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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-KSB
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended DECEMBER 31, 1995
Commission File Number 0-15572
FIRST BANCORP
(Exact Name of Registrant as Specified in its Charter)
NORTH CAROLINA 56-1421916
(State of Incorporation) (I.R.S. Employer Identification Number)
341 NORTH MAIN STREET, TROY, NORTH CAROLINA 27371-0508
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number (including area code): (910) 576-6171
Securities Registered Pursuant to Section 12(b) of the Act: NONE
Securities Registered Pursuant to Section 12(g) of the Act:
COMMON STOCK, $5 PAR VALUE
(Title of each class)
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 twelve 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. [X] YES [ ] 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 the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [ ]
Registrant's revenues for its most recent fiscal year were $26.9 million.
The aggregate market value of the voting stock, Common Stock, $5 par
value, held by non-affiliates of the registrant, based on the closing sale
price of the Common Stock on January 31, 1996 as reported on the NASDAQ
National Market System, was approximately $27,365,000. Shares of Common Stock
held by each officer and director and by each person who owns 5% or more of
the outstanding Common Stock have been excluded in that such persons may be
deemed to be affiliates. This determination of affiliate status is not
necessarily a conclusive determination for other purposes.
The number of shares of the Registrant's Common Stock outstanding on
January 31, 1996 was 1,507,085.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Proxy Statement to be filed pursuant to
Regulation 14A are incorporated herein by reference into Part III.
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CROSS REFERENCE INDEX
Begins on
Page(s)
PART I Business:
Item 1 General Description 4
Net Interest Income 12,24
Average Balances and Net Interest Income Analysis 12,24
Volume and Rate Variance Analysis 12,24
Rate Sensitivity Analysis 12,25
Provision for Possible Loan Losses 14,29
Other Income 14,25
Other Expense 14,25
Income Taxes 15,25
Distribution of Assets and Liabilities 15,26
Investment Portfolio Composition and Maturities 15,26,27
Loan Portfolio Composition and Credit Risks 16,28
Loan Maturities and Sensitivity to Changes in
Interest Rates 16,28
Nonperforming Assets 16,28
Summary of Loan Loss and Recovery Experience 18,29
Allocation of the Allowance for Possible Loan Losses 18,29
Average Deposit Balances and Maturities 19,29,30
Return on Assets and Equity 19,23,30,31
Liquidity 19
Capital Resources, Components and Ratios 20,30
Inflation 20
Accounting Changes 21
Item 2 Properties 9
Item 3 Legal Proceedings 10
Item 4 Submission of Matters to a Vote of Shareholders 10
PART II
Item 5 Market for the Registrant's Common Stock and Related
Shareholder Matters 10
Item 6 Management's Discussion and Analysis of Results of
Operations and Financial Condition 11
Item 7 Financial Statements and Supplementary Data:
Consolidated Balance Sheets
as of December 31, 1995 and 1994 32
Statements Of Consolidated Income
for each of the years in the three-year period
ended December 31, 1995 33
Statements Of Consolidated Cash Flows
for each of the years in the three-year period
ended December 31, 1995 34
Statements Of Changes In
Consolidated Shareholders Equity
for each of the years in the three-year period
ended December 31, 1995 35
Notes To Consolidated Financial Statements
for each of the years in the three-year period
ended December 31, 1995 36
Report Of Independent Auditors 52
Management's Responsibility For Financial Reporting 53
Selected Consolidated Financial Data 23
Quarterly Financial Summary 31
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Begins on
Page(s)
Item 8 Changes in and Disagreements with Accountants on
Accounting and Financial Disclosures 54
PART III
Item 9 Directors and Executive Officers of the Registrant;
Compliance with Section 16(a) of the Exchange Act 54*
Item 10 Executive Compensation 54*
Item 11 Security Ownership of Certain Beneficial Owners and
Management 54*
Item 12 Certain Relationships and Related Transactions 54*
Item 13 Exhibits, Financial Statement Schedules and Reports
on Form 8-K 54
SIGNATURES 57
* Information called for by Part III (Items 9 through 12) is incorporated
herein by reference to the Registrant's definitive Proxy Statement for the 1995
Annual Meeting of Shareholders to be filed with the Securities and Exchange
Commission.
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PART I
Item 1. Business
General Description
The Company
First Bancorp (the "Company") is a one-bank holding company. The
principal activity of the Company is the ownership and operation of First Bank
(the "Bank"), a state chartered bank with its main office in Troy, North
Carolina. The Company also owns and operates two nonbank subsidiaries,
Montgomery Data Services, Inc. ("Montgomery Data"), a data processing company,
and First Bancorp Financial Services, Inc. ("First Bancorp Financial"),
formerly First Recovery, Inc. ("First Recovery"), which currently owns and
operates various real estate. On August 1, 1994, First Recovery's back-up
data processing operations were divested. Both nonbank subsidiaries are
headquartered in Troy. The Company also controls First Bank Insurance
Services, Inc. (First Bank Insurance), an insurance agency acquired in 1994 as
a subsidiary of the Bank. On December 29, 1995, the insurance agency
operations of First Bank Insurance were divested.
The Company was incorporated in North Carolina on December 8, 1983, as
Montgomery Bancorp, for the purpose of acquiring 100% of the outstanding
common stock of the Bank through stock-for-stock exchanges. On December 31,
1986, the Company changed its name to First Bancorp to conform its name to the
name of the Bank, which had changed its name from Bank of Montgomery to First
Bank in 1985.
The Bank was organized in 1934 and began banking operations in 1935 as
the Bank of Montgomery, named for the county in which it operated. With its
1995 acquisition of the Laurinburg and Rockingham offices of First Scotland
Bank and its 1994 acquisition of Central State Bank ("Central State"), High
Point, North Carolina, the Bank operates in a ten county area centered in
Troy, North Carolina. Troy, population 3,400, is located in the center of
Montgomery County, approximately 60 miles east of Charlotte and 50 miles south
of Greensboro. The Bank conducts business from 32 branches located within a
60-mile radius of Troy, covering a geographical area from Laurinburg to the
southeast, to High Point to the north and to Kannapolis to the west. Ranked
by assets, the Bank was the 18th largest bank in North Carolina as of
September 30, 1995. The Bank provides a full range of banking services,
including the accepting of demand and time deposits, the making of secured and
unsecured loans to individuals and businesses, trust services (offered through
a contractual arrangement with another financial institution), discount
brokerage services and self-directed IRA's (both offered through a contractual
arrangement with a brokerage firm). In 1995, the Bank accounted for
substantially all of the Company's consolidated net income.
The Company's principal executive offices are located at 341 North Main
Street, Troy, North Carolina 27371-0508, and its telephone number is (910)
576-6171. Unless the context otherwise requires, references to the "Company"
in this Annual Report on Form 10-KSB shall mean collectively First Bancorp
and its subsidiaries.
General Business
The Bank engages in a full range of banking activities, providing such
services as checking, savings, NOW and money market accounts and other time
deposits of various types; loans for business, agriculture, real estate,
personal uses, home improvement and automobiles; credit cards; letters of
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credit; trust services; investment and discount brokerage services; IRA's;
safe deposit box rentals; bank money orders; and electronic funds transfer
services, including wire transfers and automated teller machines. Because the
majority of the Bank's customers are individuals and small to medium-sized
businesses located in the counties it serves, deposits and loans are well
diversified. There are no seasonal factors that would have any material
adverse effect on the Bank's business, and the Bank does not rely on foreign
sources of funds or income.
As part of the acquisition of Central State in 1994, the Bank acquired
Central State's wholly owned insurance agency subsidiary, Central State
Insurance Services, Inc. At the time of the acquisition, the name of the
agency was changed to First Bank Insurance Services, Inc. First Bank
Insurance offered a full range of insurance products to businesses and
individuals. The insurance agency operations of First Bank Insurance were
divested at no material gain or loss on December 29, 1995 because it earned
insufficient revenues to generate net income in 1995 or 1994.
Montgomery Data Services provides electronic data processing services to
financial institutions. The Bank is currently Montgomery Data Services'
largest customer, accounting for 90% of its data processing revenues in the
most recent fiscal year. Ownership and operation of Montgomery Data Services
allows the Company to do all of its electronic data processing without paying
fees for such services to an independent provider. Maintaining its own data
processing system also allows the Company to adapt the system to its
individual needs and to the services and products it offers. Although not a
significant source of income, Montgomery Data Services does provide the
Company with additional revenues through fees it charges to its other data
processing customer.
First Bancorp Financial was organized under the name of First Recovery in
September of 1988 for the purpose of providing a back-up data processing site
for Montgomery Data and other financial and non-financial clients. First
Recovery's back-up data processing operations were divested on August 1, 1994.
First Bancorp Financial now owns and leases the First Recovery building. In
1995, First Bancorp Financial purchased several parcels of real estate from
the Bank that were acquired through foreclosure. The parcels purchased
consist of real estate having various purposes. First Bancorp Financial is
actively pursuing the sale of these properties.
Territory Served and Competition
The Company serves primarily the south central area of the Piedmont
region of North Carolina, with offices in Cabarrus, Chatham, Davidson,
Guilford, Montgomery, Moore, Randolph, Richmond, Scotland and Stanly counties.
The Company's headquarters are located in Troy, Montgomery County. The
Company's 32 branches and facilities are all located within a 60-mile radius
of Troy. Most of these offices are located in small communities whose
economies are based primarily on manufacturing and light industry. Although
the Company's market is predominantly small communities and rural areas, the
area is not dependent on agriculture. Textiles, furniture, mobile homes,
electronics, plastic and metal fabrication, forest products, food products and
cigarettes are among the leading manufacturing industries in the trade area.
Leading producers of socks, hosiery and area rugs are located in Montgomery
County. The Pinehurst-Southern Pines area is a widely known golf resort and
retirement area. The High Point area is widely known for its furniture
market. Additionally, many of the communities served by the Company are
bedroom" communities serving Charlotte and Greensboro in addition to smaller
cities such as Albemarle, Asheboro, Concord, High Point, Kannapolis,
Lexington, Pinehurst and Sanford.
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The banking laws of North Carolina allow state-wide branching, and
consequently commercial banking in the state is highly competitive. The
Company competes in its various market areas with, among others, several large
interstate bank holding companies that are headquartered in North Carolina.
These large competitors have substantially greater resources than the Company,
including broader geographic markets, higher lending limits and the ability to
make greater use of large-scale advertising and promotions. A significant
number of interstate banking acquisitions have taken place in the past decade,
thus further increasing the size and financial resources of some of the
Company's competitors, three of which are among the largest bank holding
companies in the nation. See "Supervision and Regulation" below for a further
discussion of regulations in the Company's industry that affect competition.
The Company competes not only against banking organizations, but also
against a wide range of financial service providers including federally and
state chartered savings and loan institutions, credit unions, investment and
brokerage firms and small-loan or consumer finance companies. Competition
among financial institutions of all types is virtually unlimited with respect
to legal ability and authority to provide most financial services. The
Company believes it has certain advantages over its competition in the areas
it serves. The Company seeks to maintain a distinct local identity in each of
the communities it serves and actively sponsors and participates in local
civic affairs. Most lending and other customer-related business decisions can
be made without delays associated with larger systems. Additionally,
employment of local managers and personnel in various offices and low turnover
of personnel enable the Company to establish and maintain long-term
relationships with individual and corporate customers.
Lending Policy and Procedures
Conservative lending policies and procedures and appropriate underwriting
standards are high priorities of the Bank. Loans are approved under the
Bank's written loan policy, which provides that lending officers, principally
branch managers, have sole authority to approve loans of various maximum
amounts up to $75,000. Each of the Bank's regional senior lending officers
has sole discretion to approve secured loans in principal amounts up to
$250,000 and together can approve loans up to $750,000. Lending limits may
vary depending upon whether the loan is secured or unsecured.
The Bank's board of directors reviews and approves loans that exceed
management's lending authority, loans to officers, directors and their
affiliates and, in certain instances, other types of loans. New credit
extensions are reviewed daily by the Bank's senior management and at least
monthly by the board of directors.
The Bank continually monitors its loan portfolio to identify areas of
concern and to enable management to take corrective action. Lending officers
and the board of directors meet periodically to review past due loans and
portfolio quality, while also assuring that the Bank is appropriately meeting
the credit needs of the communities it serves. Individual lending officers
are responsible for pursuing collection of past-due amounts and monitoring any
changes in the financial status of the borrowers.
Investment Policy and Procedures
The Bank has adopted an investment policy designed to optimize the Bank's
income from funds not needed to meet loan demand in a manner consistent with
appropriate liquidity and risk objectives. Pursuant to this policy, the Bank
may invest in federal, state and municipal obligations, public housing
authority bonds, industrial development revenue bonds, Federal National
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Mortgage Association ("FNMA"), Government National Mortgage Association
("GNMA") and Student Loan Marketing Association ("SLMA") securities. The
Bank's investments must satisfy certain investment quality criteria. The
investments must be rated at least BAA by Moody's or BBB by Standard and
Poor's. Securities rated below A are periodically reviewed for
creditworthiness. The Bank may purchase non-rated municipal bonds only if
such bonds are in the Bank's general market area and determined by the Bank to
have a credit risk no greater than the minimum ratings referred to above.
Industrial development authority bonds, which normally are not rated, are
purchased only if they are shown to possess a high degree of credit soundness
to assure reasonably prompt sale at a fair value.
The Company's investment officers implement the investment policy,
monitor the investment portfolio, recommend portfolio strategies, and report
to the Bank's investment committee. Reports of all purchases, sales, net
profits or losses and market appreciation or depreciation of the bond
portfolio are reviewed by the Company's board of directors each month. Once a
quarter, the Company's interest rate risk exposure is monitored by the board
of directors. Once a year, the written investment policy is reviewed by the
board of directors and the Bank's portfolio is compared with the portfolios of
other North Carolina banks of comparable size.
All the Bank's securities are kept in safekeeping accounts at
correspondent banks.
Recent Acquisitions
As part of its operations, the Company regularly evaluates the potential
acquisition of or merger with, and holds discussions with, various financial
institutions.
