rank (taking into consideration differences in
age and health). Any exercise of the Insurance Policy Buy-Out Option (as defined
below) by Executive shall release CCBF and CCB Bank from any further obligation
to maintain the Split Dollar Agreement or the Insurance Policy.
(f) Expenses. During the Employment Period, Executive shall be
entitled to receive prompt reimbursement for all reasonable expenses incurred by
Executive in accordance with the policies, practices and procedures of CCBF and
CCB Bank to the extent applicable generally to other senior executive employees
of CCBF or CCB Bank.
(g) Fringe and Similar Benefits. During the Employment Period,
Executive shall be entitled to fringe benefits in accordance with the plans,
practices, programs and policies of CCBF and CCB Bank in effect for senior
executive employees of CCBF or CCB Bank. In addition to, and not in lieu of, any
other provision of this Agreement, Executive shall receive annually an allowance
equal to three percent (3%) of his Base Salary for such fiscal year under CCB
Bank's "Senior Officer Perquisites" policy, payable and available for such uses
as are set forth in such policy.
(h) Vacation, Sick and Other Leave. During the Employment
Period, Executive shall be entitled annually to a minimum of twenty (20)
business days of paid vacation and shall be entitled to those number of business
days of paid disability, sick and other leave specified in the employment
policies of CCBF or CCB Bank.
(i) Allocation. CCBF and CCB Bank may allocate between them
for accounting and taxation purposes the payment of compensation to Executive
under this Agreement on the basis of such factors as they deem relevant and
appropriate; provided, however, that CCBF and CCB Bank shall be jointly and
severally liable and obligated to fulfill all obligations to Executive under
this Agreement.
7. Termination of Employment (Other Than In Connection With A Change Of
Control).
(a) Death or Disability. Executive's employment with CCBF and
CCB Bank shall terminate automatically upon Executive's death during the
Employment Period. If the CCBF Board and the Bank Board determine in good faith
that the Disability of Executive has occurred during the Employment Period
(pursuant to the definition of Disability set forth below), they may give to
Executive written notice in accordance with Section 7(d) and 16(g) of this
Agreement of their intention to terminate Executive's employment. In such event,
Executive's employment with CCBF and CCB Bank shall terminate effective on the
60th day after receipt of such written notice by Executive (the "Disability
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Effective Date"), provided that, within the 30 days after such receipt,
Executive shall not have returned to full-time performance of Executive's
duties. For purposes of this Agreement, "Disability" shall mean the absence of
Executive from Executive's duties with CCBF and CCB Bank on a full-time basis
for 180 consecutive business days as a result of incapacity due to mental or
physical illness or injury which is determined to be total and permanent by a
physician selected by the CCBF Board and the Bank Board, or the insurers of CCBF
and CCB Bank, and acceptable to Executive or Executive's legal representative,
which acceptance shall not be unreasonably withheld, subject to (i) CCBF's and
CCB Bank's obligations, and Executive's rights, under (A) the Americans With
Disabilities Act, 42 U.S.C. ss.ss.1210 ET SEQ., and (B) the Family and Medical
Leave Act, 29 U.S.C. ss.ss.2601 ET SEQ. (and the regulations promulgated under
the foregoing Acts), and (ii) the exclusion from such 180 business day
calculation of any business days constituting vacation days under Section 6(h)
and any business days which an employee is permitted to be absent under the
disability, sick or other leave policies of CCBF or CCB Bank.
(b) Cause. CCBF and CCB Bank may terminate Executive's
employment with CCBF and CCB Bank for Cause. For purposes of this Agreement,
"Cause" shall mean:
(i) the willful and continued failure of Executive to
perform substantially Executive's duties with CCBF
and CCB Bank, other than any such failure resulting
from Disability, after a written demand for
substantial performance is jointly delivered to
Executive by the CCBF Board and the Bank Board which
specifically identifies the manner in which the CCBF
Board and the Bank Board believe that Executive has
not substantially performed Executive's duties, or
(ii) the willful engaging by Executive in illegal conduct
or gross misconduct which is materially and
demonstrably injurious to CCBF and CCB Bank.
For purposes of this provision, no act or failure to act on the part of
Executive shall be considered "willful" unless it is done, or omitted to be
done, by Executive in bad faith or without reasonable belief that Executive's
action or omission was in the best interests of CCBF and CCB Bank. Any act, or
failure to act, based upon authority given pursuant to resolutions duly adopted
by the CCBF Board or the Bank Board or based upon the advice of counsel for CCBF
or CCB Bank shall be conclusively presumed to be done, or omitted to be done, by
Executive in good faith and in the best interests of CCBF and CCB Bank. The
cessation of employment of Executive shall not be deemed to be for Cause unless
and until there shall have been delivered to Executive copies of resolutions
duly adopted by the affirmative votes of not less than three-quarters (3/4) of
the entire membership of each of the CCBF Board and the Bank Board at meetings
of such Boards called and held for such purpose (after reasonable notice is
provided to Executive and Executive is given an opportunity, together with
counsel, to be heard before the CCBF Board and the Bank Board), finding that, in
the good faith opinion of each such Board, Executive is guilty of the conduct
described in items (i) or (ii) above, and specifying the particulars thereof in
detail.
(c) Good Reason. Executive's employment may be terminated by
Executive for Good Reason. For purposes of this Agreement, "Good Reason" shall
mean:
(i) the assignment to Executive of any duties or
responsibilities inconsistent in any respect with
Executive's position (including status, offices,
titles, and reporting requirements), authority,
duties, prerogatives or responsibilities as
contemplated by Section 3 of this Agreement, or any
other action by CCBF or CCB Bank which results in a
diminution in such positions, authority, duties,
prerogatives or responsibilities, excluding for this
purposes an isolated, insubstantial and
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inadvertent action not taken in bad faith and which
is remedied by CCBF or CCB Bank, as applicable,
promptly after receipt of notice thereof given by
Executive;
(ii) any failure by CCBF or CCB Bank to comply with any of
the provisions of Section 6 of this Agreement, other
than an isolated, insubstantial and inadvertent
failure not occurring in bad faith and which is
remedied by CCBF or CCB Bank, as applicable, promptly
after receipt of notice thereof given by Executive;
(iii) the requirement by CCBF and/or CCB Bank that
Executive, without his consent, be based or conduct
on an on-going basis more than ten percent (10%) of
his activities under this Agreement at any office or
location more than 35 mile (by most direct highway
route) from the location of the headquarters building
of CCBF and CCB Bank in Durham, North Carolina as of
the Effective Date;
(iv) any purported termination of Executive's
employment under this Agreement otherwise than as
expressly permitted by this Agreement; or
(v) any failure by CCBF and/or CCB Bank to comply
with and satisfy Section 14(b) of this Agreement.
For purposes of this Section 7(c), any good faith determination of "Good Reason"
made by Executive shall be conclusive.
(d) Notice of Termination. Any termination by CCBF and CCB
Bank for Disability or Cause or by Executive for Good Reason shall be
communicated by Notice of Termination to the other party thereto given in
accordance with Section 16(g) of this Agreement. For purposes of this Agreement,
a "Notice of Termination" means a written notice which (i) indicates the
specific termination provision in this Agreement relied upon, (ii) to the extent
applicable, sets forth in reasonable detail the facts and circumstances claimed
to provide a basis for termination of Executive's employment under the provision
so indicated, and (iii) if the Date of Termination (as defined below) is other
than the date of receipt of such notice, specifies the termination date (which
date shall be not more than 30 days after the giving of such notice except as
otherwise provided in Section 7(a)). The failure by Executive or CCBF and CCB
Bank to set forth in the Notice of Termination any fact or circumstance which
contributes to a showing of Disability, Cause or Good Reason shall not waive any
right of Executive or CCBF and CCB Bank hereunder or preclude Executive or CCBF
and CCB Bank from asserting such fact or circumstance in enforcing Executive's
or CCBF's and CCB Bank's rights hereunder.
(e) Date of Termination. "Date of Termination" means (i) if
Executive's employment is terminated by CCBF and CCB Bank for Cause or by
Executive for Good Reason, the date of receipt of the Notice of Termination or
any later date specified therein, as the case may be, (ii) if Executive's
employment is terminated by CCBF and CCB Bank other than for Cause or Disability
or other than by reason of death, the date of receipt of the Notice of
Termination, and (iii) if Executive's employment is terminated by reason of
death or Disability, the Date of Termination shall be the date of death of
Executive or the Disability Effective Date, as the case may be.
8. Obligations of CCBF and CCB Bank Upon Termination (Other Than In
Connection With A Change Of Control).
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(a) Other Than For Cause, Death or Disability. If, during the
Employment Period, CCBF shall terminate Executive's employment other than for
Cause, death or Disability, or Executive shall terminate his employment for Good
Reason (and, in each case, other than in connection with a Change of Control),
then in consideration of Executive's services rendered prior to such
termination;
(i) CCBF and CCB Bank shall pay to Executive a lump sum
in cash within 30 days after the Date of Termination
the aggregate of the following amounts:
A. the sum of (1) Executive's Base Salary
through the Date of Termination to the
extent not theretofore paid, (2) the product
of (x) Executive's "target" bonus for the
then current fiscal year under the EMIP as
described in Section 6(b)(i) above ("Target
EMIP Bonus"), and (y) a fraction, the
numerator of which is the number of days in
the current fiscal year through the Date of
Termination, and the denominator of which is
365, and (3) any compensation previously
deferred by Executive (together with any
accrued interest or earnings thereon) and
any accrued vacation pay, in each case to
the extent not theretofore paid (the sum of
the amounts described in clauses (1), (2),
and (3) shall be hereinafter referred to as
the "Accrued Obligations"); and
B. the amount equal to the product of (1) the
number of days remaining in the Employment
Period from and after the Date of
Termination (the "Remaining Employment
Period"), and (2) Executive's Base Salary
divided by 365; and
C. the amount equal to the product of (1) the
number of days in the Remaining Employment
Period, and (2) Executive's Target EMIP
Bonus divided by 365; and
D. an amount equal to the excess of (a) the
actuarial equivalent of Executive's benefits
under the Benefit Plans that are qualified
defined benefit retirement plans (utilizing
actuarial assumptions no less favorable to
Executive than those in effect under the CCB
Financial Corporation Retirement Plan on the
Date of Termination) and any Benefit Plans
that are excess or supplemental retirement
plans in which Executive participates which
Executive would receive if Executive's
employment continued throughout the
Remaining Employment Period, assuming for
this purpose that all accrued benefits are
fully vested and assuming that Executive's
compensation in each remaining year of the
Employment Period is the Base Salary plus
the Target EMIP Bonus, over (b) the
actuarial equivalent of Executive's actual
benefits (paid or payable), if any, under
such Benefit Plans as of the Date of
Termination; and
(ii) CCBF shall immediately grant, if not theretofore
granted for the fiscal year in which the Date of
Termination occurs, an award under the LTIP of the
same type and in the same quantative amount as
Executive's "target" award under the LTIP for the
current fiscal year ("Target LTIP Award"), which
award shall be vested and non-forfeitable as of the
Date of Termination (assuming for calculation
purposes that the LTIP's superior performance
objective for such fiscal year has
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been met) and shall be exercisable on and after the
first day subsequent to the six (6) months following
the date of grant; and
(iii) for the Remaining Employment Period, or such longer
period as may be provided by the terms of the
appropriate plan, program, practice or policy, CCBF
and CCB Bank shall continue to provide benefits to
Executive and/or Executive's family at least equal to
those which would have been provided to them in
accordance with the Welfare Benefit Plans described
in Section 6(d) of this Agreement if Executive's
employment had not been terminated; provided,
however, that if Executive becomes re-employed with
another employer and is eligible to receive
substantially the same benefits under the other
employer's plans as Executive would receive under the
Welfare Benefit Plans under this item (iii), the
benefits under the Welfare Benefit Plans shall be
secondary to those provided under such other
employer's plans during such applicable period of
eligibility. For purposes of determining eligibility
and years-of-service credit (but not the time of
commencement of benefits) of Executive for retiree
benefits pursuant to such Welfare Benefit Plans,
Executive shall be considered to have remained
employed throughout the Remaining Employment Period
and to have retired on the last day of such period;
and
(iv) to the extent not theretofore paid or provided, CCBF
and CCB Bank shall timely pay or provide to Executive
any other amounts or benefits required to be paid or
provided herein or which Executive is eligible to
receive under any Welfare Benefit Plan or any other
plan, program, policy or practice or contract or
agreement of CCBF or CCB Bank (such other amounts and
benefits shall be hereinafter referred to as the
"Other Benefits"); and
(v) all options to acquire capital stock of CCBF
("Options") previously granted to Executive,
including those awarded under item (ii) above, that
are unvested on the Date of Termination shall be
deemed vested, fully exercisable and non-forfeitable
as of the Date of Termination and all previously
granted Options that are vested, but unexercised, on
the Date of Termination shall remain exercisable, in
each case for the period during which they would have
been exercisable absent the termination of
Executive's employment; and
(vi) during the Remaining Employment Period, CCBF and CCB
Bank shall maintain the Split Dollar Agreement and
continue to pay all premiums due under the Split
Dollar Agreement and the Insurance Policy; provided,
however, that upon or at any time prior to the
expiration of the Remaining Employment Period,
Executive or the then owner of the Insurance Policy
may terminate the Split Dollar Agreement and the
Collateral Assignment by paying to CCBF and/or CCB
Bank an amount equal to the total amount of the
premiums advanced by CCBF and/or CCB Bank in
accordance with the Split Dollar Agreement as of the
date of the termination of the Split Dollar
Agreement, minus any withdrawals of cash value or
loans proceeds received by CCBF and/or CCB Bank from
the cash value of the Insurance Policy and which were
made to CCBF and/or CCB Bank as of the date of the
termination of the Split Dollar Agreement (such
payment may, in the discretion of Executive or other
owner of the policy, be made in cash or may be
accomplished by means of a loan or withdrawal of cash
values of the Insurance
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Policy which is authorized by the Executive or such
other owner of the Insurance Policy) (the "Insurance
Policy Buy-Out Option");
(vii) provided, however, that notwithstanding any provision
of this Agreement to the contrary, Executive shall
forfeit his right to receive, or, to the extent such
amounts have previously been paid to Executive, shall
repay in full to CCBF or CCB Bank, as applicable,
with interest at 8% per annum within 30 days of a
final determination of Executive's liability therefor
as set forth below, the sum of the amounts described
in Section 8(a)(i)(B) and (C) of this Agreement if
any time during the Employment Period or the
Remaining Employment Period (the "Restricted Period")
Executive violates the restrictive covenants set
forth in Section 13 of this Agreement. Any
determination of whether Executive has violated such
covenants shall be made by arbitration in Durham,
North Carolina under the Rules of Commercial
Arbitration (the "Rules") of the American Arbitration
Association, which Rules are deemed to be
incorporated by reference herein.
(b) Death. If Executive's employment is terminated by reason
of Executive's death during the Employment Period, this Agreement shall
terminate without further obligations to Executive's legal representatives under
this Agreement, except that; (i) Accrued Obligations shall timely be paid as
provided below; (ii) Other Benefits shall be timely paid or provided as
described below; (iii) all Options previously granted to Executive that vested
at or prior to the Date of Termination shall remain exercisable for the longer
of twelve (12) months and the exercise period in effect immediately prior to the
Date of Termination; (iv) all Options previously granted to Executive and
scheduled to vest in the year of death shall immediately vest and be exercisable
for the exercise period set forth in the applicable grants; and (v) Executive's
rights to all benefits under all Benefit Plans that are "non-qualified" plans
shall be 100% vested, regardless of Executive's age or years of service, at the
time of Executive's death. Accrued Obligations shall be paid to Executive's
estate or beneficiary, as applicable, in a lump sum in cash within 30 days of
the Date of Termination. With respect to the provision of Other Benefits, the
term Other Benefits as utilized in this Section 8(b) shall include, without
limitation, and Executive's estate and/or beneficiaries shall be entitled to
receive, all benefits under CCBF's and CCB Bank's plans, programs, practices and
policies relating to death benefits, if any, as are applicable generally to
senior executive employees of CCBF or CCB Bank and their beneficiaries, and on
the same basis as such senior executive employees and their beneficiaries.