On December 15, 1995, First Bank completed its cash acquisition of the
Laurinburg and Rockingham branch offices of First Scotland Bank. As of
December 15, 1995, assets acquired were approximately $15.8 million. The
acquisition included earning assets of approximately $14.2 million, of which
approximately $8.9 million were loans. Deposit liabilities assumed were
approximately $15 million.
On August 25, 1994, the Company completed its cash acquisition of Central
State Bank in High Point, North Carolina. Central State, a North Carolina
state-chartered commercial bank, had approximately $35 million in assets, at
the time of the acquisition, with earning assets of approximately $32 million,
including approximately $27 million in loans. Central State also had
approximately $32 million in deposits at the time of the merger with First
Bank.
For additional information on these acquisitions, please see
Management's Discussion and Analysis and Note 2 to the Consolidated Financial
Statements.
Employees
As of December 31, 1995, the Company had 201 full-time and 25 part-time
employees. The Company considers its employee relations to be good.
Supervision and Regulation
As a bank holding company, the Company is subject to supervision,
examination and regulation by the Board of Governors of the Federal Reserve
System and the North Carolina Banking Commission. The Bank is subject to
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supervision and examination by the Federal Deposit Insurance Corporation and
the North Carolina Banking Commission. See also Note 12 to consolidated
financial statements.
Supervision and Regulation of the Company
The Company is a bank holding company within the meaning of the Bank
Holding Company Act of 1956, as amended (the "Bank Holding Company Act"), and
is required to register as such with the Board of Governors of the Federal
Reserve System (the "Federal Reserve Board" or "FRB"). The Company also is
regulated by the North Carolina Commissioner of Banks (the "Commissioner")
under the Bank Holding Company Act of 1984.
A bank holding company is required to file with the Federal Reserve Board
quarterly reports and other information regarding its business operations and
those of its subsidiaries. It is also subject to examination by the Federal
Reserve Board and is required to obtain Federal Reserve Board approval prior
to making certain acquisitions of other institutions or voting securities.
The Commissioner of Banks is empowered to regulate certain acquisitions of
North Carolina banks and bank holding companies, issue cease and desist orders
for violations of North Carolina banking laws, and promulgate rules necessary
to effectuate the purposes of the Bank Holding Company Act of 1984.
Regulatory authorities have cease and desist powers over bank holding
companies and their nonbank subsidiaries where their actions would constitute
a serious threat to the safety, soundness or stability of a subsidiary bank.
Those authorities may compel holding companies to invest additional capital
into banking subsidiaries upon acquisition or in the event of significant loan
losses or rapid growth of loans or deposits.
The United States Congress and the North Carolina General Assembly have
periodically considered and adopted legislation that has resulted in, and
could result in further, deregulation of both banks and other financial
institutions. Such legislation could modify or eliminate geographic
restrictions on banks and bank holding companies and current restrictions on
the ability of banks to engage in certain nonbanking activities. For example,
the recently-enacted Reigle-Neal Interstate Banking Act allows expansion of
interstate acquisitions by bank holding companies and banks. This and other
legislative and regulatory changes have increased the ability of financial
institutions to expand the scope of their operations, both in terms of
services offered and geographic coverage. Such legislative changes could
place the Company in more direct competition with other financial
institutions, including mutual funds, securities brokerage firms, insurance
companies, and investment banking firms. The effect of any such legislation
on the business of the Company cannot be predicted. The Company cannot
predict what other legislation might be enacted or what other regulations
might be adopted or, if enacted or adopted, the effect thereof.
Supervision and Regulation of the Bank
Federal banking regulations applicable to all depositary financial
institutions, among other things, (i) provide federal bank regulatory agencies
with powers to prevent unsafe and unsound banking practices; (ii) restrict
preferential loans by banks to "insiders" of banks; (iii) require banks to
keep information on loans to major shareholders and executive officers; and
(iv) bar certain director and officer interlocks between financial
institutions.
As a state chartered bank, the Bank is subject to the provisions of the
North Carolina banking statutes and to regulation by the Commissioner. The
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Commissioner has a wide range of regulatory authority over the activities and
operations of the Bank, and the Commissioner's staff conducts periodic
examinations of banks and their affiliates to ensure compliance with state
banking regulations. Among other things, the Commissioner regulates the
merger and consolidation of state-chartered banks, the payment of dividends,
loans to officers and directors, record keeping, types and amounts of loans
and investments, and the establishment of branches. The Commissioner also has
cease and desist powers over state-chartered banks for violations of state
banking laws or regulations and for unsafe or unsound conduct that is likely
to jeopardize the interests of depositors.
The dividends that may be paid by the Bank to the Company are subject to
legal limitations under the North Carolina law. In addition, the regulatory
authorities may restrict dividends that may be paid by the Bank or the
Company's other subsidiaries. The ability of the Company to pay dividends to
its shareholders is largely dependent on the dividends paid to the Company by
its subsidiaries.
The Bank is a member of the Federal Deposit Insurance Corporation (the
FDIC"), which currently insures the deposits of member banks. For this
protection, each bank pays a semi-annual statutory assessment and is subject
to the rules and regulations of the FDIC. The FDIC also is authorized to
approve conversions, mergers, consolidations and assumptions of deposit
liability transaction between insured banks and uninsured banks or
institutions, and to prevent capital or surplus diminution in such
transactions where the resulting, continuing, or assumed bank is an insured
nonmember bank. In addition, the FDIC monitors the Bank's compliance with
several banking statutes, such as the Depository Institution Management
Interlocks Act and the Community Reinvestment Act of 1977. The FDIC also
conducts periodic examination of the Bank to assess its compliance with
banking laws and regulations, and it has the power to implement changes in or
restrictions on a bank's operations if it finds that a violation is occurring
or is threatened.
Neither the Company nor the Bank can predict what other legislation might
be enacted or what other regulations might be adopted, or if enacted or
adopted, the effect thereof on the Bank's operations.
Item 2. Properties
The main offices of First Bancorp, First Bank and First Bancorp Financial
are located in a three-story building in the central business district of
Troy, North Carolina. The building houses administrative, training and bank
teller facilities. The Bank's Operations Division, including customer
accounting functions, offices and operations of Montgomery Data Services, and
offices for loan operations, are housed in a one-story steel frame building
approximately one-half mile west of the main office. The Company operates 32
branches and facilities, including the main office, in the trade area as
follows: Troy - main office and two additional full service branches and two
teller-window facilities; High Point and Albemarle - two full service
branches in each; Laurinburg and Pinehurst - one full service branch and one
teller-window facility in each; Aberdeen, Asheboro, Archdale, Biscoe,
Bennett, Candor, Concord, Denton, Kannapolis, Laurel Hill, Laurinburg, Locust,
Pinebluff, Pinehurst, Richfield, Robbins, Rockingham, Seven Lakes, Southern
Pines, Vass and Wagram - one full service branch in each. The Company owns
all its premises except five branch offices which are leased. There are no
options to purchase or lease additional properties. The Company considers its
facilities adequate to meet current needs and idle or vacant properties are
insignificant.
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Item 3. Legal Proceedings
Various legal proceedings may arise in the ordinary course of business and
may be pending or threatened against the Company and/or its subsidiaries.
During the quarter ended June 30, 1995, the Bank settled a lawsuit
whereby it had vigorously defended a claim by which a plaintiff homeowners'
association sought to nullify the Bank's lien on certain common areas of a
residential development including the water and sewer system. The Bank's lien
secured loans for $819,000. The court granted summary judgment in favor of
the Bank, but the plaintiff gave notice of appeal. The Bank foreclosed on the
property. During the quarter ended June 30, 1995, the Bank negotiated the
sale of the property to the plaintiff homeowners association. The terms of
the sale included satisfaction of all claims related to the property and a
dismissal of the litigation. Recoveries of expenses from the sale of
approximately $304,000 partially offset charge-offs that were recorded during
1993 and 1994.
During the quarter ended December 31, 1995, First Bank reached a
settlement among all parties involved in litigation brought by Prudential
Securities, Inc. and filed on August 8, 1994 in the United States District
Court for the Middle District of North Carolina, against one of First Bank's
customers and First Bank, arising out of loans made by Prudential and secured
by certificates of deposit issued by First Bank. First Bank's records
indicated that the certificates of deposit were issued for amounts far less
than those shown on the documents held by Prudential. The First Bank branch
manager involved in the issuance of the certificates of deposit died on August
5, 1994. After significant discovery and a mediation conference held in early
December of 1995, First Bancorp concluded that it was in the best interests of
its shareholders, customers and employees to settle the Prudential litigation
and other related litigation and avoid costly trials. Because First Bancorp's
fidelity bond coverage limit was not sufficient to cover the entire cost of
the settlement, the Company reported significant expenses in connection with
resolving the litigation. The settlement resulted in a nonrecurring fourth
quarter pretax charge of approximately $1,946,000 which equates to
approximately $1,185,000 after-tax, or 79 cents per share. Included in the
pretax charge were the out of pocket costs to settle claims in the pretax
amount of approximately $1,446,000 and additional provisions for loan losses
of $500,000 which First Bancorp recorded due to charge-offs of loans related
to the litigating parties. Before the settlement-related charge, the Bank had
already incurred approximately $789,000 in pretax expenses in 1995 for legal
services and other expenses incurred in matters related to the litigation. Of
the year-to-date expense, approximately $246,000 was expensed in the fourth
quarter.
The Company is not involved in any other legal proceedings which, in
management's opinion, could have a material effect on the consolidated
financial position of the Company.
Item 4. Submission of Matters to a Vote of Shareholders
No matters were submitted for vote to the shareholders during the fourth
quarter.
PART II
Item 5. Market for the Registrant's Common Stock and Related Shareholder
Matters
The Company's common stock is trades on the Nasdaq National Market tier
of The Nasdaq Stock Market(sm) under the symbol FBNC. Tables 1 and 20,
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included in "Management's Discussion and Analysis" below, set forth the high
and low market prices of the Company's common stock as traded by the brokerage
firms that maintain a market in the Company's common stock and the dividends
declared for the periods indicated. As of December 31, 1995, there were 675
shareholders of record.
Item 6. Management's Discussion and Analysis of Results of Operations and
Financial Condition
Management's discussion and analysis is intended to assist readers in
understanding the Company's results of operations and changes in financial
position for the past three years. This review should be read in conjunction
with the consolidated financial statements and accompanying notes beginning
on page 36 of this report and the supplemental financial data contained in
Tables 1 through 20 included with this discussion and analysis.
During 1995, First Bank completed its cash acquisition of the Laurinburg
and Rockingham branch offices of First Scotland Bank. Assets acquired were
approximately $15.8 million including earning assets of approximately $14.2
million, of which approximately $8.9 million were loans. Deposit liabilities
assumed were approximately $15 million. During 1994, the Company completed
its cash acquisition of Central State Bank in High Point, North Carolina.
Central State had approximately $35 million in assets with earning assets of
approximately $32 million, including approximately $27 million in loans.
Central State also had approximately $32 million in deposits. For additional
information on these acquisitions , please see "Analysis of Results of
Operations" and "Analysis of Financial Condition" below and Note 2 to the
Consolidated Financial Statements.
ANALYSIS OF RESULTS OF OPERATIONS
Net interest income, the "spread" between earnings on interest-earning
assets and the interest paid on interest-bearing liabilities, constitutes the
largest source of the Company's earnings. Other factors that significantly
affect operating results are the loan loss provision, other non-interest income
such as service fees and other non-interest expenses such as salaries, FDIC
insurance assessments and other overhead costs, and the effect of income taxes.
1995 Compared To 1994
Excluding the effects of the two nonrecurring events discussed below, the
Company experienced strong growth in its core business for 1995. Net interest
income increased 12.5% while noninterest income increased 12.9% for the year
ended December 31, 1995. Nonrecurring litigation related expenses during the
year and at settlement and severance expenses accounted for approximately 86%
of the increase in noninterest expenses for 1995.
Late in the fourth quarter of 1995, First Bancorp made an economic
decision to settle the litigation pending against First Bank. Because First
Bank's fidelity bond coverage limit was not sufficient to cover the entire
cost of the settlement, it incurred and reported significant expenses in
connection with resolving the litigation. The settlement resulted in a
nonrecurring fourth quarter pretax charge of approximately $1,946,000, or 79
cents per share after tax. Included in the pretax charge are the out of
pocket costs to settle claims in the amount of approximately $1,446,000 and
additional provisions for loan losses of $500,000 which were recorded due to
charge-offs of loans related to the litigating parties. Excluded from the
$1,446,000 settlement amount were legal fees and other expenses of
approximately $789,000 pretax related to the litigation that were incurred
during 1995 and were included in other operating expenses. These amounts also
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exclude the costs related to the significant time and energy of company
personnel required by the discovery process. In late December, First Bank
also recognized severance expenses related to two former senior managers in
the aggregate pretax amount of $745,000, or $0.30 per share after tax. These
one-time charges totaling $2,691,000 pretax resulted in lower earnings of
$1,582,000 compared to $2,987,000 for the year ended December 31, 1994. For
additional information related to the settlement, please see "Legal
Proceedings" and Note 9 to the Consolidated Financial Statements.
1994 Compared To 1993
First Bancorp reported increased earnings for the fourth consecutive year
in 1994. Net income increased 10.6% in 1994 to $2,987,000, or $1.99 per
share, from $2,701,000, or $1.80 per share, in 1993. The return on average
assets improved to 1.12% in 1994 compared to 1.09% in 1993, while the returns
on average equity were 10.59% and 10.10%, respectively. Net interest income,
the largest component of earnings, increased by $1,278,000, or 11.1%, compared
to 1993 primarily because of higher loan volumes and strengthening spreads.
Also contributing significantly to earnings in 1994 was a $203,000 decrease in
the provision for possible loan losses.