Without limiting the foregoing, for one (1) year after Executive's death, CCBF
and CCB Bank shall pay any premium required for any "qualified beneficiary" to
continue his or her health care coverage in accordance with Title I, Part 6 of
the Employee Retirement Security Act of 1974, as amended.
(c) Disability. If Executive's employment is terminated by
reason of Executive's Disability during the Employment Period, this Agreement
shall terminate without further obligations to Executive, except that: (i)
Accrued Obligations shall be timely paid as provided below; (ii) Other Benefits
shall be timely paid or provided as described below; (iii) all Options that are"
incentive stock options" ("ISOs"), as described in Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"), and that vested at or prior to
the Date of Termination shall remain exercisable for the lesser of twelve (12)
months and the period of exercise in effect immediately prior to the Date of
Termination; (iv) all Options previously granted and scheduled to vest in the
year in which the Date of Termination occurs shall immediately vest and be
exercisable (A) in the case of ISOs, for twelve (12) months from the Date of
Termination, and (B) in the case of Options that are not ISOs, for the exercise
period set forth in the applicable grant; (v) all other Options that vested at
or prior to the Date of Termination shall remain
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exercisable for the period of exercise in effect immediately prior to the Date
of Termination; and (vi) Executive may exercise his Insurance Plan Buy-Out
Option on the Date of Termination. Accrued Obligations shall be paid to
Executive in a lump sum in cash within 30 days of the Date of Termination. With
respect to the provision of Other Benefits, the term Other Benefits as utilized
in this Section 8(c) shall include, without limitation, and Executive shall be
entitled after the Date of Termination to receive, all disability and other
benefits under all Welfare Benefit Plans and all other plans, programs,
practices, and policies of CCBF and CCB Bank relating to disability, if any, as
are applicable generally to senior executive employees of CCBF and CCB Bank and
their families, and on the same basis as such senior executive employees and
their families.
(d) Cause. If Executive's employment shall be terminated for
Cause during the Employment Period, this Agreement shall terminate without
further obligations to Executive, except that (i) the Accrued Obligations shall
be paid in a lump sum in cash within 30 days of the Date of Termination, and
(ii) Other Benefits shall be paid or provided in a timely manner, in each case
to the extent theretofore unpaid; provided, however, that Executive's right to
continue to participate in Welfare Benefit Plans shall terminate on the 30th day
following the Date of Termination, subject to his rights under the Consolidated
Omnibus Budget Reconciliation Act of 1985, 29 U.S.C. ss.1161 ET SEQ.
9. Termination In Connection With a Change of Control.
(a) Change of Control Termination. In the event that during
the Employment Period, CCBF and CCB Bank terminate Executive's employment other
than for Cause or Disability or Executive terminates such employment for Good
Reason, in any of the foregoing cases within one (1) year after a Change of
Control (each a "Change of Control Termination"), Executive shall be entitled to
receive the payments and benefits specified in this Section 9. The date on which
CCBF and CCB Bank or Executive receives notice in accordance with Section 16(g)
of a Change of Control Termination shall be deemed the Change of Control
Termination Date.
(b) Definition of Change of Control. A Change of Control shall
be deemed to have occurred upon: (i) any "Person" or "Group" (as defined in or
pursuant to Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended (the "1934 Act"), but not including CCBF, CCB Bank, any other Subsidiary
or any "employee benefit plan" (as defined in or pursuant to the Employee
Retirement Income Security Act of 1974, 29 U.S.C. ss.1002(3), and as used herein
"Person" or "Group") becoming the "beneficial owner" (as defined in Rule 13d-3
under the 1934 Act) or otherwise acquiring control, directly or indirectly, of
securities of CCBF representing twenty-five percent (25%) or more of the voting
power of CCBF's then outstanding securities; (ii) the acquisition by any Person
or Group in any manner of the ability to elect, or to control the election, of a
majority of the directors of CCBF or CCB Bank; (iii) the merger of CCBF or CCB
Bank into another entity, the merger of any entity into CCBF or CCB Bank or the
acquisition of assets by CCBF or CCB Bank, in any such case with the result that
the beneficial owners of CCBF's and CCB Bank's outstanding securities
immediately prior to such transaction do not beneficially own more than sixty
percent (60%) of CCBF's and CCB Bank's outstanding securities after the
consummation of such transaction; (iv) the sale or other transfer of more than
fifty percent (50%) of the assets of CCBF or CCB Bank to any entity not
controlled by CCBF; (v) the consummation of any transaction by CCBF or CCB Bank
that results (A) in the majority of the Boards of Directors of CCBF and CCB Bank
after the consummation of such transaction not being composed of Incumbent
Directors, or (B) the beneficial owners of CCBF's outstanding securities
immediately prior to the consummation of such a transaction not beneficially
owning more than sixty percent (60%) of CCBF's outstanding securities after such
transaction; or (vi) the occurrence of any other event or circumstance which is
not described in the foregoing provisions of this Section 9(b) but which the
CCBF Board determines affects
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control of CCBF and/or CCB Bank and constitutes a Change of Control for purposes
of this Agreement. The term "Incumbent Director" shall mean any director who as
of the Effective Date was a member of the CCBF Board or the Bank Board, or any
individual becoming a member of the CCBF Board or the Bank Board subsequent to
the Effective Date whose election by CCBF shareholders or by the shareholder of
CCB Bank, as applicable, was recommended by at least two-thirds (2/3) of the
then Incumbent Directors on the CCBF Board or the Bank Board, as applicable.
Notwithstanding the foregoing, a Change of Control shall not include
any transaction to which Executive consents in a writing specifically noting
this provision of this Agreement.
(c) Change of Control Payments and Benefits. Upon a
Change of Control Termination:
(i) CCBF and CCB Bank shall pay to Executive in
a lump sum in cash within 30 days after the
date of the Change In Control Termination
Date the aggregate of the following amounts:
(A) the sum of the Accrued Obligations;
and
(B) an amount equal to 2.99 times the
total of Executive's Base Salary and
Target EMIP Bonus; and
(C) an amount equal to the excess of (a)
the actuarial equivalent of the
benefits under CCBF's Benefit Plans
that are qualified defined benefit
retirement plans (utilizing
actuarial assumptions no less
favorable to Executive than those in
effect under the CCB Financial
Corporation Retirement Plan on the
Change of Control Termination Date)
and any Benefit Plan that are excess
or supplemental retirement plans in
which Executive participates which
Executive would receive if
Executive's employment continued
throughout the Remaining Employment
Period, assuming for this purpose
that all accrued benefits are fully
vested, and, assuming that
Executive's compensation in each
remaining year of the Employment
Period is the Base Salary plus the
Target EMIP Bonus, over (b) the
actuarial equivalent of Executive's
actual benefits (paid or payable),
if any, under such Benefit Plans as
of the Change of Control Termination
Date; and
(ii) Unless the relevant Change of Control is a
merger of CCBF or CCB Bank with another
Person or entity which is intended to be
accounted for under the pooling-of-interests
method and which has been approved by the
vote of such number of Incumbent Directors
as comprised a majority of the CCBF Board or
the Bank Board, as applicable, CCBF shall
immediately grant, if not theretofore
granted for the fiscal year in which the
Change of Control Termination Date occurs,
an award under the LTIP of the same type and
in the same quantative amount as the Target
LTIP Award, which award shall be vested and
non-forfeitable as of the Change of Control
Termination Date (assuming for calculation
purposes that the LTIP's superior
performance objective for such fiscal year
has been met) and shall be exercisable on
and after the first day subsequent to the
six (6) months following the date of grant;
and
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(iii) CCBF shall immediately grant, if not
theretofore granted for the fiscal year in
which the Date of Termination occurs, an
award under the EMIP of the same type and in
the same quantative amount as the Target
EMIP Bonus, which award shall be distributed
as of the Change of Control Termination Date
(assuming for calculation purposes that the
EMIP's maximum performance objective for
such fiscal year has been met); and
(iv) for the number of days remaining in the
Employment Period from and after the Change
of Control Termination Date (the "Continuing
Period"), or such longer period as may be
provided by the terms of the appropriate
plan, program, practice or policy, CCBF and
CCB Bank shall continue benefits to
Executive and/or Executive's family at least
equal to those which would have been
provided to them in accordance with the
Welfare Benefit Plans described in Section
6(d) of this Agreement if Executive's
employment had not been terminated;
provided, however, that if Executive becomes
re-employed with another employer and is
eligible to receive substantially the same
benefits under the other employer's plans as
Executive would receive under the Welfare
Benefit Plans under this item (iv), the
benefits under the Welfare Benefit Plans
shall be secondary to those provided under
such other plans during such applicable
period of eligibility. For purposes of
determining eligibility and years-of-service
credit (but not the time of commencement of
benefits) of Executive for retiree benefits
pursuant to such Welfare Benefit Plans,
Executive shall be considered to have
remained employed through the Continuing
Period and to have retired on the last day
of such period; and
(v) all Options previously granted to Executive
that are unvested as of the Change of
Control Termination Date shall be deemed
vested, fully exercisable and
non-forfeitable as of the Change of Control
Termination Date (provided, however, that
Options granted less than six (6) months
before the Change of Control Termination
Date shall not be exercisable until the
first day subsequent to the six (6) months
following their dates of grant) and all
previously granted Options that are vested,
but unexercised, on the Change of Control
Termination Date shall remain exercisable,
in each case for the period during which
they would have been exercisable absent the
termination of Executive's employment; and
(vi) Executive's benefits under all Benefit Plans
that are non-qualified plans shall be 100%
vested, regardless of Executive's age or
years of service, as of the Change of
Control Termination Date; and
(vii) CCBF and CCB Bank shall maintain and
continue to pay during the Continuing Period
all premiums due under the Split Dollar
Agreement and the Insurance Policy;
provided, however, that upon or at any time
prior to the expiration of the Continuing
Period, Executive may exercise his Insurance
Policy Buy-Out Option.
10. Additional Payments
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(a) Amount of Additional Payments. Anything in this Agreement
seemingly to the contrary notwithstanding, in the event it shall be determined
that any or the aggregate of all payments, distributions, accelerations of
vesting, awards and provisions of benefits by CCBF and/or CCB Bank to or for the
benefit of the Executive (whether paid or payable, distributed or distributable,
accelerated, awarded or provided pursuant to the terms of this Agreement or
otherwise) (a "Payment") would constitute an "excess parachute payment" within
the meaning of Section 280G of the Code and subject to the excise tax imposed by
Section 4999 of the Code (the "Excise Tax"), then prior to the making of any
Payment to the Executive, a calculation shall be made of the amount of the
Excise Tax and an additional cash payment (the "Additional Payment") shall be
promptly made to the Executive in the sum of (i) the Excise Tax and (ii) the
total of any Excise Tax and income tax or any other tax payable on the amounts
specified in item (i) and this item (ii). In addition, if it shall be determined
at any time by reference to Internal Revenue Service ("IRS") regulations or
rulings, as a consequence IRS audits or assessments of Executive (or in
settlement thereof), by reference to the terms of the final judgment of a court
or other judicial body of competent jurisdiction or as a result of other similar
events requiring Executive to pay an Excise Tax or any income or other excise
tax on the amounts specified in this Section 10(a), that an Additional Payment
made was less than the sums specified in items (i) and (ii) above, CCBF and CCB
Bank promptly shall make a further cash payment to Executive in the sum of (x)
such deficit and (y) any Excise Tax and any income tax or any other tax on such
further cash payment.
(b) Determination of Excise Tax and Other Amounts. The
determination of whether an Excise Tax would be imposed, the amount of such
Excise Tax, and the calculation of the amounts referred to in Section 10(a)
shall be made by CCBF's and CCB Bank's regular independent accounting firm or,
at the election of Executive, another nationally recognized independent
accounting firm (either, the "Accounting Firm") which shall provide detailed
supporting analyses and calculations. All fees and expenses of the Accounting
Firm shall be borne solely by CCBF and CCB Bank. Any determination by the
Accounting Firm shall be binding upon CCBF, CCB Bank and Executive.
11. Non-Exclusivity of Rights. Nothing in this Agreement shall prevent
or limit Executive's continuing or future participation in any plan, program,
policy, or practice provided by CCBF, CCB Bank or any other Subsidiary and for
which Executive may qualify, nor, subject to Section 14(e), shall anything
herein limit or otherwise affect such rights as Executive may have under any
contract or agreement with CCBF, CCB Bank or any other Subsidiary. Amounts which
are vested benefits or which Executive is otherwise entitled to receive under
any plan, policy, practice or program of or any contract or agreement with CCBF,
CCB Bank or other Subsidiary at or subsequent to a Date of Termination or Change
of Control Termination Date shall be payable in accordance with such plan,
policy, practice or program or such contract or agreement except as explicitly
modified by this Agreement.
12. Full Settlement. CCBF's and CCB Bank's obligation to make the
payments provided for in this Agreement and otherwise to perform their
obligations hereunder shall not be affected by any set-off, counterclaim,
recoupment, defense or other claim, right or action which CCBF or CCB Bank may
have against Executive or others. In no event shall Executive be obligated to
seek other employment or take any other action by way of mitigation of the
amounts payable to Executive under any of the provisions of this Agreement;
provided, however, that Executive's right to receive benefits under Welfare
Benefit Plans to the extent that Executive obtains other employment shall be
limited as provided in Sections 8(a)(iv) and 9(c)(iv). CCBF and CCB Bank agree
to pay as incurred, to the full extent permitted by law, all legal fees and
expenses which Executive may reasonably incur as a result of any contest
(regardless of the outcome thereof) by CCBF and CCB Bank, Executive or others of
the validity or enforceability of, or liability under, any provision of this
Agreement or any guarantee of performance
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<PAGE>
thereof (including as a result of any contest by Executive about the amount of
any payment pursuant to this Agreement), plus in each case interest on any
delayed payment at the "applicable federal rate" provided for in Section
7872(f)(2)(A) of the Code.
13. Covenants.
(a) Covenant Not to Compete. During the Restricted Period,
Executive shall not, within the States of North Carolina and South Carolina,
directly or indirectly, in any capacity, render his services, or engage or have
a financial interest in, any business that shall be competitive with any of
those business activities in which CCBF or any of its Subsidiaries that are
financial institutions, is engaged as of the date of this Agreement (a
"Competition"), which business activities include the provision of banking
services (collectively, the "Business"); provided, however, that Executive's
ownership of less than three percent (3%) of the outstanding securities of any
Competitor that has a class of securities listed on a securities exchange or
qualified for quotation on any over-the-counter market shall not be a violation
of the foregoing. If a court determines that the foregoing restrictions are too
broad or otherwise unreasonable under applicable law, including with respect to
time, scope or territory, the court is hereby requested and authorized by the
parties hereto to revise the foregoing restrictions to include the maximum
restrictions allowable under applicable law.
(b) Covenant No to Solicit Customers. During the Restricted
Period, Executive shall not, directly or indirectly, individually or on behalf
of any other person or entity (other than CCBF or a Subsidiary), solicit the
provision of banking services to any person, partnership, corporation or other
entity who is or was (i) a customer of any Subsidiary during any part of the
twelve (12) month period immediately prior to the Date of Termination, or (ii) a
potential customer to whom any Subsidiary solicited the provision of banking
services during any part of the twelve (12) month period immediately prior to
the Date of Termination.
(c) Covenant Not to Solicit Employees. During the Restricted
Period, Executive shall not, directly or indirectly, individually or on behalf
of any other person or entity, solicit, recruit or entice, directly or
indirectly, any employee of CCBF or any Subsidiary to leave the employment of
CCBF or such Subsidiary to work with Executive or with any person, partnership,
corporation or other entity with whom Executive is or becomes affiliated or
associated.
(d) Reasonableness of Scope and Duration. The parties hereto
agree that the covenants and agreements contained in this Section 13 are
reasonable in their time, territory and scope, and they intend that they be
enforced, and no party shall raise any issue of the reasonableness of the time,
territory or scope of any such covenants in any proceeding to enforce any such
covenants.
(e) Enforceability. Executive agrees that monetary damages
would not be a sufficient remedy for any breach or threatened breach of the
provisions of this Section 13, and that in addition to all other rights and
remedies available to CCBF, CCBF shall be entitled to specific performance and
injunctive or other equitable relief as a remedy for any such breach or
threatened breach.
(f) Separate Covenants and Severability. The covenants and
agreements contained in this Section 13 shall be construed as separate and
independent covenants. Should any part or provision of any such covenant or
agreement be held invalid, void or unenforceable in any court of competent
jurisdiction, no other part or provision of this Agreement shall be rendered
invalid, void or unenforceable by a court of competent jurisdiction, no other
part or provision of this Agreement shall be rendered invalid, void or
unenforceable as a result. If any portion of the foregoing provisions is found
to be invalid or unenforceable by a court of competent jurisdiction unless
modified, it is the intent of the parties that
15
<PAGE>
the otherwise invalid or unreasonable term shall be reformed, or a new
enforceable term provided, so as to most closely effectuate the provisions as is
validly possible.
(g) Inapplicability. The provisions of this Section 13 shall
not be operative upon, or be in any way enforceable against Executive at or
after, a Change of Control Termination or a termination of Executive's
employment by CCBF and CCB Bank other than for Cause, death or Disability (i.e.,
a termination without Cause).
14. Assignment and Successors.
(a) Executive. This Agreement is personal to Executive and
without the prior written consent of CCBF and CCB Bank shall not be assignable
by Executive otherwise than by will or the laws of descent and distribution.
This Agreement shall inure to the benefit of and be enforceable by Executive's
legal representatives.
(b) CCBF and CCB Bank. This Agreement shall inure to the
benefit of and be binding upon CCBF and CCB Bank and their respective successors
and assigns. Each of CCBF and CCB Bank will require any successor to it (whether
direct or indirect, by stock or asset purchase, merger, consolidation or
otherwise) to all or substantially all of its business or more than fifty
percent (50%) of its assets to assume expressly and agree to perform this
Agreement in the same manner and to the same extent it would be required to
perform it if no such succession had taken place. As used in this Agreement,
"CCBF" and "CCB Bank" shall mean CCBF and CCB Bank as hereinbefore defined and
any successor to their respective businesses and/or assets as aforesaid which
assumes and agrees to perform this Agreement by operation of law, or otherwise.
15. Regulatory Intervention. Notwithstanding anything in this Agreement
to the contrary, the obligations of CCBF and CCB Bank under this Agreement are
subject to the following terms and conditions:
(a) If the Executive is suspended and/or temporarily
prohibited from participating in the conduct of CCBF's or CCB Bank's affairs by
a notice served under Section 8(e)(3) or (g)(1) of the Federal Deposit Insurance
Act (12 U.S.C. ss.1818 (e)(3) and (g)(1)), CCBF's or CCB Bank's obligations
hereunder, as applicable, shall be suspended as of the date of service unless
stayed by appropriate proceedings. If the charges in the notice are dismissed,
all of CCBF's or CCB Bank's obligations, as applicable, which were suspended
shall be reinstated.
(b) If Executive is removed and/or permanently prohibited from
participating in the conduct of CCBF's or CCB Bank's affairs by an order issued
under Section 8(e)(4) or (g)(1) of the Federal Deposit Insurance Act (12 U.S.C.
ss.1818 (e)(4) and (g)(1)), all obligations of CCBF or CCB Bank, as applicable,
under this Agreement shall terminate as of the effective date of the order, but
vested rights of the parties shall not be affected.
(c) If CCB Bank is in default (as defined in Section 3(x)(1)
of the Federal Deposit Insurance Act (12 U.S. C. ss.1813 (x)(1)), all
obligations of CCB Bank under this Agreement shall terminate as of the date of
default, but any vested rights of Executive shall not be affected.
(d) All obligations of CCB Bank under this Agreement shall be
terminated, except to the extent determined that continuation of the contract is
necessary for the continued operation of CCB Bank, if so ordered by the North
Carolina Commissioner of Banks (the "Commissioner") at the time the
16
<PAGE>
Federal Deposit Insurance Corporation ("FDIC") enters into an agreement to
provide assistance to or on behalf of CCB Bank under the authority contained in
Section 13(c) of the Federal Deposit Insurance Act (12 U.S.C. ss.1823 (c)), or
if so ordered by the Commissioner at the time the FDIC approves a supervisory
merger to resolve problems related to operation of CCB Bank or when CCB Bank is
determined by the Commissioner to be in an unsafe or unsound condition. Any
rights of Executive that shall have vested under this Agreement shall not be
affected by such action.
(e) With regard to the provisions of this Section 15(a)
through (d):
(i) CCBF and CCB Bank agree to use their best efforts to
oppose any such notice of charges as to which there
are reasonable defenses;
(ii) In the event the notice of charges is dismissed or
otherwise resolved in a manner that will permit CCBF
and/or CCB Bank to resume their obligations to pay
compensation hereunder, CCBF and/or CCB Bank will
promptly make such payment hereunder; and
(iii) During any period of suspension under Section 15(a),
the vested rights of Executive shall not be affected
except to the extent precluded by such notice.
(f) CCB Bank's obligations to provide compensation or other
benefits to Executive under this Agreement shall be terminated or limited to the
extent required by the provisions of any final regulation or order of the FDIC
promulgated under Section 18(k) of the Federal Deposit Insurance Act (12 U.S.C.
ss.1828(k)) limiting or prohibiting any "golden parachute payment" as defined
therein, but only to the extent that the compensation or payments to be provided
by CCB Bank under this Agreement are so prohibited or limited.
(g) It is intended by CCBF, CCB Bank and Executive that if
only one of CCBF and CCB Bank is prohibited from fulfilling its obligations
under this Agreement in any of the circumstances described in the above
provisions of this Section 15 (whether for a period or permanently), the other
shall remain obligated to fulfill all obligations of CCBF and CCB Bank under
this Agreement.
16. Miscellaneous.
(a) No Mitigation. Executive shall not be required to mitigate
the amount of any payment provided for in this Agreement by seeking other
employment or otherwise and, except as provided in Sections 8(a)(iv) and
9(c)(iv), no such payment shall be offset or reduced by the amount of any
compensation or benefits provided to Executive in any subsequent employment.
(b) Waiver. Failure of either part to insist, in one or more
instances, on performance by the other in strict accordance with the terms and
conditions of this Agreement shall not be deemed a waiver or relinquishment of
any right granted in this Agreement or of the future performance of any such
term or condition or of any other term or condition of this Agreement, unless
such waiver is contained in a writing signed by the party making the waiver.
(c) Severability. If any provision or covenant, of any part
thereof, of this Agreement should be held by any court to be invalid, illegal or
unenforceable, either in whole or in part, such invalidity, illegality or
unenforceability shall not affect the validity, legality or enforceability of
the
17
<PAGE>
remaining provisions or covenants, or any part thereof, of this Agreement, all
of which shall remain in full force and effect.
(d) Other Agents. Nothing in this Agreement is to be
interpreted as limiting CCBF or CCB Bank from employing other personnel on such
terms and conditions as may be satisfactory to it.
(e) Entire Agreement. Except as provided herein, this
Agreement contains the entire agreement among CCBF, CCB Bank and Executive, with
respect to the subject matter hereof and supersedes and invalidates any previous
employment and severance agreements or contracts with Executive, including,
without limitation, that certain Change of Control Agreement, dated July 17,
1995, by and between CCB Bank and Executive which is amended and restated
herein. No representations, inducements, promises or agreements, oral or
otherwise, which are not embodied herein, shall be of any force or effect.
(f) Governing Law. Except to the extent preempted by federal
law, the laws of the State of North Carolina shall govern this Agreement in all
respects, whether as to its validity, construction, capacity, performance or
otherwise.
(g) Notices. All notices, requests, demands and other
communications required or permitted hereunder shall be in writing and shall be
deemed to have been duly given if delivered or seven (7) days after mailing if
mailed, first class, certified mail, postage prepaid:
To CCBF and CCB Bank:
CCB Financial Corporation
111 Corcoran Street
Durham, North Carolina 27702-0931
Attention: Chairman of the Board
To Executive:
Richard L. Furr
3013 Travistock Drive
Durham, North Carolina 27712
Any party may change the address to which notices, requests, demands and other
communications shall be delivered or mailed by giving notice thereof to the
other party in the same manner provided herein.
(h) Amendments and Modifications. This Agreement may be
amended or modified only by a writing signed by all parties hereto, which makes
specific reference to this Agreement.
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IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Employment and Amended and Restated Change of Control Agreement as of the
date first above written.
CCB FINANCIAL CORPORATION
By:/s/ ERNEST C. ROESSLER
------------------------------------
Title: Chairman and President
---------------------------------
CENTRAL CAROLINA BANK AND
TRUST COMPANY
By:/s/ ERNEST C. ROESSLER
------------------------------------
Title: Chairman and President
---------------------------------
EXECUTIVE:
/s/ RICHARD L. FURR
----------------------------------------
Richard L. Furr
19
Exhibit 10.4
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this "Agreement") is
made and entered into as of the 1st day of August, 1999 by and among CCB
Financial Corporation, a North Carolina corporation ("CCBF"), Central Carolina
Bank and Trust Company, a North Carolina commercial bank ("CCB Bank"), and
Sheldon M. Fox ("Executive").
BACKGROUND
----------
WHEREAS, Executive was employed initially as a Senior Vice President
and the Chief Financial Officer of CCBF and of CCB Bank, the primary banking
subsidiary of CCBF as of October 26 1998; and
WHEREAS, the expertise and experience of Executive and his
relationships and reputation in the financial institutions industry are
extremely valuable to CCBF, CCB Bank and the direct and indirect subsidiaries of
CCBF ("Subsidiaries"); and
WHEREAS, it is in the best interests of CCBF, its Subsidiaries and its
shareholders to maintain an experienced and sound executive management team to
manage CCBF, CCB Bank and the other Subsidiaries and to further CCBF's overall
strategies to protect and enhance the value of its shareholders' investments;
and
WHEREAS, CCBF, CCB Bank and Executive desire to amend and restate
Executive's Employment Agreement, dated as of October 26, 1998, to establish the
scope, terms and conditions of Executive's employment by CCBF and CCB Bank.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements set forth herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
1. Effective Date. The effective time and date of this Agreement shall
be deemed to be 12:00:01 o'clock, a.m., on October 26, 1998 (the "Effective
Date").
2. Definitions. The following defined terms are defined in the
referenced Sections of this Agreement.
Term Section
---- -------
Accrued Obligations Section 8(a)(i)(A)
Additional Payment Section 10(a)
Base Salary Section 6(a)
Bank Board Section 3(b)
Benefit Plans Section 6(c)
Cause Section 7(b)
CCBF Board Section 3(b)
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Change of Control Section 9(b)
Change of Control Termination Section 9(a)
Change of Control Termination Date Section 9(a)
Code Section 8(c)
Competitor Section 13(a)
Continuing Period Section 9(c)(iv)
Commissioner Section 15(d)
Date of Termination Section 7(e)
Disability Section 7(a)
Disability Effective Date Section 7(a)
Effective Date Section 1
EMIP Section 6(b)(i)
Employment Period Section 4
Excise Tax Section 10(a)
FDIC Section 15(d)
Good Reason Section 7(c)
Group Section 9(b)
Incumbent Directors Section 9(b)
IRS Section 10(a)
ISOs Section 8(c)
LTIP Section 6(b)(ii)
1934 Act Section 9(b)
Notice of Termination Section 7(d)
Other Benefits Section 8(a)(iv)
Options Section 8(a)(vi)
Payment Section 10(a)
Person Section 9(b)
Remaining Employment Period Section 8(a)(i)(B)
Restricted Period Section 8(a)(vi)
Subsidiaries Preamble
Target EMIP Bonus Section 8(a)(i)(A)
Target LTIP Award Section 8(a)(ii)
Welfare Benefit Plans Section 6(d)
3. Employment. Executive will be employed as an Executive Vice
President and the Chief Financial Officer of each of CCBF and CCB Bank.
Executive's responsibilities, duties, prerogatives and authority in such
executive offices, and the clerical, administrative and other support staff and
office facilities provided to him, shall be those customary for the chief
financial officer of publicly held corporations generally and of holding
companies and financial institutions that are a part of the financial
institutions industry specifically. In his executive capacities Executive shall
report to the President and Chief Executive Officer of CCBF and CCB Bank, as
applicable.
4. Employment Period. Unless earlier terminated, Executive's employment
shall be for two (2) years commencing on the Effective Date, and unless
terminated as provided herein as of the end of such two (2) year term, shall
continue for a renewing three (3) year term commencing on the second anniversary
of the Effective Date (the "Employment Period"). After the commencement of the
renewing three (3) year term, the Employment Period shall, without further
action by Executive, CCBF or CCB Bank, be extended for an additional one (1)
year on each anniversary of the Effective Date, such that the remaining term of
the Employment Period shall continue to be three (3) years; provided, further,
however,
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that CCBF and CCB Bank or Executive may, by notice to the other, cause the
Employment Period to cease to extend automatically as of a specific anniversary
of the Effective Date. Such notice must be given and received at least eleven
(11) months and thirty-one (31) days prior to the anniversary of the Effective
Date on which it is to be effective. Upon the effectiveness of such notice, the
Employment Period shall be fixed at three (3) years, and the Employment Period
shall terminate upon the expiration of such three-year period.
5. Extent of Service. During the Employment Period, and excluding any
periods of vacation, sick or other leave to which Executive is entitled under
this Agreement, Executive agrees to devote reasonable attention and time during
normal business hours to the business and affairs of CCBF and CCB Bank, and, to
the extent necessary to discharge the responsibilities assigned to Executive
hereunder, to use Executive's reasonable best efforts to perform faithfully and
efficiently his responsibilities and duties under this Agreement. During the
Employment Period, it shall not be a violation of this Agreement for Executive
to (i) devote reasonable periods of time to charitable, trade association,
community and similar activities, and/or (ii) manage personal business interests
and investments, so long as such activities do not interfere with the
performance of Executive's responsibilities and duties under this Agreement. It
is expressly understood and agreed that to the extent that any such activities
have been conducted by Executive prior to the Effective Date, the continued
conduct of such activities (or the conduct of activities similar in nature and
scope thereto) subsequent to the Effective Date shall not thereafter be deemed
to interfere with the performance of Executive's responsibilities and duties
hereunder.
6. Compensation and Benefits.
(a) Base Salary. For the 1998 and 1999 fiscal years of CCBF,
CCBF will pay to Executive a base salary of $232,000 per year ("Base Salary"),
less normal withholdings, payable in equal monthly or more frequent installments
as are customary under CCB Bank's payroll practices from time to time.
Commencing with the fiscal year beginning January 1, 2000 and thereafter during
the Employment Period, the Compensation Committee of the CCBF Board shall review
Executive's total compensation annually and in its sole discretion may adjust
Executive's Base Salary from year to year, but during the Employment Period
neither the Compensation Committee, the CCBF Board nor the Bank Board may
decrease Executive's Base Salary below $232,000, and periodic increases, once
granted, shall not be subject to revocation. The annual review of Executive's
total compensation by the Compensation Committee will consider, among other
things, changes in the cost of living, Executive's own performance and CCBF's
consolidated performance.
(b) Incentive Plans. Commencing with the fiscal year beginning
January 1, 1999 and thereafter during the Employment Period, Executive shall be
entitled:
(i) to participate in CCBF's Executive Management
Incentive Plan ("EMIP"), and any successor or
substitute plan to the EMIP, in at least as favorable
a manner as any other senior executive employee
participant. CCBF's President and Chief Executive
Officer shall recommend annually to the Compensation
Committee appropriate minimum, target and maximum
performance objectives, and appropriate measures and
weights for the components of the performance
objectives, and minimum, target and maximum bonus
levels for Executive. Executive's annual minimum,
target and maximum bonus levels under the EMIP
initially shall be 0%, 50%, and 100% of Executive's
Base Salary for such year or such greater levels as
the Compensation Committee may determine Executive's
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individual performance warrants or as are necessary
to satisfy the provisions of the first sentence of
this item (i); and
(ii) to participate in CCBF's Long-Term Incentive Plan
("LTIP"), and any successor or substitute plan to the
LTIP, in at least as favorable a manner as any other
senior executive employee participant. Executive's
annual target award level under the LTIP initially
shall be 65% of Executive's Base Salary for such year
or such greater level as the Compensation Committee
may determine Executive's individual performance
warrants or as is necessary to satisfy the provisions
of the first sentence of this item (ii).