Although not significantly impacting net income, the acquisition of
Central State did increase the components of net income, specifically net
interest income and noninterest income and expenses. Because this was a cash
acquisition, only income and expenses incurred since August 25, 1994, the date
of acquisition, were included in the Company's reported earnings. Since that
August date, the High Point operations posted approximately $760,000 in net
interest income, $224,000 in noninterest income and $978,000 in noninterest
expenses. Also please see Note 2 to the Consolidated Financial Statements.
Net Interest Income
Table 2 analyzes net interest income on a taxable-equivalent basis to
adjust for the nontaxable status of income earned on certain investments, such
as municipal bonds. The Company's net interest income on a taxable-
equivalent basis increased by 12% in 1995 and 11% in 1994. Average earning
assets increased by 10% in 1995 and 8% in 1994. The net yield on average
earning assets (net interest income divided by average earning assets) was
5.58% in 1995 and 5.48% in 1994 and 5.32% in 1993. The interest rate spread
decreased by 3 basis points in 1995 and increased by 9 basis points in 1994.
Average interest-bearing liabilities increased 10% in 1995 and 5% in
1994. The average rate paid on such liabilities increased 91 basis points in
1995 and decreased 5 basis points in 1994. Total interest expense increased
43% in 1995 primarily because of changes in deposit rates and increased 3% in
1994 primarily because of growth in deposit volumes.
Changes in interest income and interest expense can result from variances
in both volume and rates. Table 3 analyzes the effect of variance in volume
and rate on taxable-equivalent interest income, interest expense and net
interest income. The net effect of changes in volumes was an increase in net
interest income of $1,641,000 in 1995 and $1,407,000 in 1994 primarily due to a
sharp rise in loans resulting from the August 1994 acquisition of Central State.
Rate Sensitivity
An important aspect of achieving satisfactory levels of net interest
income is the management of the composition and maturities of rate-sensitive
assets and liabilities. Table 4 sets forth the Company's interest sensitivity
analysis for December 31, 1995, and describes, at various cumulative maturity
<PAGE>
intervals, the gap ratios (ratios of rate-sensitive assets to rate-sensitive
liabilities) for assets and liabilities that management considers rate
sensitive.
In evaluating the Company's exposure to interest rate risk, certain
shortcomings inherent in Table 4 must be considered. For example, this method
only measures the magnitude of the timing differences and does not address
earnings, market value, or management actions. Also, interest rates on certain
types of assets and liabilities may fluctuate in advance of changes in market
interest rates, while interest rates on other types may lag behind changes in
market rates. In addition to the effects of "when" various rate-sensitive
products reprice, market rate changes may not result in uniform changes in
rates among all products. For example, a 1% change in the prime lending rate
may result in other than a 1% change in the rates of other rate-sensitive
products. As a result, management regularly projects earnings over a variety
of interest rate scenarios to more accurately measure interest rate risk.
Increases in future market interest rates could have a negative impact on net
interest income if portfolio mixes are held constant and rate-sensitive
liabilities reprice upward more rapidly than rate-sensitive earning assets.
The Company manages portfolio mixes to minimize changes in net interest income
due to changing rates.
During 1995, the increases in interest expense paid on rate-sensitive
liabilities was offset by similar increases in interest income received from
interest-earning assets. In addition, increased volumes of loans helped to
increase the Company's net interest income during a period of rising interest
rates. The rate of repricing savings, NOW and money market deposits slowed in
1995, whereas these liabilities repriced almost immediately during the most
recent declining rate cycle.
At December 31, 1995, the Company's rate-sensitive liabilities repricing
over the next twelve months exceeded the rate-sensitive earning assets
repricing over the next twelve months by approximately $57,546,000 as presented
in Table 4. As of December 31, 1995, approximately 56% of the Company's
interest-earning assets could be repriced within one year and approximately 93%
of interest-earning assets could be repriced within five years. Approximately
90% of interest-bearing liabilities could be repriced within one year and
substantially all interest-bearing liabilities could be repriced within five
years.
At December 31, 1995, the Company's calculated fair value of loans as
computed under Statement of Financial Accounting Standards Number 107 ("SFAS
No. 107"), "Disclosures About Fair Value of Financial Instruments," was
approximately $4,677,000 greater than the net book value of such loans,
compared to approximately $420,000 at December 31, 1994. This change is
primarily due to the decrease in market rates and its related impact on the
fair value of fixed rate loans. The calculated fair value for deposit
liabilities was approximately $475,000 greater than the book value of such
deposits at December 31, 1995, compared to a calculated fair value of
approximately $1,759,000 in excess of the net book value at December 31, 1994.
This decrease is largely due to a combination of (i) a shift in deposit growth
from demand and savings deposits to time deposits that results in more deposits
subject to fair value and carrying value differences and (ii) a decline in time
deposit interest rates in the market that results in lower fair values of fixed
rate liabilities.
<PAGE>
Provision For Possible Loan Losses
The provision for possible loan losses charged to earnings is based on
management's continuing review and evaluation of its loan portfolio and general
economic conditions. The Company made provisions for possible loan losses of
$900,000 for 1995 compared to $387,000 for 1994 and $590,000 for 1993. The
1995 increase was primarily attributable to amounts provided for the purpose of
replenishing reserves that were depleted because of charge-offs of loans
related to the parties involved in the litigation that was settled on December
28, 1995. Management made the determination to record these charge-offs as a
result of the related settlement negotiations. For additional information,
please see "Legal Proceedings" and Note 9 to the Consolidated Financial
Statements. The 1994 decrease was largely because nonperforming loans and
nonperforming assets, excluding the effect of the Central State acquisition,
decreased to amounts of approximately $1,449,000 and $3,707,000, respectively,
while the 1993 increase in these provisions was primarily attributable to the
increase in period end loans outstanding. The allowance, or reserve, for
possible loan losses was 2.17% and 2.70% of total loans at December 31, 1995
and 1994, respectively. Approximately $187,000 and $2,487,000 in loan loss
reserves were acquired from First Scotland and Central State in 1995 and 1994,
respectively. Please see "Summary of Loan Loss Experience" below for a more
detailed discussion of the allowance for possible loan losses. The allowance
is monitored and analyzed in conjunction with the Bank's loan analysis and
grading program, and adjustments are made to maintain an adequate allowance for
possible loan losses.
Other Income
Other income, principally charges for the use of the Company's services,
is a significant contributor to net earnings. Other income increased by 13%
in both 1995 and 1994 primarily due to the operations in High Point acquired
in 1994. In addition, the Company has been able to increase other income by
increasing the prices of its services to partially offset increases in other
expenses. Data processing fees continued to decrease due to a declining
customer base of the Company's data processing subsidiary. Table 5 sets forth
the principal components of other income.
Other Expenses
Other expenses increased by 31% in 1995 and by 14% in 1994. The 1995
increase was primarily attributable to two nonrecurring events in the fourth
quarter that resulted in charges of approximately $745,000 in severance related
personnel expenses and approximately $1,446,000 in expenses related to the
settlement of litigation. In addition to the settlement expenses, the Company
had already expended approximately $789,000 for litigation related legal and
other costs, which was the primary reason for the increase in other operating
expenses during 1995. For additional information, please see "Legal
Proceedings" and Note 9 to Consolidated Financial Statements. Part of the 1995
and most of the 1994 increases in total operating expenses were attributable to
the absorption of Central State. Such noninterest expense of activities in
High Point were approximately $1,914,000 and $978,000 in 1995 and 1994,
respectively. Partially offsetting the 1995 increases were recoveries of legal
and other expenses of approximately $304,000 from the sale of other real estate
and a $275,000 decrease in FDIC insurance premiums. The 1994 increase in legal
and audit expenses included approximately $160,000 in expenses related to the
litigation settled on December 28, 1995. Table 6 sets forth the principal
components of other expenses.
<PAGE>
Income Taxes
The provision for income taxes decreased 50% to $580,000 in 1995 from
$1,155,000 in 1994 and increased 13% to $1,155,000 in 1994 from $1,021,000 in
1993. The 1995 decrease was primarily attributable to two nonrecurring
expenses in the aggregate pretax amount of approximately $2,691,000. The
Company's effective tax rates were 27% in 1995, 28% in 1994 and 27% in 1993.
Table 7 presents income tax expenses and the related effective tax rates.
ANALYSIS OF FINANCIAL CONDITION
The following discussion focuses on the factors considered by management
to be important in assessing the Company's financial condition. The Company's
assets and deposits have continued to grow, reflecting growth in existing
markets and expansion into new geographic areas. Total assets were $322
million at December 31, 1995, an increase of 11.1% compared to a 12.5%
increase in 1994. Interest-earning assets increased 12.8% compared to a 12.5%
increase in 1994. Loans, the primary interest-earning asset, increased by
13.9% in 1995 and by 18.1% in 1994. Total assets, interest-earning assets and
loans acquired in the December 1995 purchase of two branch offices from First
Scotland Bank were $16 million, $14 million and $9 million, respectively.
Funding the 1995 asset growth was a $29.3 million, or 11.3%, increase in
deposits, approximately $15 million of which was acquired from First Scotland.
Total assets, interest-earning assets and loans acquired in the August 1994
purchase of Central State were $35 million, $32 million and $27 million,
respectively. In 1994, the $2.2 million increase in the allowance for
possible loan losses, the $4.9 million increase in intangible assets and the
$3 million increase in other assets were largely attributable to the purchase
of Central State. Asset growth in 1994 was funded by a $31.4 million, or
13.8%, increase in deposits, the substantial portion of which was acquired
from Central State. The Company's assets and deposits have experienced 8%
compound growth rates over the last five years.
Distribution Of Assets And Liabilities
Table 8 sets forth the percentage relationships of significant components
of the Company's balance sheets at December 31, 1995, 1994 and 1993. As a
percentage of total assets at December 31, 1995, the decrease in capital was
primarily attributable to the nonrecurring litigation and severance expenses
in the fourth quarter that reduced earnings. As a percentage of total assets
at December 31, 1994, the decrease in interest-earning assets, the increase in
other assets (largely intangible assets) and the decrease in capital were all
primarily attributable to the cash purchase of Central State.
Investment Portfolio
The composition of the Company's investment portfolio as of December 31,
1995, 1994 and 1993 is presented in Table 9. In 1994, the Company classified
its investment securities as available for sale or held-to-maturity as required
by its adoption of Statement of Financial Accounting Standards Number 115
("SFAS No. 115"), "Accounting for Certain Investments in Debt and Equity
Securities." The Company considered all debt securities held as of December
31, 1993 to be held-to-maturity securities. Also please see Notes to
Consolidated Financial Statements for discussions of the changes implemented in
accounting for investment securities.
Table 10 shows maturities of investment securities held by the Company at
December 31, 1995 and 1994, and the weighted average yields and effective
yields for the scheduled maturity of each security. As of December 31, 1995,
costs of securities available for sale were $49,297,000 compared to market
<PAGE>
values of $49,657,000. In accordance with SFAS No. 115, securities available
for sale are adjusted to market values with the unrealized gain or loss, net
of taxes, reflected as a component of shareholders equity. As of December 31,
1995, the book values of securities held-to-maturity were $19,740,000 compared
to market values of $20,374,000. As of December 31, 1994, the market values
of securities held-to-maturity were $20,794,000 compared to book values of
$20,942,000. As of December 31, 1995 and 1994 the average maturity of the
aggregate available for sale and held-to-maturity portfolios was 2.2 years and
2.1 years, respectively, and the weighted average taxable-equivalent book
yields on such aggregate portfolios were 6.52% and 6.00% as of December 31,
1995 and 1994, respectively.
As of December 31, 1995 and 1994, the Company held no investment
securities of any one issuer, other than U. S. Treasury and U. S. Government
agencies, in which aggregate book values and approximate market values exceeded
10% of shareholders equity.
Loan Portfolio and Credit Risks
The Company strives to maintain its loan portfolio in accordance with what
management believes are conservative loan underwriting policies that result in
loans specifically tailored to the needs of the Company's market areas. Every
effort is made to identify and minimize the credit risks associated with such
lending strategies. The Company has no foreign loans, few agricultural loans
and does not engage in significant lease financing or highly leveraged
transactions. Commercial loans are diversified among a variety of industries.
The majority of loans captioned in the tables below as "real estate" loans are
primarily various personal and commercial loans where real estate provides
additional security for the loan. Collateral for virtually all of these loans
is located within the Company's principal market area. The composition of the
Company's loan portfolio is presented in Table 11 for the periods indicated.
The 1995 increase resulted primarily from increased loan demand, although the
$8.9 million in loans acquired from First Scotland contributed to the growth.
The 1994 increase in loans was largely attributable to the acquisition of
Central State. Loan demand varies with changes in interest rates in the
market.
Off-balance sheet lending commitments as of December 31, 1995 consisted of
unfunded loan commitments of $34.8 million (including unfunded commitments of
$7.7 million on revolving credit plans) and $0.8 million of standby letters of
credit.
Maturities And Sensitivities Of Loans To Changes In Interest Rates
Table 12 sets forth the maturity distribution of the Company's loans as
of December 31, 1995. The percentages of variable rate loans and fixed rate
loans to total performing loans were 49% and 51%, respectively, as of December
31, 1995 compared to 47% and 53%, respectively, as of December 31, 1994. The
Bank intentionally makes a blend of fixed and variable rate loans so as to
minimize rate sensitivity. Loans repricing within one year were 58% of the
loan portfolios at December 31, 1995 and December 31, 1994. The overall yield
on the loan portfolio increased only 5 basis points comparing year-end 1995
with year-end 1994 because of flat lending rates in the market.
Nonperforming Assets
Nonperforming assets include nonaccrual loans, loans past due 90 or more
days and still accruing interest, restructured loans and foreclosed,
repossessed and idled properties. Table 13 summarizes the Company's
nonperforming assets at the dates indicated.
<PAGE>
Nonaccrual loans are loans on which interest income is no longer being
recognized or accrued. The accrual of interest is discontinued on all loans
that become 90 days past due with respect to principal or interest. The
placing of loans on nonaccrual status negatively impacts earnings because (i)
interest accrued but unpaid as of the date a loan is placed on nonaccrual
status is either deducted from interest income or is charged off, (ii) future
accruals of interest income are not recognized until it becomes certain that
both principal and interest can be paid and (iii) principal charged off, if
appropriate, may necessitate additional provisions for loan losses that are
charged against earnings. In some cases, where borrowers are experiencing
financial difficulties, loans may be restructured to provide terms
significantly different from the originally contracted terms.