(c) Savings and Retirement Plans. During the Employment
Period, Executive shall be entitled to participate in all savings, pension and
retirement plans (including supplemental retirement plans), practices, policies
and programs (but not including, until such time as the Compensation Committee
of the CCBF Board shall determine otherwise, split-dollar life insurance
programs) applicable generally to senior executive employees of CCBF or CCB Bank
(the "Benefit Plans"), and on at least as favorable a basis as any other senior
executive employee participant. Without limiting the foregoing, Benefit Plans
shall include the CCB Financial Corporation Retirement Plan, the CCB Financial
Corporation Retirement Savings Plan, the CCB Financial Corporation Retirement
Income Equity Plan, the CCB Financial Corporation Retirement Savings Equity Plan
and any substitute and successor plan to any of the foregoing.
(d) Welfare Benefit Plans. During the Employment Period,
Executive and/or Executive's family, as the case may be, shall be eligible for
participation in and shall receive all benefits under all welfare benefit plans,
practices, policies and programs provided by CCBF or CCB Bank (including,
without limitation, medical, hospitalization, prescription, dental, disability,
employee life, group life, accidental death and dismemberment, and travel
accident, but not including, until such time as the Compensation Committee of
the CCBF Board shall determine otherwise, split-dollar life insurance programs)
to the extent applicable generally to senior executive employees of CCBF or CCB
Bank ("Welfare Benefit Plans").
(e) Expenses. During the Employment Period, Executive shall be
entitled to receive prompt reimbursement for all reasonable expenses incurred by
Executive in accordance with the policies, practices and procedures of CCBF and
CCB Bank to the extent applicable generally to other senior executive employees
of CCBF or CCB Bank.
(f) Fringe and Similar Benefits. During the Employment Period,
Executive shall be entitled to fringe benefits in accordance with the plans,
practices, programs and policies of CCBF and CCB Bank in effect for senior
executive employees of CCBF or CCB Bank. In addition to, and not in lieu of, any
other provision of this Agreement, Executive shall receive annually an allowance
equal to three percent (3%) of his Base Salary for such fiscal year under CCB
Bank's "Senior Officer Perquisites" policy, payable and available for such uses
as are set forth in such policy.
(g) Vacation, Sick and Other Leave. During the Employment
Period, Executive shall be entitled annually to a minimum of twenty (20)
business days of paid vacation and shall be entitled to those number of business
days of paid disability, sick and other leave specified in the employment
policies of CCBF or CCB Bank.
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(h) Allocation. CCBF and CCB Bank may allocate between them
for accounting and taxation purposes the payment of compensation to Executive
under this Agreement on the basis of such factors as they deem relevant and
appropriate; provided, however, that CCBF and CCB Bank shall be jointly and
severally liable and obligated to fulfill all obligations to Executive under
this Agreement.
7. Termination of Employment (Other Than In Connection With A Change Of
Control).
(a) Death or Disability. Executive's employment with CCBF and
CCB Bank shall terminate automatically upon Executive's death during the
Employment Period. If the CCBF Board and the Bank Board determine in good faith
that the Disability of Executive has occurred during the Employment Period
(pursuant to the definition of Disability set forth below), they may give to
Executive written notice in accordance with Section 7(d) and 16(g) of this
Agreement of their intention to terminate Executive's employment. In such event,
Executive's employment with CCBF and CCB Bank shall terminate effective on the
60th day after receipt of such written notice by Executive (the "Disability
Effective Date"), provided that, within the 30 days after such receipt,
Executive shall not have returned to full-time performance of Executive's
duties. For purposes of this Agreement, "Disability" shall mean the absence of
Executive from Executive's duties with CCBF and CCB Bank on a full-time basis
for 180 consecutive business days as a result of incapacity due to mental or
physical illness or injury which is determined to be total and permanent by a
physician selected by the CCBF Board and the Bank Board, or the insurers of CCBF
and CCB Bank, and acceptable to Executive or Executive's legal representative,
which acceptance shall not be unreasonably withheld, subject to (i) CCBF's and
CCB Bank's obligations, and Executive's rights, under (A) the Americans With
Disabilities Act, 42 U.S.C. ss.ss.1210 ET SEQ., and (B) the Family and Medical
Leave Act, 29 U.S.C. ss.ss.2601 ET SEQ. (and the regulations promulgated under
the foregoing Acts), and (ii) the exclusion from such 180 business day
calculation of any business days constituting vacation days under Section 6(g)
and any business days which an employee is permitted to be absent under the
disability, sick or other leave policies of CCBF or CCB Bank.
(b) Cause. During the Employment Period, CCBF and CCB Bank may
terminate Executive's employment with CCBF and CCB Bank without Cause or for
Cause. For purposes of this Agreement, "Cause" shall mean:
(i) the willful and continued failure of Executive to
perform substantially Executive's duties with CCBF
and CCB Bank, other than any such failure resulting
from Disability, after a written demand for
substantial performance is jointly delivered to
Executive by the CCBF Board and the Bank Board which
specifically identifies the manner in which the CCBF
Board and the Bank Board believe that Executive has
not substantially performed Executive's duties, or
(ii) the willful engaging by Executive in illegal conduct
or gross misconduct which is materially and
demonstrably injurious to CCBF and CCB Bank.
For purposes of this provision, no act or failure to act on the part of
Executive shall be considered "willful" unless it is done, or omitted to be
done, by Executive in bad faith or without reasonable belief that Executive's
action or omission was in the best interests of CCBF and CCB Bank. Any act, or
failure to act, based upon authority given pursuant to resolutions duly adopted
by the CCBF Board or the Bank Board or based upon the advice of counsel for CCBF
or CCB Bank shall be conclusively presumed to be done, or omitted to be done, by
Executive in good faith and in the best interests of CCBF and CCB Bank. The
cessation of employment of Executive shall not be deemed to be for Cause unless
and until there shall have been delivered to Executive copies of resolutions
duly adopted by the affirmative votes of not
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less than three-quarters (3/4) of the entire membership of each of the CCBF
Board and the Bank Board at meetings of such Boards called and held for such
purpose (after reasonable notice is provided to Executive and Executive is given
an opportunity, together with counsel, to be heard before the CCBF Board and the
Bank Board), finding that, in the good faith opinion of each such Board,
Executive is guilty of the conduct described in items (i) or (ii) above, and
specifying the particulars thereof in detail.
(c) Good Reason. During the Employment Period, Executive's
employment may be terminated by Executive for Good Reason. Such a termination
shall not be deemed a resignation. For purposes of this Agreement, "Good Reason"
shall mean:
(i) the assignment to Executive of any duties or
responsibilities inconsistent in any respect with
Executive's positions (including status, offices,
titles, and reporting requirements), authority,
duties, prerogatives or responsibilities as
contemplated by Section 3 of this Agreement, or any
other action by CCBF or CCB Bank which results in a
diminution in such positions, authority, duties,
prerogatives or responsibilities, excluding for these
purposes an isolated, insubstantial and inadvertent
action not taken in bad faith and which is remedied
by CCBF or CCB Bank, as applicable, promptly after
receipt of notice thereof given by Executive;
(ii) any failure by CCBF or CCB Bank to comply with any of
the provisions of Section 6 of this Agreement, other
than an isolated, insubstantial and inadvertent
failure not occurring in bad faith and which is
remedied by CCBF or CCB Bank, as applicable, promptly
after receipt of notice thereof given by Executive;
(iii) the requirement by CCBF and/or CCB Bank that
Executive, without his consent, be based or conduct
on an on-going basis more than ten percent (10%) of
his activities under this Agreement at any office or
location more than 35 miles (by most direct highway
route) from the location of the headquarters building
of CCBF and CCB Bank in Durham, North Carolina as of
the Effective Date;
(iv) any purported termination of Executive's employment
under this Agreement other than as expressly
permitted by this Agreement; or
(v) any failure by CCBF and/or CCB Bank to comply with
and satisfy Section 14(b) of this Agreement.
For purposes of this Section 7(c), any good faith determination of "Good Reason"
made by Executive shall be conclusive.
(d) Notice of Termination. Any termination by CCBF and CCB
Bank for Disability or for or without Cause or by Executive for Good Reason
shall be communicated by Notice of Termination to the other party thereto given
in accordance with Section 16(g) of this Agreement. For purposes of this
Agreement, a "Notice of Termination" means a written notice which (i) indicates
the specific termination provision in this Agreement relied upon, (ii) to the
extent applicable, sets forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of Executive's employment under the
provision so indicated, and (iii) if the Date of Termination (as defined below)
is other than the date of receipt of such notice, specifies the termination date
(which date shall be not more than 30 days after the giving of such notice
except as otherwise provided in Section 7(a)). The failure by Executive or CCBF
and CCB Bank to set forth in the Notice of Termination any fact or circumstance
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which contributes to a showing of Disability, Cause or Good Reason shall not
waive any right of Executive or CCBF and CCB Bank hereunder or preclude
Executive or CCBF and CCB Bank from asserting such fact or circumstance in
enforcing Executive's or CCBF's and CCB Bank's rights hereunder.
(e) Date of Termination. "Date of Termination" means (i) if
Executive's employment is terminated by CCBF and CCB Bank for Cause or by
Executive for Good Reason, the date of receipt of the Notice of Termination or
any later date specified therein, as the case may be, (ii) if Executive's
employment is terminated by CCBF and CCB Bank other than for Cause or Disability
or other than by reason of death, the date of receipt of the Notice of
Termination, and (iii) if Executive's employment is terminated by reason of
death or Disability, the Date of Termination shall be the date of death of
Executive or the Disability Effective Date, as the case may be.
8. Obligations of CCBF and CCB Bank Upon Termination (Other Than In
Connection With A Change Of Control).
(a) Other Than for Cause, Death or Disability. If, during the
Employment Period, CCBF shall terminate Executive's employment other than for
Cause, death or Disability, or Executive shall terminate his employment for Good
Reason (and, in each case, other than in connection with a Change of Control),
then in consideration of Executive's services rendered prior to such
termination:
(i) CCBF and CCB Bank shall pay to Executive a lump sum
in cash within 30 days after the Date of Termination
the aggregate of the following amounts:
A. the sum of (1) Executive's Base Salary
through the Date of Termination to the
extent not theretofore paid, (2) the product
of (x) Executive's "target" bonus for the
then current fiscal year under the EMIP as
described in Section 6(b)(i) above ("Target
EMIP Bonus"), and (y) a fraction, the
numerator of which is the number of days in
the current fiscal year through the Date of
Termination, and the denominator of which is
365, and (3) any compensation previously
deferred by Executive (together with any
accrued interest or earnings thereon) and
any accrued vacation pay, in each case to
the extent not theretofore paid (the sum of
the amounts described in clauses (1), (2),
and (3) shall be hereinafter referred to as
the "Accrued Obligations"); and
B. the amount equal to the product of (1) the
number of days remaining in the Employment
Period (which, at all times prior to October
26, 2000, shall be deemed to be 730 days
notwithstanding any other provision of this
Agreement) from and after the Date of
Termination (the "Remaining Employment
Period"), and (2) Executive's Base Salary
divided by 365; and
C. the amount equal to the product of (1) the
number of days in the Remaining Employment
Period, and (2) Executive's Target EMIP
Bonus divided by 365; and
D. an amount equal to the excess of (a) the
actuarial equivalent of Executive's benefits
under the Benefit Plans that are qualified
defined benefit retirement plans (utilizing
actuarial assumptions no less favorable
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to Executive than those in effect under the
CCB Financial Corporation Retirement Plan on
the Date of Termination) and any Benefit
Plans that are excess or supplemental
retirement plans in which Executive
participates which Executive would receive
if Executive's employment continued
throughout the Remaining Employment Period,
assuming for this purpose that all accrued
benefits are fully vested and assuming that
Executive's compensation in each remaining
year of the Employment Period is the Base
Salary plus the Target EMIP Bonus, over (b)
the actuarial equivalent of Executive's
actual benefits (paid or payable), if any,
under such Benefit Plans as of the Date of
Termination; and
(ii) CCBF shall immediately grant, if not theretofore
granted for the fiscal year in which the Date of
Termination occurs, an award under the LTIP of the
same type and in the same quantative amount as
Executive's "target" award under the LTIP for the
current fiscal year (the "Target LTIP Award"), which
award shall be vested and non-forfeitable as of the
Date of Termination (assuming for calculation
purposes that the LTIP's superior performance
objective for such fiscal year has been met) and
shall be exercisable on and after the first day
subsequent to the six (6) months following the date
of grant; and
(iii) for the Remaining Employment Period, or such longer
period as may be provided by the terms of the
appropriate plan, program, practice or policy, CCBF
and CCB Bank shall continue to provide benefits to
Executive and/or Executive's family at least equal to
those which would have been provided to them in
accordance with the Welfare Benefit Plans described
in Section 6(d) of this Agreement if Executive's
employment had not been terminated; provided,
however, that if Executive becomes re-employed with
another employer and is eligible to receive
substantially the same benefits under the other
employer's plans as Executive would receive under the
Welfare Benefit Plans under this item (iii), the
benefits under the Welfare Benefit Plans shall be
secondary to those provided under such other
employer's plans during such applicable period of
eligibility. For purposes of determining eligibility
and years-of-service credit (but not the time of
commencement of benefits) of Executive for retiree
benefits pursuant to such Welfare Benefit Plans,
Executive shall be considered to have remained
employed throughout the Remaining Employment Period
and to have retired on the last day of such period;
and
(iv) to the extent not theretofore paid or provided, CCBF
and CCB Bank shall timely pay or provide to Executive
any other amounts or benefits required to be paid or
provided herein or which Executive is eligible to
receive under any Welfare Benefit Plan or any other
plan, program, policy or practice or contract or
agreement of CCBF or CCB Bank (such other amounts and
benefits shall be hereinafter referred to as the
"Other Benefits"); and
(v) all options to acquire capital stock of CCBF
("Options") previously granted to Executive,
including those awarded under item (ii) above, that
are unvested on the Date of Termination shall be
deemed vested, fully exercisable and non-forfeitable
as of the Date of Termination and all previously
granted Options that are vested, but unexercised, on
the Date of Termination shall remain exercisable,
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in each case for the period during which they would
have been exercisable absent the termination of
Executive's employment;
(vi) provided, however, that notwithstanding any provision
of this Agreement to the contrary, Executive shall
forfeit his right to receive, or, to the extent such
amounts have previously been paid to Executive, shall
repay in full to CCBF or CCB Bank, as applicable,
with interest at 8% per annum within 30 days of a
final determination of Executive's liability therefor
as set forth below, the sum of the amounts described
in Section 8(a)(i)(B) and (C) of this Agreement if
any time during the Employment Period or the
Remaining Employment Period (the "Restricted Period")
Executive violates the restrictive covenants set
forth in Section 13 of this Agreement. Any
determination of whether Executive has violated such
covenants shall be made by arbitration in Durham,
North Carolina under the Rules of Commercial
Arbitration (the "Rules") of the American Arbitration
Association, which Rules are deemed to be
incorporated by reference herein.
(b) Death. If, during the Employment Period Executive's
employment is terminated by reason of Executive's death, this Agreement shall
terminate without further obligations to Executive's legal representatives under
this Agreement, except that; (i) Accrued Obligations shall timely be paid as
provided below; (ii) Other Benefits shall be timely paid or provided as
described below; and (iii) all Options previously granted to Executive that
vested at or prior to the Date of Termination shall remain exercisable for the
longer of twelve (12) months and the exercise period in effect immediately prior
to the Date of Termination. Additionally, if Executive's employment is
terminated by reason of death during the Employment Period, (i) all Options
previously granted to Executive and scheduled to vest in the year of death shall
immediately vest and be exercisable for the exercise period set forth in the
applicable grants, and (ii) Executive's rights to all benefits under all Benefit
Plans that are "non-qualified" plans shall be 100% vested, regardless of
Executive's age or years of service, at the time of Executive's death. Accrued
Obligations shall be paid to Executive's estate or beneficiary, as applicable,
in a lump sum in cash within 30 days of the Date of Termination. With respect to
the provision of Other Benefits, the term Other Benefits as utilized in this
Section 8(b) shall include, without limitation, and Executive's estate and/or
beneficiaries shall be entitled to receive, all benefits under CCBF's and CCB
Bank's plans, programs, practices and policies relating to death benefits, if
any, as are applicable generally to senior executive employees of CCBF or CCB
Bank and their beneficiaries, and on the same basis as such senior executive
employees and their beneficiaries. Without limiting the foregoing, for one (1)
year after Executive's death, CCBF and CCB Bank shall pay any premium required
for any "qualified beneficiary" to continue his or her health care coverage in
accordance with Title I, Part 6 of the Employee Retirement Security Act of 1974,
as amended.
(c) Disability. If, during the Employment Period, Executive's
employment is terminated by reason of Executive's Disability, this Agreement
shall terminate without further obligations to Executive, except that: (i)
Accrued Obligations shall be timely paid as provided below; (ii) Other Benefits
shall be timely paid or provided as described below; (iii) all Options that are"
incentive stock options" ("ISOs"), as described in Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"), and that vested at or prior to
the Date of Termination shall remain exercisable for the lesser of twelve (12)
months and the period of exercise in effect immediately prior to the Date of
Termination; and (iv) all other Options that vested at or prior to the Date of
Termination shall remain exercisable for the period of exercise in effect
immediately prior to the Date of Termination. Additionally, if Executive's
employment is terminated by reason of Disability during the Employment Period,
all Options previously
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granted and scheduled to vest in the year in which the Date of Termination
occurs shall immediately vest and be exercisable (A) in the case of ISOs, for
twelve (12) months from the Date of Termination, and (B) in the case of Options
that are not ISOs, for the exercise period set forth in the applicable grant.
Accrued Obligations shall be paid to Executive in a lump sum in cash within 30
days of the Date of Termination. With respect to the provision of Other
Benefits, the term Other Benefits as utilized in this Section 8(c) shall
include, without limitation, and Executive shall be entitled after the Date of
Termination to receive, all disability and other benefits under all Welfare
Benefit Plans and all other plans, programs, practices, and policies of CCBF and
CCB Bank relating to disability, if any, as are applicable generally to senior
executive employees of CCBF and CCB Bank and their families, and on the same
basis as such senior executive employees and their families.
(d) Cause; Resignation. If Executive's employment shall be
terminated for Cause or Executive resigns during the Employment Period, this
Agreement shall terminate without further obligations to Executive, except that
(i) the Accrued Obligations shall be paid in a lump sum in cash within 30 days
of the Date of Termination, and (ii) Other Benefits shall be paid or provided in
a timely manner, in each case to the extent theretofore unpaid; provided,
however, that Executive's right to continue to participate in Welfare Benefit
Plans shall terminate on the 30th day following the Date of Termination, subject
to his rights under the Consolidated Omnibus Budget Reconciliation Act of 1985,
29 U.S.C. ss.1161 ET SEQ.
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9. Termination In Connection With a Change of Control.
(a) Change of Control Termination. In the event that during
the Employment Period, CCBF and CCB Bank terminate Executive's employment other
than for Cause or Disability or Executive terminates such employment for Good
Reason, in any of the foregoing cases within one (1) year after a Change of
Control (each a "Change of Control Termination"), Executive shall be entitled to
receive the payments and benefits specified in this Section 9. The date on which
CCBF and CCB Bank or Executive receives notice in accordance with Section 16(g)
of a Change of Control Termination shall be deemed the Change of Control
Termination Date.
(b) Definition of Change of Control. A Change of Control shall
be deemed to have occurred upon: (i) any "Person" or "Group" (as defined in or
pursuant to Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended (the "1934 Act"), but not including CCBF, CCB Bank, any other Subsidiary
or any "employee benefit plan" (as defined in or pursuant to the Employee
Retirement Income Security Act of 1974, 29 U.S.C. ss.1002(3), and as used herein
"Person" or "Group") becoming the "beneficial owner" (as defined in Rule 13d-3
under the 1934 Act) or otherwise acquiring control, directly or indirectly, of
securities of CCBF representing twenty-five percent (25%) or more of the voting
power of CCBF's then outstanding securities; (ii) the acquisition by any Person
or Group in any manner of the ability to elect, or to control the election, of a
majority of the directors of CCBF or CCB Bank; (iii) the merger of CCBF or CCB
Bank into another entity, the merger of any entity into CCBF or CCB Bank or the
acquisition of assets by CCBF or CCB Bank, in any such case with the result that
the beneficial owners of CCBF's and CCB Bank's outstanding securities
immediately prior to such transaction do not beneficially own more than sixty
percent (60%) of CCBF's and CCB Bank's outstanding securities after the
consummation of such transaction; (iv) the sale or other transfer of more than
fifty percent (50%) of the assets of CCBF or CCB Bank to any entity not
controlled by CCBF; (v) the consummation of any transaction by CCBF or CCB Bank
that results (A) in the majority of the Boards of Directors of CCBF and CCB Bank
after the consummation of such transaction not being composed of Incumbent
Directors, or (B) the beneficial owners of CCBF's outstanding securities
immediately prior to the consummation of such a transaction not beneficially
owning more than sixty percent (60%) of CCBF's outstanding securities after such
transaction; or (vi) the occurrence of any other event or circumstance which is
not described in the foregoing provisions of this Section 9(b) but which the
CCBF Board determines affects control of CCBF and/or CCB Bank and constitutes a
Change of Control for purposes of this Agreement. The term "Incumbent Director"
shall mean any director who as of the Effective Date was a member of the CCBF
Board or the Bank Board, or any individual becoming a member of the CCBF Board
or the Bank Board subsequent to the Effective Date whose election by CCBF
shareholders or by the shareholder of CCB Bank, as applicable, was recommended
by at least two-thirds (2/3) of the then Incumbent Directors on the CCBF Board
or the Bank Board, as applicable.
Notwithstanding the foregoing, a Change of Control shall not include
any transaction to which Executive consents in a writing specifically noting
this provision of this Agreement.
(c) Change of Control Payments and Benefits. Upon a
Change of Control Termination:
(i) CCBF and CCB Bank shall pay to Executive in
a lump sum in cash within 30 days after the
Change Of Control Termination Date the
aggregate of the following amounts:
(A) the sum of the Accrued Obligations;
and
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(B) an amount equal to two (2) times the
total of Executive's Base Salary and
Target EMIP Bonus (2.99 times the
total of Executive's Base Salary and
Target EMIP Bonus if the Change Of
Control Termination Date is after
October 25, 2000); and
(C) an amount equal to the excess of (a)
the actuarial equivalent of the
benefits under CCBF's Benefit Plans
that are qualified defined benefit
retirement plans (utilizing
actuarial assumptions no less
favorable to Executive than those in
effect under the CCB Financial
Corporation Retirement Plan on the
Change of Control Termination Date)
and any Benefit Plan that are excess
or supplemental retirement plans in
which Executive participates which
Executive would receive if
Executive's employment continued
throughout the Remaining Employment
Period, assuming for this purpose
that all accrued benefits are fully
vested, and, assuming that
Executive's compensation in each
remaining year of the Employment
Period is the Base Salary plus the
Target EMIP Bonus, over (b) the
actuarial equivalent of Executive's
actual benefits (paid or payable),
if any, under such Benefit Plans as
of the Change of Control Termination
Date; and
(ii) Unless the relevant Change of Control is a
merger of CCBF or CCB Bank with another
Person or entity which is intended to be
accounted for under the pooling-of-interests
method and which has been approved by the
vote of such number of Incumbent Directors
as comprised a majority of the CCBF Board or
the Bank Board, as applicable, CCBF shall
immediately grant, if not theretofore
granted for the fiscal year in which the
Change of Control Termination Date occurs,
an award under the LTIP of the same type and
in the same quantative amount as the Target
LTIP Award, which award shall be vested and
non-forfeitable as of the Change of Control
Termination Date (assuming for calculation
purposes that the LTIP's superior
performance objective for such fiscal year
has been met) and shall be exercisable on
and after the first day subsequent to the
six (6) months following the date of grant;
and
(iii) CCBF shall immediately grant, if not
theretofore granted for the fiscal year in
which the Date of Termination occurs, an
award under the EMIP of the same type and in
the same quantitive amount as the Target
EMIP Bonus, which award shall be distributed
as of the Change of Control Termination Date
(assuming for calculation purposes that the
EMIP's maximum performance objective for
such fiscal year has been met); and
(iv) for the number of days remaining in the
Employment Period (which, at all times prior
to October 26, 2000, shall be deemed to be
730 days notwithstanding any other provision
of this Agreement) from and after the Change
of Control Termination Date (the "Continuing
Period"), or such longer period as may be
provided by the terms of the appropriate
plan, program, practice or policy, CCBF and
CCB Bank shall continue benefits to
Executive and/or Executive's family at least
equal to those which would have been
provided to them in accordance with the
Welfare
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Benefit Plans described in Section 6(d) of
this Agreement if Executive's employment had
not been terminated; provided, however, that
if Executive becomes re-employed with
another employer and is eligible to receive
substantially the same benefits under the
other employer's plans as Executive would
receive under the Welfare Benefit Plans
under this item (iv), the benefits under the
Welfare Benefit Plans shall be secondary to
those provided under such other plans during
such applicable period of eligibility. For
purposes of determining eligibility and
years-of-service credit (but not the time of
commencement of benefits) of Executive for
retiree benefits pursuant to such Welfare
Benefit Plans, Executive shall be considered
to have remained employed through the
Continuing Period and to have retired on the
last day of such period; and
(v) all Options previously granted to Executive
that are unvested as of the Change of
Control Termination Date shall be deemed
vested, fully exercisable and
non-forfeitable as of the Change of Control
Termination Date (provided, however, that
Options granted less than six (6) months
before the Change of Control Termination
Date shall not be exercisable until the
first day subsequent to the six (6) months
following their dates of grant) and all
previously granted Options that are vested,
but unexercised, on the Change of Control
Termination Date shall remain exercisable,
in each case for the period during which
they would have been exercisable absent the
termination of Executive's employment; and
(vi) Executive's benefits under all Benefit Plans
that are non-qualified plans shall be 100%
vested, regardless of Executive's age or
years of service, as of the Change of
Control Termination Date.
10. Additional Payments
(a) Amount of Additional Payments. Anything in this Agreement
seemingly to the contrary notwithstanding, in the event it shall be determined
that any or the aggregate of all payments, distributions, accelerations of
vesting, awards and provisions of benefits by CCBF and/or CCB Bank to or for the
benefit of the Executive (whether paid or payable, distributed or distributable,
accelerated, awarded or provided pursuant to the terms of this Agreement or
otherwise) (a "Payment") would constitute an "excess parachute payment" within
the meaning of Section 280G of the Code and subject to the excise tax imposed by
Section 4999 of the Code (the "Excise Tax"), then prior to the making of any
Payment to the Executive, a calculation shall be made of the amount of the
Excise Tax and an additional cash payment (the "Additional Payment") shall be
promptly made to the Executive in the sum of (i) the Excise Tax and (ii) the
total of any Excise Tax and income tax or any other tax payable on the amounts
specified in item (i) and this item (ii). In addition, if it shall be determined
at any time by reference to Internal Revenue Service ("IRS") regulations or
rulings, as a consequence of IRS audits or assessments of Executive (or in
settlement thereof), by reference to the terms of the final judgment of a court
or other judicial body of competent jurisdiction or as a result of other similar
events requiring Executive to pay an Excise Tax or any income or other excise
tax on the amounts specified in this Section 10(a), that an Additional Payment
made was less than the sums specified in items (i) and (ii) above, CCBF and CCB
Bank promptly shall make a further cash payment to Executive in the sum of (x)
such deficit and (y) any Excise Tax and any income tax or any other tax on such
further cash payment.
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<PAGE>
(b) Determination of Excise Tax and Other Amounts. The
determination of whether an Excise Tax would be imposed, the amount of such
Excise Tax, and the calculation of the amounts referred to in Section 10(a)
shall be made by CCBF's and CCB Bank's regular independent accounting firm or,
at the election of Executive, another nationally recognized independent
accounting firm (either, the "Accounting Firm") which shall provide detailed
supporting analyses and calculations. All fees and expenses of the Accounting
Firm shall be borne solely by CCBF and CCB Bank. Any determination by the
Accounting Firm shall be binding upon CCBF, CCB Bank and Executive.
11. Non-Exclusivity of Rights. Nothing in this Agreement shall prevent
or limit Executive's continuing or future participation in any plan, program,
policy, or practice provided by CCBF, CCB Bank or any other Subsidiary and for
which Executive may qualify, nor, subject to Section 14(e), shall anything
herein limit or otherwise affect such rights as Executive may have under any
contract or agreement with CCBF, CCB Bank or any other Subsidiary. Amounts which
are vested benefits or which Executive is otherwise entitled to receive under
any plan, policy, practice or program of or any contract or agreement with CCBF,
CCB Bank or other Subsidiary at or subsequent to a Date of Termination or Change
of Control Termination Date shall be payable in accordance with such plan,
policy, practice or program or such contract or agreement except as explicitly
modified by this Agreement.
12. Full Settlement. CCBF's and CCB Bank's obligation to make the
payments provided for in this Agreement and otherwise to perform their
obligations hereunder shall not be affected by any set-off, counterclaim,
recoupment, defense or other claim, right or action which CCBF or CCB Bank may
have against Executive or others. In no event shall Executive be obligated to
seek other employment or take any other action by way of mitigation of the
amounts payable to Executive under any of the provisions of this Agreement;
provided, however, that Executive's right to receive benefits under Welfare
Benefit Plans to the extent that Executive obtains other employment shall be
limited as provided in Sections 8(a)(iii) and 9(c)(iv). CCBF and CCB Bank agree
to pay as incurred, to the full extent permitted by law, all legal fees and
expenses which Executive may reasonably incur as a result of any contest
(regardless of the outcome thereof) by CCBF and CCB Bank, Executive or others of
the validity or enforceability of, or liability under, any provision of this
Agreement or any guarantee of performance thereof (including as a result of any
contest by Executive about the amount of any payment pursuant to this
Agreement), plus in each case interest on any delayed payment at the "applicable
federal rate" provided for in Section 7872(f)(2)(A) of the Code.
13. Covenants.
(a) Covenant Not to Compete. During the Restricted Period,
Executive shall not, within the States of North Carolina and South Carolina,
directly or indirectly, in any capacity, render his services, or engage or have
a financial interest in, any business that shall be competitive with any of
those business activities in which CCBF or any of its Subsidiaries that are
financial institutions is engaged as of the date of this Agreement (a
"Competition"), which business activities include the provision of banking
services (collectively, the "Business"); provided, however, that Executive's
ownership of less than three percent (3%) of the outstanding securities of any
Competitor that has a class of securities listed on a securities exchange or
qualified for quotation on any over-the-counter market shall not be a violation
of the foregoing. If a court determines that the foregoing restrictions are too
broad or otherwise unreasonable under applicable law, including with respect to
time, scope or territory, the court is hereby requested and authorized by the
parties hereto to revise the foregoing restrictions to include the maximum
restrictions allowable under applicable law.
14
<PAGE>
(b) Covenant Not to Solicit Customers. During the Restricted
Period, Executive shall not, directly or indirectly, individually or on behalf
of any other person or entity (other than CCBF or a Subsidiary), solicit the
provision of banking services to any person, partnership, corporation or other
entity who is or was (i) a customer of any Subsidiary during any part of the
twelve (12) month period immediately prior to the Date of Termination, or (ii) a
potential customer to whom any Subsidiary solicited the provision of banking
services during any part of the twelve (12) month period immediately prior to
the Date of Termination.
(c) Covenant Not to Solicit Employees. During the Restricted
Period, Executive shall not, directly or indirectly, individually or on behalf
of any other person or entity, solicit, recruit or entice, directly or
indirectly, any employee of CCBF or any Subsidiary to leave the employment of
CCBF or such Subsidiary to work with Executive or with any person, partnership,
corporation or other entity with whom Executive is or becomes affiliated or
associated.