If the nonaccrual loans and restructured loans as of December 31, 1995,
1994 and 1993 had been current in accordance with their original terms and had
been outstanding throughout the period (or since origination if held for part
of the period), gross interest income in the amounts of approximately $82,000,
$142,000 and $166,000 for nonaccrual loans and $71,000, $24,000 and $45,000
for restructured loans would have been recorded for 1995, 1994 and 1993,
respectively. Interest income on such loans that was actually collected and
included in net income in 1995, 1994 and 1993 amounted to approximately
$36,000, $67,000 and $8,000 for nonaccrual loans and $69,000, $24,000 and
$43,000 for restructured loans, respectively. As of December 31, 1995, 1994
and 1993, nonaccrual loans, loans past due 90 or more days and restructured
loans were approximately 0.68%, 1.06% and 1.64%, respectively, of the total
loans outstanding at such dates.
Nonaccrual loans were approximately $772,000 as of December 31, 1995
compared to $1,724,000 as of December 31, 1994 and $1,987,000 as of December
31, 1993. Approximately $590,000 of the decrease in nonaccrual loans resulted
from charge-offs of loans related to the litigation settled in late December,
1995. For additional information, please see "Legal Proceedings", "Provision
For Possible Loan Losses" and Note 9 to the Consolidated Financial Statements.
Nonaccrual loans were 0.36% of loans at the end of 1995 compared to 0.93% and
1.26% at the end of 1994 and 1993, respectively. As of December 31, 1995, the
largest nonaccrual balance to any one borrower was approximately $106,000, and
the average size of the 35 nonaccrual loans was approximately $22,000.
Approximately $161,000 and $275,000 of nonaccrual loans at December 31, 1995
and 1994, respectively, were acquired from Central State.
In addition to the nonperforming loan amounts included above, management
believes that an estimated $2,500,000-$3,000,000 of loans that are currently
performing in accordance with their contractual terms may potentially develop
problems depending upon the particular financial situations of the borrowers
and economic conditions in general. The majority of these potential problem
loans were acquired from Central State and First Scotland Bank. Management
has taken these potential problem loans into consideration when evaluating the
adequacy of the allowance for loan losses at December 31, 1995.
Loans classified for regulatory purposes as loss, doubtful, substandard,
or special mention that have not been disclosed in the problem loan amounts and
potential problem loan amounts above do not represent or result from trends or
uncertainties which management reasonably expects will materially impact future
operating results, liquidity, or capital resources, or represent material
credits about which management is aware of any information which causes
management to have serious doubts as to the ability of such borrowers to comply
with the loan repayment terms.
<PAGE>
Foreclosed and repossessed properties were approximately $1,393,000 as of
December 31, 1995, compared to $2,976,000 as of December 31, 1994 and
$1,781,000 as of December 31, 1993. Approximately $855,000 of the 1995
decrease in foreclosed properties resulted from the sale of real estate to a
homeowners association (please see "Legal Proceedings" and Note 9 to the
Consolidated Financial Statements) while approximately $363,000 of the
decrease was due to sales and/or charge-offs of properties acquired from
Central State. The levels represented 0.43%, 1.03% and 0.69% of total assets
at the end of 1995, 1994 and 1993, respectively. As of December 31, 1995, the
parcel with the largest carrying value of approximately $446,000 constituted
32% of the total and four parcels with carrying values of more than $100,000
each accounted for 70% of the total. The Company's management has reviewed
recent appraisals of these properties and has concluded that their fair
values, less estimated costs to sell, exceeds the respective carrying values
at December 31, 1995. Approximately $516,000 and $970,000 of foreclosed
properties at December 31, 1995 and 1994, respectively, were acquired from
Central State.
Summary Of Loan Loss Experience
The allowance for possible loan losses is created by direct charges to
operations. Losses on loans are charged against the allowance in the period in
which such loans, in management's opinion, become uncollectible. The
recoveries realized during the period are credited to this allowance.
The factors that influence management's judgment in determining the amount
charged to operating expense include past loan loss experience, composition of
the loan portfolio (including off-balance sheet commitments), evaluation of
possible future losses and current economic conditions.
The Bank uses a loan analysis and grading program to facilitate its
evaluation of possible future loan losses and the adequacy of its allowance for
possible loan losses. In this program, risk grades are assigned by management
and tested by the Bank's Internal Audit Department. The program evaluates all
loans that management identifies as having potential credit weaknesses in
addition to loans past due 90 days or more, nonaccrual loans and remaining
unpaid loans identified during previous regulatory and other examinations.
Table 14 sets forth the allocation of the allowance for possible loan
losses at the dates indicated. Comparing 1995 to 1994, the Company's loan
loss reserves as a percentage of total loans decreased to 2.17% from 2.70%
because (i) charge-offs were higher in 1995 thereby decreasing the allowance
and (ii) loans added in 1995 required smaller reserves. Primarily because of
loan loss reserves acquired in the 1994 purchase of Central State, the
Company's loan loss reserves were 2.70% of total loans as of December 31, 1994
compared to 1.78% of total loans as of December 31, 1993. The portion of these
reserves that was allocated to known weaknesses in the loan portfolio decreased
by 10% to $4,093,000 at December 31, 1995, compared to $4,548,000 at
December 31, 1994.
Management considers the allowance for possible loan losses adequate to
cover possible loan losses on the loans outstanding as of each reporting date.
It must by emphasized, however, that the determination of the allowance using
the Company's procedures and methods rests upon various judgments and
assumptions about future economic conditions and other factors affecting loans.
No assurance can be given that the Company will not in any particular period
sustain loan losses that are sizable in relation to the amount reserved or that
subsequent evaluations of the loan portfolio, in light of conditions and
factors then prevailing, will not require significant changes in the allowance
for possible loan losses or future charges to earnings.
<PAGE>
In addition, various regulatory agencies, as an integral part of their
examination process, periodically review the allowances for possible loan
losses and losses on foreclosed real estate. Such agencies may require the
Bank to recognize additions to the allowances based on the examiners judgments
about information available to them at the time of their examinations.
For the years indicated, Table 15 summarizes the Company's balances of
loans outstanding, average loans outstanding, changes in the allowance arising
from charge-offs and recoveries by category, and additions to the allowance
that have been charged to expense. The Company charged off loans of
approximately $1,600,000 in 1995 and $803,000 in 1994. Charge-offs in 1995
included approximately $590,000 of loans related to the parties involved in
the litigation that was settled on December 28, 1995. For additional
information, please see "Legal Proceedings" and Note 9 to the Consolidated
Financial Statements. Charge-offs related to loans acquired from Central
State were approximately $235,000 and $161,000 for 1995 and 1994,
respectively. As reflected in Table 14, Central State's reserve level
significantly increased the 1994 post-acquisition loan loss reserves of the
Company. The allowance for loan losses in the amount of approximately
$2,487,000 that Central State had recorded prior to the 1994 acquisition was
based largely on its levels of nonperforming assets and potential problem
loans.
Deposits
The average amounts of deposits of the Company for the years ended
December 31, 1995, 1994 and 1993 are presented in Table 16. The Company has a
large, stable base of time deposits with little dependence on volatile deposits
of $100,000 or more. The time deposits are principally certificates of deposit
and individual retirement accounts obtained from individual customers.
Deposits of certain local governments and municipal entities represented 4.6%
of the Bank's total deposits at December 31, 1995. All such public funds are
collateralized by investment securities. The Company does not purchase
brokered deposits.
As of December 31, 1995, the Company held approximately $31,961,000 in
time certificates of deposit of $100,000 or more and other time deposits of
$107,474,000. Table 17 is a maturity schedule of time deposits of $100,000 or
more as of December 31, 1995.
Return On Assets And Equity
Table 18 shows return on assets (net income divided by average total
assets), return on equity (net income divided by average shareholders equity),
dividend payout ratio (dividends declared per share divided by net income per
share) and shareholders equity to assets ratio (average shareholders equity
divided by average total assets) for each of the years in the three-year period
ended December 31, 1995. The changes in return on assets, return on equity and
dividend payout ratio are largely due to the effects of the two nonrecurring
charges previously discussed.
Liquidity
The Company's liquidity is determined by its ability to convert assets to
cash or acquire alternative sources of funds to meet the needs of its customers
who are withdrawing or borrowing funds, and to maintain reserve requirements,
pay expenses and operate the Company on an ongoing basis. The Company's
primary liquidity sources are cash and due from banks and federal funds sold,
as well as other short-term investment securities. In addition, the Company
(through the Bank) has the ability, on a short-term basis, to purchase federal
<PAGE>
funds from other financial institutions. The Company typically has not had to
rely on the purchase of federal funds as a source of liquidity. The rate
sensitivity of the Company's assets and liabilities also may have an effect on
its liquidity (see Table 4, "Rate Sensitivity Analysis"). Largely because of
the Company's 1994 cash acquisition of Central State, the loan to deposit
ratio has increased to levels more typical of the Bank's North Carolina peer
group. The Company's management believes its liquidity sources are adequate
to meet its operating needs.
Capital Resources
The Company is regulated by the Board of Governors of the Federal Reserve
Board ("FRB") and is subject to securities registration and public reporting
regulations of the Securities and Exchange Commission. The Bank is regulated
by the Federal Deposit Insurance Corporation ("FDIC") and the North Carolina
State Banking Commission. The Company is not aware of any recommendations of
regulatory authorities or otherwise which, if they were to be implemented,
would have a material effect on its liquidity, capital resources, or
operations.
The Company and the Bank must comply with regulatory capital requirements
established by the FRB and FDIC. These standards require the Company to
maintain minimum ratios of Tier 1 capital to total risk-weighted assets and
total capital to risk-weighted assets of 4.00% and 8.00%, respectively. Tier 1
capital is comprised of total shareholders equity calculated in accordance
with generally accepted accounting principles less intangible assets, and
total capital is comprised of Tier 1 capital plus certain adjustments, the
largest of which for the Company is the allowance for possible loan losses.
Risk-weighted assets refer to the on- and off-balance sheet exposures of the
Company adjusted for their related risk levels using formulas set forth in FRB
and FDIC regulations.
In addition to the risk-based capital requirements described above, the
Company is subject to a leverage capital requirement, which calls for a minimum
ratio of Tier 1 capital (as defined above) to quarterly average total assets of
3.00% to 5.00%, depending upon the institution's composite ratings as
determined by its regulators. The FRB has not advised the Company of any
requirement specifically applicable to it.
At December 31, 1995 and 1994, the Company was in compliance with all
existing capital requirements, as summarized in Table 19. See "Supervision and
Regulation" under "Business" and Note 12 to the Consolidated Financial
Statements for discussion of other matters that may affect the Company's
capital resources.
Inflation
Since the assets and liabilities of a bank are primarily monetary in
nature (payable in fixed determinable amounts), the performance of a bank is
affected more by changes in interest rates than by inflation. Interest rates
generally increase as the rate of inflation increases, but the magnitude of the
change in rates may not be the same. The effect of inflation on banks is
normally not as significant as its influence on those businesses that have
large investments in plant and inventories. During periods of high inflation,
there are normally corresponding increases in the money supply, and banks will
normally experience above average growth in assets, loans and deposits. Also,
general increases in the price of goods and services will result in increased
operating expenses.
<PAGE>
Accounting Changes
The Company prepares its financial statements and related disclosures in
conformity with standards established by, among others, the Financial
Accounting Standards Board (the "FASB"). Because the information needed by
users of financial reports is dynamic, the FASB frequently has new rules and
proposed new rules for companies to apply in reporting their activities. The
following discussion addresses such changes as of December 31, 1995 that
affect the Company's future reporting.
In March 1995, the FASB issued Statement of Financial Accounting Standards
Number 121 ("SFAS No. 121"), "Accounting for Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed Of," which establishes accounting
standards for the impairment of long-lived assets, certain identifiable
intangibles, and goodwill related to those assets to be held and used and for
those to be disposed of. This statement requires that long-lived assets and
certain intangibles be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying value may not be recoverable. An
impairment loss should be recognized if the sum of the undiscounted future cash
flows is less than the carrying amount of the asset. Those assets to be
disposed of are to be reported at the lower of the carrying amount or fair
value, less costs to sell. Adoption of SFAS No. 121 is required for fiscal
years beginning after December 15, 1995. Adoption of this statement should not
have a material effect on the Companys consolidated financial statements at
the date of adoption.
In October 1995, the FASB issued Statement of Financial Accounting
Standards Number 122, "Accounting for Mortgage Servicing Rights, an amendment
of SFAS No. 65." The statement amends SFAS No. 65, "Accounting for Certain
Mortgage Banking Activities," to require that a mortgage banking enterprise, or
an entity engaged in mortgage banking activities, recognize as separate assets
rights to service mortgage loans for others, however those rights are
acquired. This statement also requires that a mortgage banking enterprise
assess its capitalized mortgage servicing rights for impairment based on the
fair values of these rights. This statement applies prospectively in fiscal
years beginning after December 31, 1995. The Company will adopt this statement
prospectively on January 1, 1996, and does not believe that it will have a
material effect on the consolidated financial statements upon adoption.
In October 1995, the FASB issued Statement of Financial Accounting
Standards Number 123, "Accounting for Stock-Based Compensation" ("SFAS No.
123"). The statement defines a fair value method of accounting for an employee
stock option or similar equity instrument and encourages all entities to adopt
that method of accounting for all of their employee stock compensation plans.
It also allows an entity to continue to measure compensation cost for those
plans using the intrinsic value based method of accounting prescribed in
Accounting Principles Board Opinion Number 25 ("APB No. 25"), "Accounting for
Stock Issued to Employees." SFAS No. 123 requires that an employers
financial statements include certain disclosures about stock-based compensation
arrangements regardless of the method used to account for them. Entities
electing to remain with the accounting in APB 25 must make pro forma
disclosures of net income and, if presented, earnings per share, as if the fair
value based method of accounting defined in SFAS No. 123 had been applied.
The disclosure requirements of this statement are effective for financial
statements for fiscal years beginning after December 15, 1995, or for an
earlier fiscal year for which this statement is initially adopted for
recognizing compensation cost. Pro forma disclosures required for entities
that elect to continue to measure compensation cost using APB 25 must include
the effects of all awards granted in fiscal years that begin after December 15,
<PAGE>
1994. The Company has determined that it will elect to continue to measure
compensation cost using APB 25, and therefore will make any appropriate
disclosures in its financial statements for the year ending December 31, 1996,
of net income and earnings per share as if the fair value based method of
accounting defined in SFAS No. 123 had been applied. Management has not yet
quantified these pro forma disclosures.
The FASB also issues exposure drafts for proposed statements of financial
accounting standards. Such exposure drafts are subject to comment from the
public, to revisions by the FASB and to final issuance by the FASB as
statements of financial accounting standards. Management considers the effect
of the proposed statements on the consolidated financial statements of the
Company and monitors the status of changes to issued exposure drafts and to
proposed effective dates.
<PAGE>
<TABLE>
<CAPTION>
Table 1 Selected Consolidated Financial Data
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended December 31, Five-Year
($ in thousands except per share ----------------------------------------------------------- Compound
and nonfinancial data) 1995 1994 1993 1992 1991 Growth
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Income Statement Data
Interest income $ 23,302 $ 19,009 $ 17,530 $ 18,453 $ 20,419 2.0%
Interest expense 8,953 6,257 6,056 7,532 10,400 -4.4%
Net interest income 14,349 12,752 11,474 10,921 10,019 7.8%
Provision for possible loan losses 900 387 590 505 565 -6.3%
Net interest income after provision
for possible loan losses 13,449 12,365 10,884 10,416 9,454 9.3%
Other income 3,581 3,173 2,796 2,777 2,718 7.2%
Other expenses 14,868 11,396 9,958 9,721 9,489 10.6%
Income before income taxes 2,162 4,142 3,722 3,472 2,683 -0.1%
Income taxes 580 1,155 1,021 1,019 680 -1.2%
Net income $ 1,582 $ 2,987 $ 2,701 $ 2,453 $ 2,003 0.3%
- -----------------------------------------------------------------------------------------------------------------------------------
Per Share Data (1)
Net income $ 1.05 $ 1.99 $ 1.80 $ 1.63 $ 1.33 0.4%
Cash dividends declared 0.70 0.65 0.58 0.43 0.31 22.9%
Dividend payout 66.67% 32.66% 32.22% 26.38% 23.31% 22.4%
Market price:
High $ 29.50 $ 23.00 $ 21.00 $ 17.50 $ 14.50 11.9%
Low 20.50 18.00 14.75 11.00 10.75 12.5%
Close 25.50 21.00 21.00 15.25 11.25 14.9%
Stated book value 20.09 19.14 18.24 17.03 15.82 6.3%
Tangible book value 15.91 14.97 17.33 16.58 15.12 2.8%
- -----------------------------------------------------------------------------------------------------------------------------------
Selected Balance Sheet Data (at year end)
Securities available for sale $ 49,657 $ 46,150 $ - $ - $ - n/a
Securities held-to-maturity 19,740 20,942 65,746 68,359 59,912 -18.4%
Loans, net of unearned income 211,522 185,749 157,279 144,716 147,694 8.0%
Allowance for possible loan losses 4,587 5,009 2,797 2,526 2,484 14.0%
Intangible assets 6,306 6,279 1,374 681 1,059 34.3%
Total assets 321,739 289,613 257,339 242,622 232,553 7.9%
Deposits 287,715 258,430 227,043 214,867 206,033 8.1%
Total liabilities 291,462 260,823 229,896 217,007 208,752 8.1%
Total shareholders equity 30,277 28,790 27,443 25,615 23,801 6.3%
- -----------------------------------------------------------------------------------------------------------------------------------
Selected Average Balances
Assets $ 296,400 $ 267,227 $ 247,717 $ 236,198 $ 224,380 6.7%
Securities 68,307 69,500 69,713 63,787 54,475 5.9%
Loans 192,035 168,167 149,247 146,710 145,610 6.5%
Earning assets 268,725 244,092 226,563 217,508 206,826 6.5%
Deposits 262,846 236,725 218,795 208,924 198,551 6.8%
Interest-bearing liabilities 225,006 204,141 193,988 188,489 179,179 6.2%
Shareholders equity 30,461 28,197 26,751 24,721 23,033 6.8%
- -----------------------------------------------------------------------------------------------------------------------------------
Nonfinancial Data
Number of shareholders of record 675 692 702 704 705
Number of employees (full/part time) 201/25 198/26 171/34 167/29 171/34
Number of banking offices 32 28 26 26 26
Number of communities 23 22 21 21 21
- -----------------------------------------------------------------------------------------------------------------------------------
Ratios
Return on average equity 5.19% 10.59% 10.10% 9.92% 8.70%
Return on average assets 0.53% 1.12% 1.09% 1.04% 0.89%
Net interest margin (taxable-equivalent basis) 5.58% 5.48% 5.32% 5.33% 5.13%
Average shareholders equity to average assets 10.28% 10.55% 10.80% 10.47% 10.27%
Average loans to average deposits 73.06% 71.04% 68.21% 70.22% 73.34%
Net charge-offs to average loans 0.79% 0.39% 0.21% 0.32% 0.32%
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Table 2 Average Balances And Net Interest Income Analysis
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended December 31,
-----------------------------------------------------------------------------------------------------------
1995 1994 1993
----------------------------------- ----------------------------------- -----------------------------------
Interest Interest Interest
Average Average Earned Average Average Earned Average Average Earned
($ in thousands) Volume Rate or Paid Volume Rate or Paid Volume Rate or Paid
----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Assets
Loans(1) $ 192,035 9.87%$ 18,959 $ 168,167 9.07%$ 15,254 $ 149,247 8.97%$ 13,393
Taxable securities 48,871 5.65% 2,762 51,844 4.82% 2,501 53,810 5.49% 2,956
Non-taxable
securities(2) 19,436 8.95% 1,739 17,656 9.13% 1,612 15,903 9.73% 1,547
Federal funds sold 8,383 5.94% 498 6,425 4.05% 260 7,603 2.93% 223
----------- ----------- ----------- ----------- ----------- -----------
Total interest-
earning assets 268,725 8.92% 23,958 244,092 8.04% 19,627 226,563 8.00% 18,119
----------- ----------- -----------
Cash and due from
banks 11,575 10,912 11,066
Bank premises and
equipment, net 7,799 6,444 5,684
Other assets 8,301 5,779 4,404
----------- ----------- -----------
Total assets $ 296,400 $ 267,227 $ 247,717
=========== =========== ===========
Liabilities and
and Equity
Interest-bearing
deposits $ 224,999 3.98% 8,953 $ 204,080 3.06% 6,253 $ 193,966 3.12% 6,054
Federal funds
purchased 7 - - 1 - - - - -
Borrowed funds - - - 60 6.67% 4 22 9.09% 2
----------- ----------- ----------- ----------- ----------- -----------
Total interest-
bearing
liabilities 225,006 3.98% 8,953 204,141 3.07% 6,257 193,988 3.12% 6,056
----------- ----------- -----------
Non-interest-
bearing deposits 37,847 32,645 24,829
Other liabilities 3,086 2,244 2,149
Shareholders'
equity 30,461 28,197 26,751
----------- ----------- -----------
Total liabilities
and shareholders'
equity $ 296,400 $ 267,227 $ 247,717
=========== =========== ===========
Net yield on interest-
earning assets and
net interest income 5.58%$ 15,005 5.48%$ 13,370 5.32%$ 12,063
=========== =========== ===========
Interest rate spread 4.94% 4.97% 4.88%
<FN>
(1) Average loans, net of unearned income. These amounts include non-accruing loans, the effect of which is to lower the average
rates shown. Interest earned includes recognized loan fees in the amounts of $660,000, $637,000 and $648,000 for 1995, 1994
and 1993, respectively.
(2) Interest earned on non-taxable securities has been (i) adjusted to a taxable-equivalent basis using the applicable combined
federal and state tax rate for the period and (ii) reduced by the nondeductible portion of interest expense.
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Table 3 Volume And Rate Variance Analysis
- -----------------------------------------------------------------------------------------------------------------------------------
Changes in Changes in
Average Volumes Interest Earned or Paid Attributed to Changes in
----------------------- -----------------------------------------------------------------------
1995 1994 1995 1994
----------- ----------- ----------------------------------- -----------------------------------
(in thousands) Volume(1) Rate(1) Net Volume(1) Rate(1) Net
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Loans $ 23,868 $ 18,920 $ 2,264 $ 1,441 $ 3,705 $ 1,702 $ 159 $ 1,861
Taxable securities (2,973) (1,966) (157) 418 261 (101) (354) (455)
Non-taxable securities(2) 1,780 1,753 160 (33) 127 166 (101) 65
Federal funds sold 1,958 (1,178) 98 140 238 (42) 79 37
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Total interest-earning
assets $ 24,633 $ 17,529 2,365 1,966 4,331 1,725 (217) 1,508
=========== =========== ----------- ----------- ----------- ----------- ----------- -----------
Interest-bearing deposits $ 20,919 $ 10,114 726 1,974 2,700 318 (119) 199
Federal funds purchased 6 1 - - - (3) 3 -
Borrowed funds (60) 38 (2) (2) (4) 3 (1) 2
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Total interest-bearing
liabilities $ 20,865 $ 10,153 724 1,972 2,696 318 (117) 201
=========== =========== ----------- ----------- ----------- ----------- ----------- -----------
Net interest income $ 1,641 $ (6)$ 1,635 $ 1,407 $ (100)$ 1,307
=========== =========== =========== =========== =========== ===========
<FN>
(1) The combined rate/volume variance for each category has been allocated equally between rate and volume variances.
(2) Interest earned on non-taxable securities has been (i) adjusted to a taxable-equivalent basis using the applicable combined
federal and state tax rate for the period and (ii) reduced by the nondeductible portion of interest expense.