(d) Reasonableness of Scope and Duration. The parties hereto
agree that the covenants and agreements contained in this Section 13 are
reasonable in their time, territory and scope, and they intend that they be
enforced, and no party shall raise any issue of the reasonableness of the time,
territory or scope of any such covenants in any proceeding to enforce any such
covenants.
(e) Enforceability. Executive agrees that monetary damages
would not be a sufficient remedy for any breach or threatened breach of the
provisions of this Section 13, and that in addition to all other rights and
remedies available to CCBF, CCBF shall be entitled to specific performance and
injunctive or other equitable relief as a remedy for any such breach or
threatened breach.
(f) Separate Covenants and Severability. The covenants and
agreements contained in this Section 13 shall be construed as separate and
independent covenants. Should any part or provision of any such covenant or
agreement be held invalid, void or unenforceable in any court of competent
jurisdiction, no other part or provision of this Agreement shall be rendered
invalid, void or unenforceable by a court of competent jurisdiction, no other
part or provision of this Agreement shall be rendered invalid, void or
unenforceable as a result. If any portion of the foregoing provisions is found
to be invalid or unenforceable by a court of competent jurisdiction unless
modified, it is the intent of the parties that the otherwise invalid or
unreasonable term shall be reformed, or a new enforceable term provided, so as
to most closely effectuate the provisions as is validly possible.
(g) Inapplicability. The provisions of this Section 13 shall
not be operative upon, or be in any way enforceable against, Executive at or
after a Change of Control Termination or a termination of Executive's employment
by CCBF and CCB Bank during the Employment Period other than for Cause, death or
Disability (i.e., a termination without Cause).
14. Assignment and Successors.
(a) Executive. This Agreement is personal to Executive and
without the prior written consent of CCBF and CCB Bank shall not be assignable
by Executive otherwise than by will or the laws of descent and distribution.
This Agreement shall inure to the benefit of and be enforceable by Executive's
legal representatives.
15
<PAGE>
(b) CCBF and CCB Bank. This Agreement shall inure to the
benefit of and be binding upon CCBF and CCB Bank and their respective successors
and assigns. Each of CCBF and CCB Bank will require any successor to it (whether
direct or indirect, by stock or asset purchase, merger, consolidation or
otherwise) to all or substantially all of its business or more than fifty
percent (50%) of its assets to assume expressly and agree to perform this
Agreement in the same manner and to the same extent it would be required to
perform it if no such succession had taken place. As used in this Agreement,
"CCBF" and "CCB Bank" shall mean CCBF and CCB Bank as hereinbefore defined and
any successor to their respective businesses and/or assets as aforesaid which
assumes and agrees to perform this Agreement by operation of law, or otherwise.
15. Regulatory Intervention. Notwithstanding anything in this Agreement
to the contrary, the obligations of CCBF and CCB Bank under this Agreement are
subject to the following terms and conditions:
(a) If the Executive is suspended and/or temporarily
prohibited from participating in the conduct of CCBF's or CCB Bank's affairs by
a notice served under Section 8(e)(3) or (g)(1) of the Federal Deposit Insurance
Act (12 U.S.C. ss.1818 (e)(3) and (g)(1)), CCBF's or CCB Bank's obligations
hereunder, as applicable, shall be suspended as of the date of service unless
stayed by appropriate proceedings. If the charges in the notice are dismissed,
all of CCBF's or CCB Bank's obligations, as applicable, which were suspended
shall be reinstated.
(b) If Executive is removed and/or permanently prohibited from
participating in the conduct of CCBF's or CCB Bank's affairs by an order issued
under Section 8(e)(4) or (g)(1) of the Federal Deposit Insurance Act (12 U.S.C.
ss.1818 (e)(4) and (g)(1)), all obligations of CCBF or CCB Bank, as applicable,
under this Agreement shall terminate as of the effective date of the order, but
vested rights of the parties shall not be affected.
(c) If CCB Bank is in default (as defined in Section 3(x)(1)
of the Federal Deposit Insurance Act (12 U.S. C. ss.1813 (x)(1)), all
obligations of CCB Bank under this Agreement shall terminate as of the date of
default, but any vested rights of Executive shall not be affected.
(d) All obligations of CCB Bank under this Agreement shall be
terminated, except to the extent determined that continuation of the contract is
necessary for the continued operation of CCB Bank, if so ordered by the North
Carolina Commissioner of Banks (the "Commissioner") at the time the Federal
Deposit Insurance Corporation ("FDIC") enters into an agreement to provide
assistance to or on behalf of CCB Bank under the authority contained in Section
13(c) of the Federal Deposit Insurance Act (12 U.S.C. ss.1823 (c)), or if so
ordered by the Commissioner at the time the FDIC approves a supervisory merger
to resolve problems related to operation of CCB Bank or when CCB Bank is
determined by the Commissioner to be in an unsafe or unsound condition. Any
rights of Executive that shall have vested under this Agreement shall not be
affected by such action.
(e) With regard to the provisions of this Section 15(a)
through (d):
(i) CCBF and CCB Bank agree to use their best efforts to
oppose any such notice of charges as to which there
are reasonable defenses;
(ii) In the event the notice of charges is dismissed or
otherwise resolved in a manner that will permit CCBF
and/or CCB Bank to resume their obligations to pay
compensation hereunder, CCBF and/or CCB Bank will
promptly make such payment hereunder; and
16
<PAGE>
(iii) During any period of suspension under Section 15(a),
the vested rights of Executive shall not be affected
except to the extent precluded by such notice.
(f) CCB Bank's obligations to provide compensation or other
benefits to Executive under this Agreement shall be terminated or limited to the
extent required by the provisions of any final regulation or order of the FDIC
promulgated under Section 18(k) of the Federal Deposit Insurance Act (12 U.S.C.
ss.1828(k)) limiting or prohibiting any "golden parachute payment" as defined
therein, but only to the extent that the compensation or payments to be provided
by CCB Bank under this Agreement are so prohibited or limited.
(g) It is intended by CCBF, CCB Bank and Executive that if
only one of CCBF and CCB Bank is prohibited from fulfilling its obligations
under this Agreement in any of the circumstances described in the above
provisions of this Section 15 (whether for a period or permanently), the other
shall remain obligated to fulfill all obligations of CCBF and CCB Bank under
this Agreement.
16. Miscellaneous.
(a) No Mitigation. Executive shall not be required to mitigate
the amount of any payment provided for in this Agreement by seeking other
employment or otherwise and, except as provided in Sections 8(b)(iv) and
9(c)(iv), no such payment shall be offset or reduced by the amount of any
compensation or benefits provided to Executive in any subsequent employment.
(b) Waiver. Failure of either part to insist, in one or more
instances, on performance by the other in strict accordance with the terms and
conditions of this Agreement shall not be deemed a waiver or relinquishment of
any right granted in this Agreement or of the future performance of any such
term or condition or of any other term or condition of this Agreement, unless
such waiver is contained in a writing signed by the party making the waiver.
(c) Severability. If any provision or covenant, of any part
thereof, of this Agreement should be held by any court to be invalid, illegal or
unenforceable, either in whole or in part, such invalidity, illegality or
unenforceability shall not affect the validity, legality or enforceability of
the remaining provisions or covenants, or any part thereof, of this Agreement,
all of which shall remain in full force and effect.
(d) Other Agents. Nothing in this Agreement is to be
interpreted as limiting CCBF or CCB Bank from employing other personnel on such
terms and conditions as may be satisfactory to it.
(e) Entire Agreement. Except as provided herein, this
Agreement contains the entire agreement among CCBF, CCB Bank and Executive, with
respect to the subject matter hereof and supersedes and invalidates any previous
employment and severance agreements or contracts with Executive. No
representations, inducements, promises or agreements, oral or otherwise, which
are not embodied herein, shall be of any force or effect.
(f) Governing Law. Except to the extent preempted by federal
law, the laws of the State of North Carolina shall govern this Agreement in all
respects, whether as to its validity, construction, capacity, performance or
otherwise.
17
<PAGE>
(g) Notices. All notices, requests, demands and other
communications required or permitted hereunder shall be in writing and shall be
deemed to have been duly given if delivered or seven (7) days after mailing if
mailed, first class, certified mail, postage prepaid:
To CCBF and CCB Bank:
CCB Financial Corporation
111 Corcoran Street
Durham, North Carolina 27702-0931
Attention: Ernest C. Roessler, Chairman of the Board
To Executive:
Sheldon M. Fox
709 Glen Eden Drive
Raleigh, North Carolina 27612
Any party may change the address to which notices, requests, demands and other
communications shall be delivered or mailed by giving notice thereof to the
other party in the same manner provided herein.
(h) Amendments and Modifications. This Agreement may be
amended or modified only by a writing signed by all parties hereto, which makes
specific reference to this Agreement.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Amended and Restated Employment Agreement as of August 1, 1999.
CCB FINANCIAL CORPORATION
By:/s/ ERNEST C. ROESSLER
---------------------------------------------
Ernest C. Roessler, Chairman, President
and Chief Executive Officer
CENTRAL CAROLINA BANK AND
TRUST COMPANY
By:/s/ ERNEST C. ROESSLER
---------------------------------------------
Ernest C. Roessler, Chairman, President
and Chief Executive Officer
EXECUTIVE:
/s/ SHELDON M. FOX
------------------------------------------------
Sheldon M. Fox
19
Exhibit 10.5
CCB Financial Corporation
Plan for Severance Compensation after a Change in Control
Amendment I
Section 2.1(c) is amended to read:
(c) "Compensation" of a Participant means the base monthly salary
paid by an Employer as consideration for the Participant's
services during the month preceeding the month in which the
date as of which Compensation is to be determined occurs,
plus (i) one-twelfth (1/12) of the Participant's "target"
bonus under CCB's Executive Management Incentive Plan
("EMIP") for the year in which the date as of which
Compensation is to be determined occurs and (ii) one-twelfth
(1/12) of any cash compensation, other than base salary or a
bonus under the EMIP, paid by an Employer to the Participant
during the twelve month period ended with the month which
immediately precedes the month in which the date as of which
Compensation is to be determined occurs.
Approved by Board of Directors
April 27, 1999
Exhibit 10.6
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this "Agreement") is
made and entered into as of the 15th day of October, 1999 by and between CCB
Financial Corporation, a North Carolina corporation ("CCB"), and William L.
Abercrombie, Jr. ("Executive").
BACKGROUND
----------
WHEREAS, Executive serves as the Chief Executive Officer of American
Federal Bank, FSB, a federal stock savings bank and a subsidiary of CCB
("American Federal"); and
WHEREAS, on July 31, 1997, Executive and CCB entered into an Employment
Agreement (the "Prior Agreement"), and Executive and CCB desire to amend and
restate such the Prior Agreement as set forth herein.
NOW THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements set forth herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
1. Effective Date. The effective date of this Agreement is October 15,
1999 (the "Effective Date").
2. Employment. Executive shall continue to be employed as an Executive
Vice President of CCB, and, pursuant to an Amended and Restated Employment
Agreement between Executive and American Federal, also dated as of October 15,
1999 (the "AFB Agreement"), he shall continue to be employed as the Chief
Executive Officer of American Federal until such time as American Federal shall
be merged into Central Carolina Bank and Trust Company ("CCB Bank"). Upon such
merger, Executive shall be an Executive Vice President of CCB Bank. Executive's
responsibilities under this Agreement shall be in accordance with the policies
and objectives established by the Board of Directors of CCB. In such capacity,
Executive will report directly to the Chief Executive Officer of CCB.
3. Employment Period. Unless earlier terminated in accordance with
Section 6 of this Agreement, Executive's employment shall be for the term
beginning the Effective Date and ending at 11:59:59 o'clock, p.m., on October
15, 2002 (the "Employment Period").
4. Extent of Service. During the Employment Period, and excluding any
periods of vacation and sick leave to which Executive is entitled, Executive
agrees to devote his business time, attention, skill and efforts to the faithful
performance of his duties hereunder; provided, however, that with the approval
of the Board of Directors of CCB, Executive may serve, or continue to serve, on
the boards of directors of, and hold any other offices or positions in, such
companies or organizations, which, in such Board's judgment, will not present
any material conflict of interest with CCB or any of its subsidiaries, divisions
or affiliates, or will not unfavorably affect the performance of Executive's
duties pursuant to this Agreement, or will not violate any applicable statute or
regulation. During the Employment Period, it shall not be a violation of this
Agreement
<PAGE>
for Executive to (i) devote reasonable periods of time to charitable and
community activities, and/or (ii) manage personal business interests and
investments, so long as such activities do not interfere with the performance of
Executive's responsibilities and duties under this Agreement. It is expressly
understood and agreed that to the extent that any such activities have been
conducted by Executive prior to the Effective Date, the continued conduct of
such activities (or the conduct of activities similar in nature and scope
thereto) subsequent to the Effective Date shall not thereafter be deemed to
interfere with the performance of Executive's responsibilities hereunder.
5. Compensation and Benefits.
(a) Base Salary. During the Employment Period, CCB will pay to
Executive a base salary of $327,000 per calendar year ("Base Salary") and an
additional fixed bonus compensation of $166,454 per calendar year ("Bonus") (the
Base Salary and the Bonus are collectively referred to hereinafter as the
"Compensation"). The Compensation, less normal withholdings, shall be payable in
equal twice monthly installments under CCB's payroll practices from time to
time. Executive's Compensation shall be prorated on a daily basis for portions
of calendar years occurring during the Employment Period. As of the Effective
Date, Executive shall cease to be a participant in CCB's Executive Management
Incentive Plan (the "EMIP"). Executive shall receive the portion of his calendar
year 1999 bonus under the EMIP allocable to the period from January 1, 1999 to,
but not including, the Effective Date in a lump sum, less applicable
withholdings, on the day prior to the Effective Date.
(b) Savings and Retirement Plans. During the Employment
Period, Executive shall be entitled to participate in all savings and retirement
plans, practices, policies and programs applicable generally to senior executive
officers of CCB and its affiliated companies, and on the same basis as such
other senior executive officers, with full credit given for Executive's total
accumulated years of service at American Federal for purposes of determining
vesting and eligibility. In addition, under the Prior Agreement, CCB assumed and
maintained on behalf of Executive that certain Supplemental Retirement Benefit
Agreement, dated as of December 19, 1994, between Executive and American Federal
(the "AFB SERP"). If so requested by Executive, CCB shall continue to maintain
the AFB SERP.
(c) Incentive Plans. Those options to acquire shares of CCB's
Common Stock granted to Executive in his capacity as an executive officer of CCB
prior to the Effective Date that remain unvested as of the Effective Date shall
vest and be exercisable as and when provided in CCB's Amended and Restated
Long-Term Incentive Plan (the "LTIP") and the applicable option grant agreement.
Executive acknowledges and agrees that CCB has no obligation to grant additional
options to acquire capital stock of CCB to him under the LTIP or otherwise.
Notwithstanding the foregoing, in the event that a "Change of Control" of CCB,
as defined in CCB's Plan for Severance Compensation After A Change of Control,
shall occur during the Employment Period, all options to acquire shares of CCB's
Common Stock granted to Executive in his capacity as an executive officer of CCB
that are outstanding but unvested immediately prior to such Change of Control
shall vest and be exercisable by Executive as of and after the occurrence of the
Change of Control. Executive's option grant agreements with respect to such
options shall be deemed amended by this Agreement as provided in the preceding
sentence.
<PAGE>
Executive has been granted performance units ("Units") under
CCB's LTIP as follows: (i) 680 Units for which the performance period is
composed of the three years beginning January 1, 1997 and ending December 31,
1999 (the "1999 Units"); (ii) 720 Units for which the performance period is
composed of the three years beginning January 1, 1998 and ending December 31,
2000 (the "2000 Units"); and, (iii) 980 Units for which the performance period
is composed of the three years beginning January 1, 1999 and ending December 31,
2001 (the "2001 Units"). The payment date for each performance period is during
March of the year following the end of such period. Executive will be entitled
to a cash payment with respect to the 1999 Units in the amount and to the extent
he qualifies therefor as provided in the LTIP and the applicable Unit grant
agreement. Executive shall be entitled to cash payments with respect to the 2000
Units and the 2001 Units in the amounts and to the extent he qualifies therefor
as provided in the LTIP and the applicable Unit grant agreements, each as
amended as of the date of this Agreement. Executive acknowledges and agrees that
CCB has no obligation to grant additional Units to him.