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Table 4 Rate Sensitivity Analysis
- -----------------------------------------------------------------------------------------------------------------------------------
As of December 31, 1995
-----------------------------------------------------------
Total
3 Months 4 to 12 Within 12 Over 12
($ in thousands) or Less Months Months Months Total
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Earning Assets
Loans $ 107,123 $ 15,189 $ 122,312 $ 89,210 $ 211,522
Securities available for sale 11,334 17,197 28,531 21,126 49,657
Securities held-to-maturity 635 1,207 1,842 17,898 19,740
Federal funds sold 11,826 - 11,826 - 11,826
----------- ----------- ----------- ----------- -----------
Total earning assets $ 130,918 $ 33,593 $ 164,511 $ 128,234 $ 292,745
=========== =========== =========== =========== ===========
Percent of total earning assets 44.72% 11.48% 56.20% 43.80% 100.00%
Cumulative percent of total earning assets 44.72% 56.20% 56.20% 100.00% 100.00%
Interest-bearing Liabilities
Time deposits of $100,000 or more $ 15,570 $ 12,741 $ 28,311 $ 3,650 $ 31,961
Savings, NOW and money market deposits 106,339 - 106,339 - 106,339
Other time deposits 36,065 51,342 87,407 20,067 107,474
----------- ----------- ----------- ----------- -----------
Total interest-bearing liabilities $ 157,974 $ 64,083 $ 222,057 $ 23,717 $ 245,774
=========== =========== =========== =========== ===========
Percent of total interest-bearing liabilities 64.28% 26.07% 90.35% 9.65% 100.00%
Cumulative percent of total interest-bearing
liabilities 64.28% 90.35% 90.35% 100.00% 100.00%
Interest sensitivity gap $ (27,056)$ (30,490)$ (57,546)$ 104,517 $ 46,971
Cumulative interest sensitivity gap $ (27,056)$ (57,546)$ (57,546)$ 46,971 $ 46,971
Cumulative interest sensitivity gap
as a percent of total earning assets -9.24% -19.66% -19.66% 16.05% 16.05%
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Table 5 Other Income
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended December 31,
-----------------------------------------------------------
(in thousands) 1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Service charges on deposit accounts $ 2,164 $ 1,935 $ 1,750
Income from sales of credit insurance 381 279 258
Other service charges, commissions and fees 913 783 519
Data processing fees 123 139 252
Securities gains, net - 37 17
----------- ----------- -----------
Total $ 3,581 $ 3,173 $ 2,796
=========== =========== ===========
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Table 6 Other Expenses
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended December 31,
-----------------------------------------------------------
(in thousands) 1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Salaries $ 5,866 $ 4,457 $ 4,002
Employee benefits 1,222 1,063 1,004
Total personnel expense 7,088 5,520 5,006
Net occupancy expense 858 735 701
Equipment rentals, depreciation and maintenance 798 883 832
Litigation settlement expenses 1,446 - -
Other operating expenses 4,678 4,258 3,419
----------- ----------- -----------
Total $ 14,868 $ 11,396 $ 9,958
=========== =========== ===========
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Table 7 Income Taxes
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended December 31,
-----------------------------------------------------------
(in thousands) 1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Income tax expense - Current $ 767 $ 712 $ 970
- Deferred (187) 443 51
----------- ----------- -----------
Total $ 580 $ 1,155 $ 1,021
=========== =========== ===========
Effective tax rate 26.83% 27.89% 27.43%
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Table 8 Distribution Of Assets And Liabilities
- -----------------------------------------------------------------------------------------------------------------------------------
As of December 31,
-----------------------------------------------------------
(in thousands) 1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Assets
Interest-earning assets:
Net loans 64 % 62 % 60 %
Securities available for sale 15 16 -
Securities held-to-maturity 6 7 26
Federal funds sold 4 2 3
----------- ----------- -----------
Total interest-earning assets 89 87 89
Non-interest-earning assets:
Cash and due from banks 4 4 6
Premises and equipment 2 2 2
Other assets 5 7 3
----------- ----------- -----------
Total assets 100 % 100 % 100 %
=========== =========== ===========
Liabilities and Shareholders Equity
Demand deposits 13 % 14 % 12 %
Savings, NOW and money market deposits 33 36 36
Time deposits of $100,000 or more 10 8 8
Other time deposits 33 31 32
----------- ----------- -----------
Total deposits 89 89 88
Accrued expenses and other liabilities 2 1 1
----------- ----------- -----------
Total liabilities 91 90 89
Shareholders equity 9 10 11
----------- ----------- -----------
Total liabilities and shareholders equity 100 % 100 % 100 %
=========== =========== ===========
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Table 9 Investment Portfolio Composition
- -----------------------------------------------------------------------------------------------------------------------------------
As of December 31,
-----------------------------------------------------------
(in thousands) 1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Securities Available for Sale:
U.S. Treasury $ 9,590 $ 10,292 $ -
U.S. Government agencies 39,054 35,666 -
Mortgage-backed 389 - -
State and local governments 601 172 -
Other 23 20 -
----------- ----------- -----------
Total $ 49,657 $ 46,150 $ -
=========== =========== ===========
Securities Held-to-Maturity:
U.S. Treasury $ - $ 88 $ 11,989
U.S. Government agencies - 2,200 37,451
State and local governments 19,357 18,248 15,968
Other 383 406 338
----------- ----------- -----------
Total $ 19,740 $ 20,942 $ 65,746
=========== =========== ===========
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Table 10 Investment Portfolio Maturities
- -----------------------------------------------------------------------------------------------------------------------------------
As of December 31,
-----------------------------------------------------------------------
1995 1994
----------------------------------- -----------------------------------
Book Fair Book Book Fair Book
($ in thousands) Value Value Yield(1) Value Value Yield(1)
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Securities available for sale:
U.S. Treasury
Due within 90 days $ 1,750 $ 1,749 5.11%$ 79 $ 79 5.02%
Due after 90 days but within one year 4,244 4,229 4.74% 5,999 5,904 4.52%
Due after one year but within five years 2,996 3,062 7.31% 3,996 3,818 4.47%
Due after five years but within ten years 505 550 7.27% 506 491 7.27%
----------- ----------- ----------- ----------- ----------- -----------
Total 9,495 9,590 5.75% 10,580 10,292 4.64%
----------- ----------- ----------- ----------- ----------- -----------
U.S. Government agencies
Due within 90 days 8,989 8,984 5.22% 11,480 11,460 5.13%
Due after 90 days but within one year 12,999 12,968 4.84% 3,000 3,983 5.78%
Due after one year but within five years 16,804 17,102 6.70% 21,997 20,223 5.08%
----------- ----------- ----------- ----------- ----------- -----------
Total 38,792 39,054 5.73% 36,477 35,666 5.15%
----------- ----------- ----------- ----------- ----------- -----------
Mortgage-backed securities
Due after one year but within five years 386 389 6.90% - - -
----------- ----------- ----------- ----------- ----------- -----------
Total 386 389 6.90% - - -
----------- ----------- ----------- ----------- ----------- -----------
State and local governments(1)
Due within 90 days 601 601 6.08% 172 172 6.50%
----------- ----------- ----------- ----------- ----------- -----------
Total 601 601 6.08% 172 172 6.50%
----------- ----------- ----------- ----------- ----------- -----------
Other
Due after five years but within ten years 23 23 6.00% 20 20 6.00%
----------- ----------- ----------- ----------- ----------- -----------
Total 23 23 6.00% 20 20 6.00%
----------- ----------- ----------- ----------- ----------- -----------
Total securities available for sale
Due within 90 days 11,340 11,334 5.25% 11,731 11,711 5.15%
Due after 90 days but within one year 17,243 17,197 4.82% 8,999 9,887 4.94%
Due after one year but within five years 20,186 20,553 6.79% 25,993 24,041 4.99%
Due after five years but within ten years 528 573 7.21% 526 511 7.22%
----------- ----------- ----------- ----------- ----------- -----------
Total $ 49,297 $ 49,657 5.75%$ 47,249 $ 46,150 5.05%
=========== =========== =========== =========== =========== ===========
Securities held-to-maturity:
U.S. Treasury
Due within 90 days $ - $ - - $ 88 $ 88 5.31%
----------- ----------- ----------- ----------- ----------- -----------
Total - - - 88 88 5.31%
----------- ----------- ----------- ----------- ----------- -----------
U.S. Government agencies
Due after 90 days but within one year - - - 200 200 5.66%
Due after one year but within five years - - - 2,000 1,943 6.00%
----------- ----------- ----------- ----------- ----------- -----------
Total - - - 2,200 2,143 5.97%
----------- ----------- ----------- ----------- ----------- -----------
State and local governments(1)
Due within 90 days 635 636 6.89% 130 130 6.81%
Due after 90 days but within one year 1,207 1,215 7.68% 246 246 7.35%
Due after one year but within five years 9,774 10,154 8.91% 10,400 10,580 8.77%
Due after five years but within ten years 6,692 6,901 8.16% 6,920 6,724 8.14%
Due after ten years 1,049 1,085 8.59% 552 477 7.92%
----------- ----------- ----------- ----------- ----------- -----------
Total 19,357 19,991 8.49% 18,248 18,157 8.47%
----------- ----------- ----------- ----------- ----------- -----------
Other
Due after five years but within ten years 383 383 6.00% 406 406 6.00%
----------- ----------- ----------- ----------- ----------- -----------
Total 383 383 6.00% 406 406 6.00%
----------- ----------- ----------- ----------- ----------- -----------
Total securities held-to-maturity
Due within 90 days 635 636 6.89% 218 218 6.20%
Due after 90 days but within one year 1,207 1,215 7.68% 446 446 6.59%
Due after one year but within five years 9,774 10,154 8.91% 12,400 12,523 8.32%
Due after five years but within ten years 7,075 7,284 8.04% 7,326 7,130 8.02%
Due after ten years 1,049 1,085 8.59% 552 477 7.92%
----------- ----------- ----------- ----------- ----------- -----------
Total $ 19,740 $ 20,374 8.44%$ 20,942 $ 20,794 8.15%
=========== =========== =========== =========== =========== ===========
<FN>
(1) Yields on tax-exempt investments have been adjusted to a taxable equivalent basis using a 34% tax rate.
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Table 11 Loan Portfolio Composition
- -----------------------------------------------------------------------------------------------------------------------------------
As of December 31,
-----------------------------------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991
----------------------- ----------------------- ----------------------- ----------------------- -----------------------
($ in % of % of % of % of % of
thousands) Amount Total Amount Total Amount Total Amount Total Amount Total
----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial,
financial
& agricul-
tural $ 34,531 16.33%$ 33,948 18.28%$ 26,900 17.10%$ 25,058 17.32%$ 25,900 17.54%
Real estate(1)
Construc-
tion 10,033 4.74% 9,869 5.31% 8,651 5.50% 6,511 4.50% 6,828 4.62%
Mortgage 138,862 65.65% 114,705 61.75% 98,165 62.42% 90,330 62.41% 90,377 61.19%
Installment
loans to
individ-
uals 27,324 12.92% 25,503 13.73% 21,576 13.72% 20,792 14.37% 22,213 15.04%
Nonaccrual 772 0.36% 1,724 0.93% 1,987 1.26% 2,025 1.40% 2,376 1.61%
----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Total $ 211,522 100.00%$ 185,749 100.00%$ 157,279 100.00%$ 144,716 100.00%$ 147,694 100.00%
=========== =========== =========== =========== =========== =========== =========== =========== =========== ===========
<FN>
(1) The majority of these loans are various personal and commercial loans where real estate provides additional security for the
loan.
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Table 12 Loan Maturities
- -----------------------------------------------------------------------------------------------------------------------------------
As of December 31, 1995
-----------------------------------------------------------------------------------------------
After One Year
Within But Within
One Year Five Years After Five Years Total
----------------------- ----------------------- ----------------------- -----------------------
($ in thousands) Amount Yield Amount Yield Amount Yield Amount Yield
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Variable Rate Loans:
Commercial, financial
and agricultural $ 14,848 9.29%$ 4,775 9.47%$ 1,337 9.36%$ 20,960 9.34%
Real estate-construction 5,911 9.39% 1,869 9.68% 675 8.50% 8,455 9.38%
Real estate-mortgage 18,453 9.36% 30,904 9.19% 21,009 9.62% 70,366 9.36%
Installment loans
to individuals 478 9.52% 2,166 11.19% 757 10.10% 3,401 10.71%
----------- ----------- ----------- -----------
Total at variable rates 39,690 9.34% 39,714 9.36% 23,778 9.59% 103,182 9.40%
----------- ----------- ----------- -----------
Fixed Rate Loans:
Commercial, financial
and agricultural 5,123 8.33% 7,379 9.15% 1,069 5.85% 13,571 8.58%
Real estate-construction 1,278 9.90% 212 8.00% 88 9.41% 1,578 9.62%
Real estate-mortgage 9,896 9.15% 48,255 8.93% 10,345 9.02% 68,496 8.98%
Installment loans
to individuals 4,224 10.54% 19,358 11.18% 341 9.34% 23,923 11.04%
----------- ----------- ----------- -----------
Total at fixed rates 20,521 9.28% 75,204 9.53% 11,843 8.75% 107,568 9.40%
----------- ----------- ----------- -----------
Subtotal 60,211 9.32% 114,918 9.47% 35,621 9.31% 210,750 9.40%
Nonaccrual loans 772 772
----------- ----------- ----------- -----------
Total loans $ 60,983 $ 114,918 $ 35,621 $ 211,522
=========== =========== =========== ===========
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Table 13 Nonperforming Assets
- -----------------------------------------------------------------------------------------------------------------------------------
As of December 31,
-----------------------------------------------------------
($ in thousands) 1995 1994 1993 1992 1991
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Loans: Nonaccrual loans $ 772 $ 1,724 $ 1,987 $ 2,025 $ 2,376
Loans past due 90 or more days and
still accruing interest - - - - 1
Restructured loans 668 252 591 276 383
----------- ----------- ----------- ----------- -----------
Total nonperforming loans 1,440 1,976 2,578 2,301 2,760
Foreclosed and repossessed properties 1,393 2,976 1,781 1,478 977
----------- ----------- ----------- ----------- -----------
Total nonperforming assets $ 2,833 $ 4,952 $ 4,359 $ 3,779 $ 3,737
=========== =========== =========== =========== ===========
Nonperforming loans as a percentage
of total loans 0.68% 1.06% 1.64% 1.59% 1.87%
Allowance for possible loan losses as a
percentage of nonperforming loans 318.54% 253.49% 108.49% 109.78% 90.00%
Nonperforming assets as a percentage of
loans and foreclosed, repossessed and
idled properties 1.33% 2.62% 2.74% 2.58% 2.51%
Nonperforming assets as a percentage of
total assets 0.88% 1.71% 1.69% 1.56% 1.61%
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Table 14 Allocation Of The Allowance For Possible Loan Losses
- -----------------------------------------------------------------------------------------------------------------------------------
As of December 31,
-----------------------------------------------------------
($ in thousands) 1995 1994 1993 1992 1991
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Commercial, financial and agricultural $ 758 $ 795 $ 346 $ 361 $ 442
Real estate:
Construction 199 214 203 84 -
Mortgage 2,516 2,704 1,802 1,708 1,650
Installment loans to individuals 620 835 266 236 267
----------- ----------- ----------- ----------- -----------
Total allocated 4,093 4,548 2,617 2,389 2,359
Unallocated 494 461 180 137 125
----------- ----------- ----------- ----------- -----------
Total $ 4,587 $ 5,009 $ 2,797 $ 2,526 $ 2,484
=========== =========== =========== =========== ===========
<FN>
The percentages of total loans in each category to total loans are presented in Table 11.
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Table 15 Loan Loss And Recovery Experience
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended December 31,
-----------------------------------------------------------
($ in thousands) 1995 1994 1993 1992 1991
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Loans outstanding at end of year,
net of unearned income $ 211,522 $ 185,749 $ 157,279 $ 144,716 $ 147,694
=========== =========== =========== =========== ===========
Average amount of loans outstanding $ 192,035 $ 168,167 $ 149,247 $ 146,710 $ 145,610
=========== =========== =========== =========== ===========
Allowance for possible loan losses
at beginning of year $ 5,009 $ 2,797 $ 2,526 $ 2,484 $ 2,379
Provision for possible loan losses
charged to expense 900 387 590 505 565
Allowance of purchased bank 187 2,487 - - -
----------- ----------- ----------- ----------- -----------
6,096 5,671 3,116 2,989 2,944
----------- ----------- ----------- ----------- -----------
Loans charged off:
Commercial, financial and agricultural (885) (242) (87) (60) (134)
Real estate - mortgage (184) (207) (158) (197) (77)
Installment loans to individuals (531) (354) (226) (294) (310)
----------- ----------- ----------- ----------- -----------
Total charge-offs (1,600) (803) (471) (551) (521)
----------- ----------- ----------- ----------- -----------
Recoveries of loans previously charged off:
Commercial, financial and agricultural 23 11 61 7 16
Real estate - mortgage 6 79 9 31 6
Installment loans to individuals 62 51 82 50 39
----------- ----------- ----------- ----------- -----------
Total recoveries 91 141 152 88 61
----------- ----------- ----------- ----------- -----------
Net charge-offs (1,509) (662) (319) (463) (460)
----------- ----------- ----------- ----------- -----------
Allowance for possible loan losses
at end of year $ 4,587 $ 5,009 $ 2,797 $ 2,526 $ 2,484
=========== =========== =========== =========== ===========
Ratios:
Net charge-offs during year to average
loans outstanding during year 0.79% 0.39% 0.21% 0.32% 0.32%
Net charge-offs to loans at end of year 0.71% 0.36% 0.20% 0.32% 0.31%
Allowance for possible loan losses
to average loans 2.39% 2.98% 1.87% 1.72% 1.71%
Allowance for possible loan losses
to loans at end of year 2.17% 2.70% 1.78% 1.75% 1.68%
Net charge-offs to allowance for
possible loan losses 32.90% 13.22% 11.41% 18.33% 18.52%
Net charge-offs to provision for
possible loan losses 167.67% 171.06% 54.07% 91.68% 81.42%
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Table 16 Average Deposits
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended December 31,
-----------------------------------------------------------------------
1995 1994 1993
----------------------- ----------------------- -----------------------
Average Average Average Average Average Average
($ in thousands) Amount Rate Amount Rate Amount Rate
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Interest-bearing demand deposits $ 71,571 2.09%$ 69,597 1.92%$ 65,726 2.10%
Savings deposits 29,322 2.56% 28,369 2.52% 23,115 2.51%
Time deposits 124,106 5.40% 106,114 3.96% 105,125 3.90%
----------- ----------- -----------
Total interest-bearing deposits 224,999 3.98% 204,080 3.06% 193,966 3.12%
Non-interest-bearing deposits 37,847 - 32,645 - 24,829 -
----------- ----------- -----------
Total deposits $ 262,846 3.41%$ 236,725 2.64%$ 218,795 2.77%
=========== =========== ===========
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Table 17 Maturities Of Time Deposits Of $100,000 Or More
- -----------------------------------------------------------------------------------------------------------------------------------
As of December 31,
-----------------------------------------------------------
3 Months 4 to 6 7 to 12 Over 12
(in thousands) or less Months Months Months Total
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Time certificates of deposit of
$100,000 or more $ 15,570 $ 6,665 $ 6,076 $ 3,650 $ 31,961
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Table 18 Return On Assets And Equity
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended December 31,
-----------------------------------------------------------
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Return on assets 0.53% 1.12% 1.09%
Return on equity 5.19% 10.59% 10.10%
Dividend payout 66.67% 32.66% 32.22%
Average shareholders equity to average assets 10.28% 10.55% 10.80%
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Table 19 Risk-Based And Leverage Capital, Capital Components And Ratios
- -----------------------------------------------------------------------------------------------------------------------------------
As of December 31,
-----------------------------------
($ in thousands) 1995 1994
----------- -----------
<S> <C> <C>
Risk-Based And Leverage Capital
Tier I capital:
Common shareholders equity $ 30,277 $ 28,790
Intangible assets (6,306) (6,279)
Unrealized holding loss (gain)
on securities available for sale (235) 663
----------- -----------
Total Tier I leverage capital 23,736 23,174
----------- -----------
Tier II capital:
Allowable allowance for possible loan losses 2,661 2,535
----------- -----------
Tier II capital additions 2,661 2,535
----------- -----------
Total risk-based capital $ 26,397 $ 25,709
=========== ===========
Risk-adjusted assets $ 219,439 $ 208,438
Tier I risk-adjusted assets
(includes Tier I capital adjustments) 212,898 202,822
Tier II risk-adjusted assets
(includes Tiers I and II capital adjustments) 215,559 205,357
Fourth quarter average assets 309,996 289,904
Adjusted fourth quarter average assets
(includes Tier I capital adjustments) 303,455 284,288
Risk-based capital ratios:
Tier I capital to Tier I risk-adjusted assets 11.15% 11.43%
Minimum required Tier I capital 4.00% 4.00%
Total risk-based capital to
Tier II risk-adjusted assets 12.25% 12.52%
Minimum required total risk-based capital 8.00% 8.00%
Leverage Capital Ratios:
Tier I leverage capital to
adjusted fourth quarter average assets 7.82% 8.15%
Minimum required Tier I leverage capital 3-5.00% 3-5.00%
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Table 20 QUARTERLY FINANCIAL SUMMARY
- -----------------------------------------------------------------------------------------------------------------------------------
1995 1994
----------------------------------------------- -----------------------------------------------
($ in thousands Fourth Third Second First Fourth Third Second First
except per share data) Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Operating Summary
Interest income, taxable
equivalent $ 6,317 $ 6,064 $ 5,988 $ 5,589 $ 5,488 $ 5,081 $ 4,644 $ 4,414
Interest expense 2,467 2,325 2,222 1,939 1,813 1,566 1,465 1,413
Net interest income,
taxable equivalent 3,850 3,739 3,766 3,650 3,675 3,515 3,179 3,001
Taxable equivalent
adjustment 165 165 166 160 155 153 157 153
Net interest income 3,685 3,574 3,600 3,490 3,520 3,362 3,022 2,848
Provision for loan losses 540 100 160 100 50 100 100 137
Net interest income after
provision for possible
loan losses 3,145 3,474 3,440 3,390 3,470 3,262 2,922 2,711
Other income 1,001 843 871 866 1,027 749 662 735
Other expenses 5,487 3,034 3,115 3,232 3,380 2,886 2,564 2,566
Income (loss) before taxes (1,341) 1,283 1,196 1,024 1,117 1,125 1,020 880
Income taxes (540) 420 391 309 301 332 285 237
Net income (loss) (801) 863 805 715 816 793 735 643
- -----------------------------------------------------------------------------------------------------------------------------------
Per Share Data(1)
Net income (loss) $ (0.53)$ 0.57 $ 0.54 $ 0.48 $ 0.54 $ 0.53 $ 0.49 $ 0.43
Cash dividends declared 0.18 0.18 0.17 0.17 0.17 0.16 0.16 0.16
Dividend payout -33.96% 31.58% 31.48% 35.42% 31.48% 30.19% 32.65% 37.21%
Market price:
High $ 29.50 $ 29.00 $ 22.50 $ 22.50 $ 23.00 $ 22.00 $ 21.00 $ 21.00
Low 25.50 21.00 21.00 20.50 18.63 18.00 18.00 18.00
Close 25.50 28.25 22.00 22.00 21.00 19.25 19.00 20.00
Stated book value 20.09 20.74 20.32 19.65 19.14 18.90 18.57 18.42
Tangible book value 15.91 16.92 16.33 15.57 14.97 14.62 18.12 17.93
- -----------------------------------------------------------------------------------------------------------------------------------
Selected Average Balances
Assets $ 309,996 $ 296,136 $ 291,981 $ 287,487 $ 289,904 $ 268,894 $ 256,237 $ 253,873
Securities 66,852 67,582 70,874 67,920 67,725 68,335 72,251 68,733
Loans 201,380 194,022 188,433 184,305 186,833 170,203 158,523 157,109
Earning assets 282,933 267,379 264,722 259,866 261,429 245,735 236,283 232,921
Deposits 274,648 261,650 259,305 255,781 258,646 238,228 226,430 223,596
Interest-bearing liabilities 234,708 223,977 221,772 218,988 219,447 204,945 196,980 195,192
Shareholders equity 31,595 30,899 29,845 29,505 28,674 28,380 27,870 27,894
- -----------------------------------------------------------------------------------------------------------------------------------
Ratios
Return on average assets -1.03% 1.17% 1.10% 0.99% 1.13% 1.18% 1.15% 1.01%
Return on average equity -10.14% 11.17% 10.79% 9.69% 11.38% 11.18% 10.55% 9.22%
Average equity to
average assets 10.19% 10.43% 10.22% 10.26% 9.89% 10.55% 10.88% 10.99%
Risk-based capital ratios:
Tier I capital 11.15% 12.57% 12.59% 12.51% 11.43% 10.59% 15.61% 15.27%
Total risk-based capital 12.25% 13.68% 13.70% 13.62% 12.52% 11.84% 16.86% 16.52%
Tier I leverage capital 7.82% 8.72% 8.56% 8.44% 8.15% 8.54% 10.80% 10.71%
Average loans to
average deposits 73.32% 74.15% 72.67% 72.06% 72.24% 71.45% 70.01% 70.26%
Average earning assets to
interest-bearing
liabilities 120.55% 119.38% 119.37% 118.67% 119.13% 119.90% 119.95% 119.33%
Net interest margin 5.44% 5.59% 5.69% 5.62% 5.62% 5.72% 5.38% 5.15%
Nonperforming loans as a
percentage of total loans 0.68% 1.21% 1.10% 1.13% 1.06% 1.29% 1.18% 1.78%
Allowance for possible loan
losses as a percentage of
nonperforming loans 318.54% 194.43% 227.95% 229.98% 253.49% 217.04% 151.54% 100.88%
Nonperforming assets as a
percentage of loans and
foreclosed, repossessed
and idled properties 1.33% 1.89% 2.00% 2.52% 2.62% 2.86% 2.50% 2.87%
Nonperforming assets as a
percentage of total assets 0.88% 1.25% 1.33% 1.65% 1.71% 1.92% 1.58% 1.79%
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Item 7. Financial Statements
FIRST BANCORP AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
As of December 31,
-----------------------------------
($ in thousands) 1995 1994
----------- -----------
ASSETS <C> <C>
Cash and due from banks, noninterest-bearing $ 12,190 $ 12,588
Federal funds sold 11,826 6,660
----------- -----------
Total cash and cash equivalents 24,016 19,248
----------- -----------
Securities available for sale (costs of
$49,297 in 1995 and $47,249 in 1994) 49,657 46,150
Securities held-to-maturity (approximate fair
values of $20,374 in 1995 and $20,794 in 1994) 19,740 20,942
Presold mortgages in process of settlement 826 631
Loans, net of unearned income 211,522 185,749
Less: Allowance for possible loan losses (4,587) (5,009)
----------- -----------
Net loans 206,935 180,740
----------- -----------
Premises and equipment, net 8,043 7,138
Accrued interest receivable 2,372 2,235
Intangible assets, net 6,306 6,279
Other assets 3,844 6,250
----------- -----------
Total assets $ 321,739 $ 289,613
=========== ===========
LIABILITIES
Deposits, domestic:
Demand $ 41,941 $ 40,390
Savings, NOW and money market 106,339 103,879
Time deposits of $100,000 or more 31,961 24,615
Other time deposits 107,474 89,546
----------- -----------
Total deposits 287,715 258,430
Accrued interest on savings and time deposits 1,889 1,144
Other 1,858 1,249
----------- -----------
Total liabilities 291,462 260,823
----------- -----------
Commitments and contingencies (Notes 8 and 9)
SHAREHOLDERS EQUITY
Common stock, par value $5 per share:
Authorized: 12,500,000 shares
Issued and outstanding: 1,507,085 shares
in 1995 and 1,504,185 shares in 1994 7,535 7,521
Capital surplus 11,355 11,308
Retained earnings 11,152 10,624
Unrealized gain (loss) on securities
available for sale, net of income taxes 235 (663)
----------- -----------
Total shareholders equity 30,277 28,790
----------- -----------
Total liabilities and shareholders equity $ 321,739 $ 289,613
=========== ===========
<FN>
See notes to consolidated financial statements.
</TABLE>
<PAGE>
FIRST BANCORP AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED INCOME
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------------------------
($ in thousands except per share data) 1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans $ 18,959 $ 15,254 $ 13,393
Interest on investment securities
Taxable interest income 2,762 2,501 2,956
Exempt from federal income taxes 1,083 994 958
Other, principally from federal funds sold 498 260 223
----------- ----------- -----------
Total interest income 23,302 19,009 17,530
----------- ----------- -----------
INTEREST EXPENSE
Time deposits of $100,000 or more 1,662 861 845
Other time and savings deposits 7,291 5,392 5,209
Borrowed funds - 4 2
----------- ----------- -----------
Total interest expense 8,953 6,257 6,056
----------- ----------- -----------
Net interest income 14,349 12,752 11,474
Provision for possible loan losses 900 387 590
----------- ----------- -----------
Net interest income after provision for possible
loan losses 13,449 12,365 10,884
----------- ----------- -----------
OTHER INCOME
Service charges on deposit accounts 2,164 1,935 1,750
Income from sales of credit insurance 381 279 258
Other service charges, commissions and fees 913 783 519
Data processing fees 123 139 252
Securities gains, net - 37 17
----------- ----------- -----------
Total other income 3,581 3,173 2,796
----------- ----------- -----------
OTHER EXPENSES
Salaries 5,866 4,457 4,002
Employee benefits 1,222 1,063 1,004
----------- ----------- -----------
Total personnel expense 7,088 5,520 5,006
Net occupancy 858 735 701
Equipment rentals, depreciation and maintenance 798 883 832
Litigation settlement 1,446 - -
Other operating expenses 4,678 4,258 3,419
----------- ----------- -----------
Total other expenses 14,868 11,396 9,958
----------- ----------- -----------
Income before income taxes 2,162 4,142 3,722
Income taxes 580 1,155 1,021
----------- ----------- -----------
NET INCOME $ 1,582 $ 2,987 $ 2,701
=========== =========== ===========
PER SHARE AMOUNTS
Net income $ 1.05 $ 1.99 $ 1.80
Cash dividends declared 0.70 0.65 0.58
<FN>
See notes to consolidated financial statements.