(d) Welfare Benefit Plans. During the Employment Period, and
subject to Section 7(c) of this Agreement, Executive and/or Executive's family,
as the case may be, shall be eligible for participation in and shall receive all
benefits under welfare benefit plans, practices, policies and programs provided
by CCB and its affiliated companies (including, without limitation, medical,
prescription, dental, employee life, group life, accidental death and travel
accident insurance plans and programs) to the extent applicable generally to
senior executive employees of CCB and its affiliated companies, and full credit
given for Executive's total accumulated years of service at American Federal for
purposes of determining vesting and eligibility (other than under CCB's retiree
medical plan). Without limiting the foregoing, (i) during the Employment Period,
CCB shall continue to maintain on behalf of Executive that certain life
insurance policy identified on Exhibit A hereto, and (ii) for one year after
Executive's death, CCB shall pay any premium required for any "qualified
beneficiary" to continue his or her health care coverage in accordance with
Title I, Part 6 of the Employee Retirement Security Act of 1974.
(e) Expenses. During the Employment Period, Executive shall be
entitled to receive prompt reimbursement for all reasonable expenses incurred by
Executive in accordance with the policies, practices and procedures of CCB and
its affiliated companies to the extent applicable generally to other senior
executive employees of CCB and its affiliated companies.
(f) Fringe Benefits. During the Employment Period, Executive
shall be entitled to fringe benefits in accordance with the plans, practices,
programs and policies of CCB and its affiliated companies in effect for senior
executive employees of CCB and its affiliated companies. Executive's Base Salary
shall be the basis for the computation of his perquisites allowance.
<PAGE>
6. Termination of Employment.
(a) Termination. Either Executive or CCB may terminate
Executive's employment hereunder as of the end of any twice monthly payroll
period. Executive's employment shall terminate automatically upon Executive's
death.
(b) Notice of Termination. Any termination by CCB or by
Executive shall be communicated by five (5) days prior written notice to the
other party thereto given in accordance with Section 13(g) of this Agreement.
(c) Date of Termination. "Date of Termination" means the last
day of the twice monthly payroll period described in Section 6(a) of this
Agreement or the date of Executive's death, as applicable.
7. Obligations of CCB Upon Termination.
(a) Termination. In the event that, during the Employment
Period, Executive's employment is terminated by CCB or Executive as provided in
Section 6(a) of this Agreement, then in consideration of Executive's services
rendered prior to such termination and as reasonable compensation for his
compliance with the restrictive covenants set forth in Section 11 of this
Agreement:
(i) CCB shall pay to Executive in cash each twice
monthly payroll period occurring after the payroll period in which the
Date of Termination occurs, when due in accordance with CCB's payroll
practices, a sum equal to the aggregate of the following amounts
divided by the number of days occurring from (and including) the first
day of the twice monthly payroll period following the pay period in
which the Date of Termination occurred through October 15, 2002 (the
"Remaining Employment Period"), with such quotient being multiplied by
the number of days in the twice monthly payroll period for which such
payment is being made:
(A) the amount of $1,480,362, less the amount of
all payments of Compensation made to
Executive under this Agreement after the
Effective Date and prior to the commencement
of the Remaining Employment Period; and
(B) an amount equal to the excess of (a) the
actuarial equivalent of the benefit under
CCB's qualified defined benefit retirement
plan (the "Retirement Plan") (utilizing
actuarial assumptions no less favorable to
Executive than those in effect under CCB's
Retirement Plan on the Date of Termination),
and any excess or supplemental retirement
plans (including the AFB SERP) in which
Executive participates (together, the "SERP")
which Executive would receive if Executive's
employment continued throughout the Remaining
Employment Period, assuming for this purpose
that all accrued benefits are fully vested,
and, assuming that Executive's compensation
in each
<PAGE>
remaining year of the Employment Period is
the Compensation, over (b) the actuarial
equivalent of Executive's actual benefits
(paid or payable), if any, under the
Retirement Plan and the SERP as of the Date
of Termination; and
(ii) CCB shall pay to Executive in cash on or before the
thirtieth (30th) day following the Effective Date the amount of any
compensation previously deferred by Executive (together with accrued
interest and earnings thereon) and any accrued vacation pay through the
Effective Date (in each case to the extent not theretofore paid); and
(iii) In the event the Date of Termination occurs on or after
January 1st and before March 31st of any calendar year, CCB shall pay
Executive in cash the amount payable to Executive with respect to Units
for the performance period which ended December 31st of the immediately
preceding calendar year, which payment shall be made at the time
provided by the LTIP and the applicable Unit award agreement;
(iv) for the Remaining Employment Period, or such longer
period as may be provided by the terms of the appropriate plan,
program, practice or policy, CCB shall continue benefits to Executive
and/or Executive's family at least equal to those which would have been
provided to them in accordance with the plans, programs, practices and
policies described in Section 5(d) of this Agreement if Executive's
employment had not been terminated, provided, however, that if
Executive becomes re-employed with another employer and is eligible to
receive medical or other welfare benefits under another employer
provided plan, the medical and other welfare benefits described herein
shall be secondary to those provided under such other plan during such
applicable period of eligibility. For purposes of determining
eligibility and years-of-service credit (but not the time of
commencement of benefits) of Executive for retiree benefits pursuant to
such plans, practices, programs and policies, Executive shall be
considered to have remained employed throughout the Remaining
Employment Period and to have retired on the last day of such period;
and
(v) to the extent not theretofore paid or provided, CCB shall
timely pay or provide to Executive any other amounts or benefits
required to be paid or provided or which Executive is eligible to
receive under any plan, program, policy or practice or contract or
agreement of CCB and its affiliated companies (such other amounts and
benefits shall be hereinafter referred to as the "Other Benefits"); and
(vi) notwithstanding any provision of this Agreement to the
contrary, Executive shall forfeit his right to receive, or, to the
extent such amounts have previously been paid to Executive, shall repay
in full to CCB with interest at 8% per annum within thirty (30) days of
a final determination of Executive's liability therefor as set forth
below, the amounts described in Section 7(a)(i)(A) and (B), Section
7(a)(ii) and Section 7(a)(iii) of this Agreement if any time during the
Employment Period or the Remaining Employment Period (the "Restricted
Period") he violates the restrictive covenants set forth in Section 11
of this Agreement. Any determination of whether Executive has violated
such covenants shall be made by arbitration in Greenville, South
Carolina under the Rules of Commercial Arbitration
<PAGE>
(the "Rules") of the American Arbitration Association, which Rules are
deemed to be incorporated by reference herein; provided, however, that
either party may seek equitable remedies in court.
(b) Death. If Executive's employment is terminated by reason
of Executive's death during the Employment Period or the Remaining Employment
Period, this Agreement shall terminate without further obligations to
Executive's legal representatives under this Agreement, other than for payment
of Remaining Obligations and the timely payment or provision of Other Benefits.
"Remaining Obligations" means the aggregate of the amounts described in Section
7(a)(i)(A) and (B), Section 7(a)(ii) and Section 7(a)(iii) of this Agreement
less the total sum of those amounts paid to Executive under such Section
7(a)(i), Section 7(a)(ii) and Section 7(a)(iii) prior to his death. Remaining
Obligations shall be paid to Executive's estate or beneficiary, as applicable,
in a lump sum in cash within 30 days of the Date of Termination. With respect to
the provision of Other Benefits, the term Other Benefits as utilized in this
Section 7(b) shall include, without limitation, and Executive's estate and/or
beneficiaries shall be entitled to receive, (i) benefits under such plans,
programs, practices and policies relating to death benefits, if any, as are
applicable generally to senior executive officers of CCB and its affiliated
companies and their beneficiaries, will full credit given for Executive total
accumulated years of service at American Federal for purposes of determining
vesting and eligibility, (ii) the death benefits under the life insurance policy
identified on Exhibit A hereto, and (iii) the beneficiary health care coverage
referred to in Section 5(d) of this Agreement.
(c) Disability. Notwithstanding any other provision of this
Agreement, Executive acknowledges and agrees (i) that in consideration of CCB's
agreements herein, he hereby waives and releases any right to participate in any
disability benefit plan, program or coverage of CCB or maintained by CCB through
an insurer or other provider and any right to receive disability payments from
or through any such plan, program or coverage, and (ii) that should Executive be
deemed entitled to receive any such disability payments notwithstanding the
provisions of the preceding item (i), the present value of all such disability
payments (with such present value being determined by the Accounting Firm (as
defined in Section 8(b) of this Agreement) using such life expectancy, interest
rate and other relevant assumptions as are deemed by it to be reasonable at the
time and in the context of its determination) shall be deducted from the
aggregate of the sums described in Section 7(a)(i) and Section 7(a)(iii) of this
Agreement.
<PAGE>
8. Mandatory Reduction of Payments in Certain Events.
(a) Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined that any payment or
distribution by CCB to or for the benefits of Executive (whether paid or payable
or distributed or distributable pursuant to the terms of this Agreement or
otherwise) (a "Payment") would be subject to the excise tax imposed by Section
4999 (the "Excise Tax") of the Internal Revenue Code of 1986, as amended (the
"Code"), then, prior to the making of any Payment to Executive, a calculation
shall be made comparing (i) the net benefit to Executive of the Payment after
payment of the Excise Tax, to (ii) the net benefit to Executive if the Payment
had been limited to the extent necessary to avoid being subject to the Excise
Tax. If the amount calculated under (i) above is less than the amount calculated
under (ii) above, then the Payment shall be limited to the extent necessary to
avoid being subject to the Excise Tax.
(b) The determination of whether an Excise Tax would be
imposed, the amount of such Excise Tax, and the calculation of the amounts
referred to in Section 8(a)(i) and (ii) above shall be made by CCB's regular
independent accounting firm at the expense of CCB or, at the election and
expense of Executive, another nationally recognized independent accounting firm
(the "Accounting Firm"). The Accounting Firm shall provide detailed supporting
calculations. Any determination by the Accounting Firm shall be binding upon CCB
and Executive. As a result of the uncertainty in the application of Section 4999
of the Code at the time of the initial determination by the Accounting Firm
hereunder, it is possible that Payments which Executive was entitled to, but did
not receive pursuant to Section 8(a), could have been made without the
imposition of the Excise Tax ("Underpayment"). In such event, the Accounting
Firm shall determine the amount of the Underpayment that has occurred and any
such Underpayment shall be promptly paid by CCB to or for the benefit of
Executive.
9. Non-Exclusivity of Rights. Except as otherwise specifically provided
herein, nothing in this Agreement shall prevent or limit Executive's continuing
or future participation in any plan, program, policy, or practice provided by
CCB or any of its affiliated companies and for which Executive may qualify, nor,
subject to Section 13(e), shall anything herein limit or otherwise affect such
rights as Executive may have under any contract or agreement with CCB or any of
its affiliated companies. Amounts which are vested benefits or which Executive
is otherwise entitled to receive under any plan, policy, practice or program of
or any contract or agreement with CCB or any of its affiliated companies at or
subsequent to the date Executive's employment is terminated shall be payable in
accordance with such plan, policy, practice or program or such contract or
agreement except as explicitly modified by this Agreement.
10. Full Settlement. CCB's obligation to make the payments provided for
in this Agreement and otherwise to perform its obligations hereunder shall not
be affected by any set-off, counterclaim, recoupment, defense or other claim,
right or action which CCB may have against Executive or others. In no event
shall Executive be obligated to seek other employment or take any other action
by way of mitigation of the amounts payable to Executive under any of the
provisions of this Agreement and such amounts shall not be reduced whether or
not Executive obtains such employment. CCB agrees to pay as incurred, to the
full extent permitted by law, all legal fees and expenses which Executive may
reasonably incur as a result of any contest (to the extent that Executive is
successful, in whole or in part, in such contest) by CCB, Executive or others of
the
<PAGE>
validity or enforceability of, or liability under, any provision of this
Agreement or any guarantee of performance thereof (including as a result of any
contest by Executive about the amount of any payment pursuant to this
Agreement), plus in each case interest on any delayed payment at the applicable
federal rate provided for in Section 7872(f)(2)(A) of the Code.
11. Covenants.
(a) Covenant Not to Compete. During the Restricted Period (as
defined in Section 7(a)(vi) of this Agreement), Executive shall not, within the
States of South Carolina and North Carolina, directly or indirectly, in any
capacity, render his services, or engage or have a financial interest in, any
business that shall be competitive with any of those business activities in
which CCB or any of its subsidiaries are engaged as of the date of Executive's
termination of employment, which business activities include the provision of
banking and related financial services (collectively, the "Business"); provided,
however, that Executive's beneficial ownership of 3% or less of any class of
securities listed for trading on a national securities exchange or traded on the
Nasdaq National Market or in the over-the-counter market and reported by The
Nasdaq Stock Market, Inc. shall not constitute a "financial interest" in
violation of this covenants. If a court determines that the foregoing
restrictions are too broad or otherwise unreasonable under applicable law,
including with respect to time or territory, the court is hereby requested and
authorized by the parties hereto to revise the foregoing restriction to include
the maximum restrictions allowable under applicable law.
(b) Covenant No to Solicit Customers. During the Restricted
Period, Executive shall not, directly or indirectly, individually or on behalf
of any other person, partnership, limited liability company, corporation or
other entity ("Person") (other than CCB or an affiliated Person thereof),
solicit the provision of services included in the Business to any Person who is
or was (i) a customer of CCB or any of its affiliates for whom CCB or any of its
affiliates provided services included in the Business during any part of the
12-month period immediately prior to the date of Executive's termination as an
employee of CCB, or (ii) a potential customer of CCB or any of its affiliates to
whom CCB or any of its affiliates solicited the provision of services included
in the Business during any part of the 12-month period immediately prior to the
date of Executive's termination as an employee of CCB.
(c) Covenant Not to Solicit Employees. During the Restricted
Period, Executive shall not, directly or indirectly, individually or on behalf
of any other Person, solicit, recruit or entice, directly or indirectly, any
employee of CCB or its affiliates to leave the employment of CCB or such
affiliate to work with Executive or with any Person with which Executive is or
becomes affiliated or associated.
(d) Reasonableness of Scope and Duration. The parties hereto
agree that the covenants and agreements contained in this Section 11 are
reasonable in their scope and duration, and they intend that they be enforced,
and no party shall raise any issue of the reasonableness of the scope or
duration of any such covenants in any proceeding to enforce any such covenants.
(e) Enforceability. Executive agrees that monetary damages
would not be a sufficient remedy for any breach or threatened breach of the
provisions of this Section 11, and that
<PAGE>
in addition to all other rights and remedies available to CCB, CCB shall be
entitled to specific performance and injunctive or other equitable relief as a
remedy for any such breach or threatened breach.
(f) Separate Covenants and Severability. The covenants and
agreements contained in this Section 11 shall be construed as separate and
independent covenants. Should any part or provision of any such covenant or
agreement be held invalid, void or unenforceable in any court of competent
jurisdiction, no other part or provision of this Agreement shall be rendered
invalid, void or unenforceable as a result. If any portion of the foregoing
provisions is found to be invalid or unenforceable by a court of competent
jurisdiction unless modified, it is the intent of the parties that the otherwise
invalid or unreasonable term shall be reformed, or a new enforceable term
provided, so as to most closely effectuate the provisions as is validly
possible.
12. Assignment and Successors.
(a) Executive. This Agreement is personal to Executive and
without the prior written consent of CCB shall not be assignable by Executive
otherwise than by will or the laws of descent and distribution. This Agreement
shall inure to the benefit of and be enforceable by Executive's legal
representatives.
(b) CCB. This Agreement shall inure to the benefit of and be
binding upon CCB and its successors and assigns. CCB will require any successor
(whether direct or indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of its business and/or assets of CCB to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that CCB would be required to perform it if no such succession had taken
place. As used in this Agreement, "CCB" shall mean CCB as hereinbefore defined
and any successor to its businesses and/or assets as aforesaid which assumes and
agrees to perform this Agreement by operation of law or otherwise.
13. Miscellaneous.
(a) No Mitigation. Executive shall not be required to mitigate
the amount of any payment provided for in this Agreement by seeking other
employment or otherwise and no such payment shall be offset or reduced by the
amount of any compensation or benefits provided to Executive in any subsequent
employment.
(b) Waiver. Failure of either part to insist, in one or more
instances, on performance by the other in strict accordance with the terms and
conditions of this Agreement shall not be deemed a waiver or relinquishment of
any right granted in this Agreement or of the future performance of any such
term or condition or of any other term or condition of this Agreement, unless
such waiver is contained in a writing signed by the party making the waiver.
(c) Severability. If any provision or covenant, of any part
thereof, of this Agreement should be held by any court to be invalid, illegal or
unenforceable, either in whole or in part, such invalidity, illegality or
unenforceability shall not affect the validity, legality or
<PAGE>
enforceability of the remaining provisions or covenants, or any part thereof, of
this Agreement, all of which shall remain in full force and effect.
(d) Other Agents. Nothing in this Agreement is to be
interpreted as limiting CCB from employing other personnel on such terms and
conditions as may be satisfactory to it.
(e) Entire Agreement. As of the date hereof, Executive and
American Federal have entered into the AFB Agreement which relates specifically
to Executive's employment as Chief Executive Officer of American Federal until
the merger of American Federal with CCB Bank, and contains certain bank
regulatory limitations imposed by the Office of Thrift Supervision and the
Federal Deposit Insurance Corporation. Except as provided herein or in the AFB
Agreement, this Agreement contains the entire agreement between CCB and
Executive with respect to the subject matter hereof and it supersedes and
invalidates any previous agreements or contracts including employment agreements
by and between Executive and CCB or American Federal. No representations,
inducements, promises or agreements, oral or otherwise, which are not embodied
herein or in the AFB Agreement, shall be of any force or effect.
(f) Governing Law. Except to the extent preempted by federal
law, the laws of the State of North Carolina shall govern this Agreement in all
respects, whether as to its validity, construction, capacity, performance or
otherwise.
(g) Notices. All notices, requests, demands and other
communications required or permitted hereunder shall be in writing and shall be
deemed to have been duly given upon personal delivery or on the seventh day
following the postmark date after mailing if mailed, first class, certified
mail, postage prepaid:
To CCB:
CCB Financial Corporation
111 Corcoran Street
Durham, North Carolina 27702-0931
Attention: Chief Executive Officer
Facsimile No.: (919) 683-6881
To Executive:
William L. Abercrombie, Jr.
300 East McBee Avenue
Greenville, South Carolina 29601
Facsimile No.: (864) 255-7504
Any party may change the address to which notices, requests, demands and other
communications shall be delivered or mailed by giving notice thereof to the
other party in the same manner provided herein.
<PAGE>
(h) Amendments and Modifications. This Agreement may be
amended or modified only by a writing signed by both parties hereto, which makes
specific reference to this Agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Amended and Restated Employment Agreement as of the date first above
written.
CCB FINANCIAL CORPORATION
By: /s/ ERNEST C. ROESSLER
-----------------------
Title: Chairman and CEO
EXECUTIVE:
/s/ WILLIAM L. ABERCROMBIE, JR.
--------------------------------
William L. Abercrombie, Jr.
Exhibit 10.7
AMERICAN FEDERAL
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT ("Agreement") is made
and entered into as of the 15th day of October, 1999 by and between American
Federal Bank, FSB, a federal stock savings bank ("American Federal"), and
William L. Abercrombie, Jr. (hereinafter "Executive").
BACKGROUND
----------
Executive is the Chief Executive Officer of American Federal, a
subsidiary of CCB Financial Corporation, a North Carolina corporation ("CCB"),
pursuant to an Employment Agreement, dated July 31, 1997 (the "Prior
Agreement"). CCB and Executive have entered into an Amended and Restated
Employment Agreement as of October 15, 1999 which governs the terms of
Executive's employment with CCB and certain of its affiliates (the "CCB
Agreement") and Executive desires to amend and restate the Prior Agreement in
the form of this Agreement.
NOW THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements set forth herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
1. Effective Date. The effective date of this Agreement is October 15,
1999.
2. Employment. Executive will serve during the term of this Agreement
as the President and Chief Executive Officer of American Federal; provided,
however, that upon the merger of American Federal into Central Carolina Bank and
Trust Company, a CCB subsidiary ("CCB Bank"), Executive become an Executive Vice
President of CCB Bank. All references herein to American Federal shall be deemed
references to CCB Bank after the effectiveness of such merger. Executive's
responsibilities to American Federal under this Agreement shall be in accordance
with the policies and objectives established form time to time by the Board of
Directors of American Federal or, after the aforesaid merger, the Board of
Directors of CCB Bank.
3. Employment Period. The term of this Agreement will be concurrent
with the term of the CCB Agreement (the "Employment Period"), unless earlier
terminated in accordance with Section 6 hereof.
4. Extent of Services. During the Employment Period, and excluding any
periods of vacation and sick leave to which Executive is entitle, Executive
agrees to devote his business time, attention, skill and efforts to the faithful
performance of his duties hereunder and under the CCB Agreement; provided,
however, Executive may engage in such incidental activities as are permitted
under the CCB Agreement.
<PAGE>
5. Compensation and Benefits. During the Employment Period, Executive's
compensation and benefits for service to American Federal will be provided by
CCB in accordance with the terms of Section 5 of the CCB Agreement, which terms
are incorporated herein by reference.
6. Termination of Employment. Executive's employment with American
Federal under this Agreement will terminate (i) under the same circumstances as,
(ii) simultaneously with, and (iii) with the same consequences as, the
termination of his employment with CCB under the terms of Sections 6, 7, and 8
of the CCB Agreement, which terms are incorporated herein by reference. Any
termination benefits shall be payable only once (i.e. not under both
Agreements). Notwithstanding the above the Board of Directors of American
Federal may terminate Executive's employment hereunder at any time, but any such
termination shall not prejudice Executive's right to compensation or other
benefits under this Agreement or the CCB Agreement.
7. Regulatory Intervention . Notwithstanding anything in this Agreement
to the contrary, this Agreement is subject to the following terms and
conditions:
(a) If Executive is suspended and/or temporarily prohibited
form participating in the conduct of American Federal's affairs by a notice
served under Section 8(e)(3) or (g)(1) of the Federal Deposit Insurance Act (12
U.S.C. 1818 (e)(3) and (g) (1)), American Federal's obligations hereunder shall
be suspended as of the date of service unless stayed by appropriate proceedings.
If the charges in the notice are dismissed, American Federal shall (i) pay
Executive all or part of the compensatio withheld while American Federal's
contract obligations were suspended, and (ii) reinstate any of American
Federal's obligation which were suspended.
(b) If Executive is removed and/or permanently prohibited from
participating in the conduct of American Federal's affairs by an order issued
under Section 8(e)(4) or (g)(1) of the Federal Deposit Insurance Act (12 U.S.C.
1818 (e)(4) and (g)(1)), all obligations of American Federal under this
Agreement shall terminate as of the effective date of the order, but vested
rights of the parties shall not be affected.
(c) If American Federal is in default (as defined in Section
3(x)(1) of the Federal Deposit Insurance Act (12 U.S.C. 1818 (e)(4) and (g)
(1)), all obligations under this Agreement shall terminate as of the effective
date of the order, but vested rights of the parties shall not be affected.
(d) All obligations under this Agreement shall be terminated,
except to the extent determined that continuation of the contract is necessary
for the continued operation of American Federal (i) by the Office of Thrift
Supervision ("OTS") at the time the Federal Deposit Insurance Corporation
("FDIC") enters into an agreement to provide assistance to or on behalf of
American Federal under the authority contained in Section 13(c) of the Federal
Deposit Insurance Act (12 U.S.C. 1823 (c)); or )ii) by the OTS at the time the
OTS approves a supervisory merger to resolve problems related to the operation
of American Federal or when American Federal is determined by the OTS to be in
an unsafe or unsound condition. Any rights of Executive that shall have vested
under this Agreement shall not be affected by such action.
(e) With regard to the provisions of this Section 7(a) through
(d):
<PAGE>
(i) American Federal agrees to use its best
efforts to oppose any such notice of charges
as to which there are reasonable defenses;
(ii) In the event the notice of charges is
dismissed or otherwise resolved in a manner
that will permit American Federal to resume
its obligation to pay compensation hereunder,
American Federal will promptly make such
payment hereunder; and
(iii) During the period of suspension, the vested
rights of the contracting parties shall not be
affected except to the extent precluded by
such notice.
(f) American Federal's obligations to provide compensation or
other benefits to Executive under this Agreement shall be terminated or limited
to the extent required by the provisions of any final regulation or order of the
Federal Deposit Insurance Corporation promulgated under Section 18(k) of the
Federal Deposit Insurance Act (12 U.S.C. 1828(k)) limiting or prohibiting any
"golden parachute payment" as defined therein, but only to the extent that the
compensation or payments to be provided under this Agreement are so prohibited
or limited.
8. Legal Expenses. To the extent not paid by CCB under the CCB
Agreement, American Federal agrees to pay as incurred to the full extent
permitted by law, all legal fees and expenses which Executive may reasonably
incur as a result of any contest (to the extent that Executive is successful, in
whole or in part, in such contest) by American Federal, Executive or others of
the validity or enforce ability of, or liability under, any provision of this
Agreement or any guarantee of performance thereof (including as a result of any
contest by Executive about the amount of any payment pursuant to this
Agreement), plus in each case interest on any delayed payment at the applicable
federal rate provided for in Section 7872(f)(2)(A) of the Internal Revenue Code
of 1986, as amended.
9. Assignment and Successors.
(a) Executive. This Agreement is personal to Executive and
without the prior written consent of American Federal shall not be assignable by
Executive otherwise than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and enforceable by Executive's legal
representatives.
(b) American Federal. This Agreement shall inure to the
benefit of and be binding upon American Federal and its successors and assigns.
American Federal will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the
business and/or assets of American Federal to assume expressly and agree to
perform this Agreement in the same manner and to the same extent that American
Federal would be required to perform it if no such succession had taken place.
As used in this Agreement, "American Federal" shall mean American Federal as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by operation of law
or otherwise.
<PAGE>
10. Miscellaneous.
(a) No Mitigation. Executive shall not be required to mitigate
the amount of any payment provided for in this Agreement by seeking other
employment or otherwise and no such payment shall be offset or reduced by the
amount of any compensation or benefits provided to Executive in any subsequent
employment.
(b) Waiver. Failure of either party to insist, in one or more
instances, on performance by the other in strict accordance with the terms and
conditions of this Agreement shall not be deemed a waiver or relinquishment of
any right granted in this Agreement or of the future performance of any such
term or condition or of any other term or condition of this Agreement, unless
such waiver is contained in a writing signed by the party making the waiver.
(c) Severability. If any provision or covenant, or any part
thereof, of this Agreement should be held by any court to be invalid, illegal or
unenforceable, either in whole or in part, such invalidity, illegality or
unenforceability shall not affect the validity, legality or enforceability of
the remaining provisions or covenants, or any part thereof, of this Agreement,
all of which shall remain in full force and effect.
(d) Other Agents. Nothing in this Agreement is to be
interpreted as limiting American Federal from employing other personnel on such
terms and conditions as may be satisfactory to it.
(e) Entire Agreement. Except as provided herein, this
Agreement and the CCB Agreement contain the entire agreement between American
Federal and Executive with respect to the subject matter hereof and such
Agreements supersede and invalidate any previous agreements or contracts
including employment agreements by and between American Federal and Executive.
No representations, inducements, promises or agreements, oral or otherwise,
which are not embodied herein or in the CCB Agreement, shall be of any force or
effect.
(f) Governing Law. Except to the extent preempted by federal
law, the laws of the State of North Carolina shall govern this Agreement in all
respects, whether as to its validity, construction, capacity, performance or
otherwise.
(g) Notices. All notices, requests, demands and other
communications required or permitted hereunder shall be in writing and shall be
deemed to have been duly given if delivered or seven days after mailing if
mailed, first class, certified mail, postage prepaid:
<PAGE>
To American Federal: American Federal Bank, FSB
300 East McBee Avenue
Greenville, South Carolina 29601
Facsimile No.: (864) 255-7504
Attention: Chairman of the Board of Directors
To Executive: William L. Abercrombie, Jr.
300 East McBee Avenue
Greenville, South Carolina 29601
Facsimile No.: (864) 255-7504
Any party may change the address to which notices, requests, demands and other
communications shall be delivered or mailed by giving notice thereof to the
other party in the same manner provided herein.
(h) Amendments and Modifications. This Agreement may be
amended or modified only by a writing signed by both parties hereto, which makes
specific reference to this Agreement.
(Signatures on next page)
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Amended and Restated Employment Agreement as of the date first above
written.
AMERICAN FEDERAL BANK, FSB
By: /s/ ERNEST C. ROESSLER
----------------------
Ernest C. Roessler, Director
EXECUTIVE:
/s/ WILLIAM L. ABERCROMBIE, JR.
-------------------------------
William L. Abercrombie, Jr.
Acknowledged and agreed to:
CCB FINANCIAL CORPORATION
By: /s/ ERNEST C. ROESSLER
----------------------
Ernest C. Roessler
Chairman, President and
Chief Executive Officer
Exhibit 23
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
CCB Financial Corporation
We consent to incorporation by reference in Registration Statements (No.
33-61268) on Form S-8, (No. 33-53595) on Form S-8, (No. 33-53599) on Form S-8,
(No. 33-51657) on Form S-8, (No. 33-54645) on Form S-8, (No. 33-61270) on Form
S-8, (No. 33-61791) on Form S-8, (No. 333-22031) on Form S-8, (No. 333-20457) on
Form S-8, (No. 333-34207) on Form S-8, (No. 333-34231) on Form S-8, (No.
333-47721) on Form S-8 and (No. 333-91581) on Form S-8 of CCB Financial
Corporation of our report dated January 20, 2000, relating to the consolidated
balance sheets of CCB Financial Corporation and subsidiaries as of December 31,
1999 and 1998, and the related consolidated statements of income, shareholders'
equity and comprehensive income, and cash flows for each of the years in the
three-year period ended December 31, 1999, which report appears in the December
31, 1999 annual report on Form 10-K of CCB Financial Corporation.
/s/ KPMG LLP
KPMG LLP
Raleigh, North Carolina
March 16, 2000
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1998
<CASH> 300,051
<INT-BEARING-DEPOSITS> 63,020
<FED-FUNDS-SOLD> 37,918
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 1,563,120
<INVESTMENTS-CARRYING> 73,370
<INVESTMENTS-MARKET> 75,448
<LOANS> 5,954,184
<ALLOWANCE> 77,266
<TOTAL-ASSETS> 8,186,298
<DEPOSITS> 6,717,025
<SHORT-TERM> 329,670
<LIABILITIES-OTHER> 90,720
<LONG-TERM> 328,922
0
0
<COMMON> 227,590
<OTHER-SE> 492,371
<TOTAL-LIABILITIES-AND-EQUITY> 8,186,298
<INTEREST-LOAN> 478,908
<INTEREST-INVEST> 95,889
<INTEREST-OTHER> 14,802
<INTEREST-TOTAL> 589,599
<INTEREST-DEPOSIT> 232,767
<INTEREST-EXPENSE> 257,547
<INTEREST-INCOME-NET> 332,052
<LOAN-LOSSES> 14,296
<SECURITIES-GAINS> 1,378
<EXPENSE-OTHER> 244,036
<INCOME-PRETAX> 232,174
<INCOME-PRE-EXTRAORDINARY> 150,823
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 150,823
<EPS-BASIC> 3.77
<EPS-DILUTED> 3.74
<YIELD-ACTUAL> 4.69
<LOANS-NON> 15,950
<LOANS-PAST> 3,555
<LOANS-TROUBLED> 2,251
<LOANS-PROBLEM> 2,400
<ALLOWANCE-OPEN> 73,182
<CHARGE-OFFS> 12,581
<RECOVERIES> 3,450
<ALLOWANCE-CLOSE> 77,266
<ALLOWANCE-DOMESTIC> 77,266
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 30,099
</TABLE>