</TABLE>
<PAGE>
FIRST BANCORP AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------------------------
(in thousands) 1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,582 $ 2,987 $ 2,701
Adjustments to reconcile net income to
net cash provided by operations:
Provision for possible loan losses 900 387 590
Net security premium amortization/discount accretion (44) 37 56
Loan fees and costs deferred net of amortization (43) (7) 65
Depreciation of premises and equipment 726 764 644
Amortization of intangible assets 501 315 282
Realized and unrealized other real estate losses (gains) 78 (11) 33
Provision for deferred income taxes (187) 443 51
Gains on sales of securities - (37) (17)
Loss on disposal of premises and equipment - 49 40
Changes in operating assets and liabilities:
Decrease (increase) in accrued interest receivable (7) (96) 147
Decrease in intangible assets 161 - -
Decrease (increase) in other assets 1,941 880 (491)
Increase (decrease) in accrued interest payable 728 133 (376)
Increase (decrease) in other liabilities 513 (1,558) 1,044
----------- ----------- -----------
Net cash provided by operating activities 6,849 4,286 4,769
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of securities available for sale (26,269) (33,050) -
Purchase of securities held-to-maturity (1,683) (5,733) (30,744)
Proceeds from sale of securities available for sale - 1,998 -
Proceeds from maturities and issuer calls of
securities available for sale 27,789 33,513 -
Proceeds from maturities and issuer calls of
securities held-to-maturity 2,240 1,332 33,318
Net increase in loans (18,600) (3,417) (14,170)
Net purchases of premises and equipment (1,323) (190) (1,214)
Net cash acquired (paid) in acquisition of
a financial institution 2,417 (1,272) -
----------- ----------- -----------
Net cash used in investing activities (15,429) (6,819) (12,810)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in deposits 14,325 (1,226) 12,176
Cash dividends paid (1,038) (947) (827)
Proceeds from issuance of common stock 61 - -
----------- ----------- -----------
Net cash provided by (used in) financing activities 13,348 (2,173) 11,349
----------- ----------- -----------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 4,768 (4,706) 3,308
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 19,248 23,954 20,646
----------- ----------- -----------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 24,016 $ 19,248 $ 23,954
=========== =========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest $ 8,225 $ 6,124 $ 6,432
Income taxes 1,362 999 1,012
Non-cash transactions:
Foreclosed loans transferred to other real estate 259 1,170 1,223
Loans to facilitate the sale of other real estate 1,199 - 273
Reclassification of securities available for sale - 49,288 -
Increase (decrease) in market value of securities
available for sale 1,459 (1,099) -
Book value of premises exchanged in acquisition
of net assets from another financial institution 219 - -
<FN>
See notes to consolidated financial statements.
</TABLE>
<PAGE>
FIRST BANCORP AND SUBSIDIARIES
STATEMENTS OF CHANGES IN CONSOLIDATED SHAREHOLDERS EQUITY
<TABLE>
<CAPTION>
Common Stock
-----------------------
Capital Retained Total
(in thousands) Shares Amount Surplus Earnings Other Equity
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1993 1,504 $ 7,521 $ 11,308 $ 6,786 $ - $ 25,615
Net income 2,701 2,701
Cash dividends declared ($0.58 per share) (873) (873)
----------- ----------- ----------- ----------- ----------- -----------
BALANCE, DECEMBER 31, 1993 1,504 7,521 11,308 8,614 - 27,443
Unrealized gain on securities classified as
available for sale upon adoption of
SFAS No. 115 on January 1, 1994 254 254
Net income 2,987 2,987
Cash dividends declared ($0.65 per share) (977) (977)
Net adjustment for securities available for sale (917) (917)
----------- ----------- ----------- ----------- ----------- -----------
BALANCE, DECEMBER 31, 1994 1,504 7,521 11,308 10,624 (663) 28,790
Net income 1,582 1,582
Cash dividends declared ($0.70 per share) (1,054) (1,054)
Common stock issued under
stock option plans 3 14 47 61
Net adjustment for securities available for sale 898 898
----------- ----------- ----------- ----------- ----------- -----------
BALANCE, DECEMBER 31, 1995 1,507 $ 7,535 $ 11,355 $ 11,152 $ 235 $ 30,277
=========== =========== =========== =========== =========== ===========
<FN>
See notes to consolidated financial statements.
</TABLE>
<PAGE>
FIRST BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) BASIS OF PRESENTATION. The consolidated financial statements include
the accounts of First Bancorp (the "Company") and its wholly owned
subsidiaries, First Bank (the "Bank") and its wholly owned subsidiary First
Bank Insurance Services, Inc. ("First Bank Insurance"), Montgomery Data
Services, Inc. ("Montgomery Data"), and First Bancorp Financial Services, Inc.,
("First Bancorp Financial"), formerly First Recovery, Inc. All significant
intercompany accounts and transactions have been eliminated. The Company is a
bank holding company. The principal activity of the Company is the ownership
and operation of First Bank, a state chartered bank with its main office in
Troy, North Carolina. The Company also owns and operates Montgomery Data, a
data processing company, and First Bancorp Financial, formerly a back-up data
processing company, both of which are also headquartered in Troy.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that effect the reported amounts of assets and liabilities and
disclosure of contingent liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates. The most significant
estimates made by the Company in the preparation of its consolidated
financial statements are the determination of the reserve for loan losses, the
valuation of other real estate, the valuation allowance for deferred tax
assets and fair value estimates for financial instruments.
(b) CASH AND CASH EQUIVALENTS. The Company considers all highly liquid
assets such as cash on hand, noninterest-bearing and interest-bearing amounts
due from banks and federal funds sold to be "cash equivalents".
(c) INVESTMENT SECURITIES. On January 1, 1994, the Company adopted
Statement of Financial Accounting Standards Number 115 ("SFAS No. 115"),
Accounting for Certain Investments in Debt and Equity Securities," which
addresses the accounting and reporting for investments in equity securities
that have readily determinable fair values and for all investments in debt
securities. As required, SFAS 115 was initially applied as of the beginning of
the Company's fiscal year and could not be applied retroactively to prior
years financial statements. These investments are to be classified in three
categories and accounted for as follows: (1) debt securities that the entity
has the positive intent and the ability to hold to maturity are classified as
held-to-maturity securities and reported at amortized cost; (2) 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;
and (3) debt and equity securities not classified as either held-to-maturity
securities or trading securities would be classified as available for sale
securities and reported at fair value, with unrealized gains and losses
excluded from earnings and reported as a separate component of shareholders'
equity. Although the Company has not historically relied upon security sales
as a source of liquidity, the sale of securities classified as available for
sale may be necessary due to liquidity needs arising from unanticipated
deposit and loan fluctuations, changes in regulatory capital and investment
requirements, or significant unforeseen changes in market conditions,
including interest rates and market values of securities held in the
portfolio. On January 1, 1994, the Company classified approximately
$49,288,000 of investment securities at amortized cost as available for sale
securities.
<PAGE>
Gains and losses on investment securities are recognized at the time of
sale based upon the specific identification method. Premiums and discounts
are amortized into income on a level yield basis.
(d) PREMISES AND EQUIPMENT. Premises and equipment are stated at cost less
accumulated depreciation. Depreciation, computed by the straight-line method,
is charged to operations over the estimated useful lives of the properties,
which range from 5 to 40 years or, in the case of leasehold improvements, over
the term of the lease, if shorter. Maintenance and repairs are charged to
operations in the year incurred. Gains and losses on dispositions are included
in current operations.
(e) ALLOWANCE FOR POSSIBLE LOAN LOSSES. The provision for possible loan
losses charged to operations is an amount sufficient to bring the allowance for
possible loan losses to an estimated balance considered adequate to absorb
losses inherent in the portfolio. Management's determination of the adequacy
of the allowance is based on an evaluation of the portfolio, current economic
conditions, historical loan loss experience and other risk factors. While
management uses the best information available to make evaluations, future
adjustments may be necessary if economic and other conditions differ
substantially from the assumptions used.
In addition, various regulatory agencies, as an integral part of their
examination process, periodically review the Bank's allowance for possible loan
losses and losses on foreclosed real estate. Such agencies may require the
Bank to recognize additions to the allowances based on the examiners judgments
about information available to them at the time of their examinations.
Effective January 1, 1995, as required, the Company adopted the
provisions of Statement of Financial Accounting Standards Number 114,
Accounting by Creditors for Impairment of a Loan," as amended by Statement of
Financial Accounting Standards Number 118, "Accounting by Creditors for
Impairment of a Loan-Income Recognition" (collectively referred to hereafter
as "SFAS No. 114"). The adoption of SFAS No. 114 did not have a material
effect on the Companys financial condition or results of operations. Under
the provisions of SFAS No. 114, the 1995 reserve for loan losses related to
loans that are identified for impairment in accordance with SFAS No. 114 is
based on discounted cash flows using the loans initial interest rates or
the fair value of the collateral if the loan is collateral dependent. Large
groups of smaller balance homogenous loans that are collectively evaluated
for impairment (such as credit card, residential mortgage and consumer
installment loans) are excluded from this impairment evaluation in accordance
with SFAS No. 114, and their reserve for loan losses is calculated in
accordance with the reserve for loan losses policy discussed above.
(f) REAL ESTATE ACQUIRED BY FORECLOSURE. Real estate acquired by foreclosure
is recorded at the lower of cost or fair value based on recent appraisals, less
estimated costs to sell. Declines in the fair value of real estate acquired by
foreclosure are recorded by a charge to expense during the period of decline.
(g) INCOME TAXES. The Company accounts for income taxes using the asset and
liability method as provided under Statement of Financial Accounting Standards
No. 109 ("SFAS No. 109"), "Accounting for Income Taxes." The objective of the
asset and liability method is to establish deferred tax assets and liabilities
for the temporary differences between the financial reporting basis and the
tax basis of the Company's assets and liabilities at enacted rates expected to
be in effect when such amounts are realized or settled. Deferred tax assets
are reduced, if necessary, by the amount of such benefits that are not
expected to be realized based upon available evidence. The cumulative effect
<PAGE>
of adopting SFAS No. 109 as of January 1, 1993 was not material, and therefore
no cumulative effect was presented in the statement of consolidated income for
the year ended December 31, 1993.
(h) INCOME AND EXPENSE. The Company and its subsidiaries use the accrual
method of accounting. Substantially all loans earn interest on the level yield
method based on the daily outstanding balance. The accrual of interest on
loans is discontinued when, in management's judgment, the principal or interest
may not be fully collected.
All loan origination and commitment fees and certain incremental direct
costs of loan origination are deferred and amortized over the life of the
related loan.
(i) INTANGIBLE ASSETS. Deposit base intangibles acquired are amortized on
an accelerated basis over their estimated useful lives, which range
principally from 5 to 10 years. Deposit base intangibles at December 31, 1995
and 1994 totaled $3,632,000 and $3,092,000, less accumulated amortization of
$2,756,000 and $2,639,000, respectively. Excess of costs over value assigned
to net assets acquired are being amortized on a straight-line basis over their
estimated useful lives, which range principally from 10 to 15 years. Such
excess at December 31, 1995 and 1994 was $5,917,000 and $5,928,000, less
accumulated amortization of $857,000 and $473,000, respectively. Intangible
assets are subject to periodic review and are adjusted for any impairment of
value.
The Company records an intangible asset in the amount of any additional
liability which must be recorded in connection with defined benefit pension
plans. Such intangible assets and additional liabilities are adjusted annually
based on the current fair value of plan assets relative to the
actuarially-determined accumulated benefit obligations for such plans.
Intangible assets related to the defined benefit plans implemented in 1993
totaled $275,000 at December 31, 1995 and $371,000 at December 31, 1994.
(j) PER SHARE AMOUNTS. Net income per share has been computed based on the
weighted average number of shares outstanding, or 1,504,586, 1,504,185 and
1,504,185 shares, for each of the years ended December 31, 1995, 1994 and
1993, respectively. Cash dividends per share are based on actual amounts
declared. Common stock equivalents resulting from the Company's stock option
plan were not considered in the earnings per share computation due to
immateriality.
(k) FAIR VALUE OF FINANCIAL INSTRUMENTS. Statement of Financial Accounting
Standards Number 107 ("SFAS No. 107"), "Disclosures About Fair Value of
Financial Instruments," requires that the Company disclose estimated fair
values for its financial instruments. Fair value methods and assumptions are
set forth below for the Company's financial instruments.
CASH, FEDERAL FUNDS SOLD, ACCRUED INTEREST RECEIVABLE, SHORT-TERM
BORROWINGS AND ACCRUED INTEREST PAYABLE. The carrying amounts for cash,
federal funds sold, accrued interest receivable, short-term borrowings and
accrued interest payable approximate their fair value because of the short
maturity of these financial instruments.
INVESTMENTS AND MORTGAGE-BACKED SECURITIES. The fair value of investment
securities, except certain state and political subdivision securities, is
estimated based on bid prices published in financial newspapers or bid
quotations received from securities dealers. The fair value of certain state
and political subdivision securities is not readily available through market
sources other than dealer quotations, so fair value estimates are based on
<PAGE>
quoted market prices of similar instruments, adjusted for differences between
the quoted instruments and the instruments being valued.
LOANS. Fair values are estimated for portfolios of loans with similar
financial characteristics. Loans are segregated by type such as commercial,
financial and agricultural, real estate construction, real estate mortgages and
installment loans to individuals. Each loan category is further segmented into
fixed and variable interest rate terms and by performing and nonperforming
categories.
The fair value of performing loans is calculated by discounting scheduled
cash flows through the estimated maturity using estimated market discount rates
that reflect the credit and interest rate risks inherent in the loan. The
estimate of maturity is based on the Company's contractual borrower agreements,
modified, as required, by an estimate of the effect of current economic and
lending conditions. The fair value of nonperforming loans is based on the book
value of each loan less an allocated allowance for loan losses. This allocated
allowance for loan losses is determined on a loan-by-loan basis using external
appraisals of collateral and internal assessments using available market
information and specific borrower information.
DEPOSIT LIABILITIES. Under SFAS No. 107, the fair value of deposits
with no stated maturity, such as non-interest-bearing demand deposits,
savings, NOW and money market accounts, is equal to the amount payable on
demand as of December 31, 1995 and 1994. The fair value of certificates of
deposit is based on the discounted value of contractual cash flows. The
discount rate is estimated using the rates currently offered for deposits of
similar remaining maturities.
COMMITMENTS TO EXTEND CREDIT AND STANDBY LETTERS OF CREDIT. At
December 31, 1995 and 1994, the Company's off-balance sheet financial
instruments had no carrying value. The large majority of commitments to
extend credit and standby letters of credit are at variable rates and/or have
relatively short terms to maturity. Therefore, the fair value for these
financial instruments is considered to be immaterial.
(l) NEW ACCOUNTING PRONOUNCEMENTS. In March 1995, the Financial Accounting
Standards Board ("FASB") issued Statement of Financial Accounting Standards
Number 121 ("SFAS No. 121"), "Accounting for Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed Of" which establishes accounting
standards for the impairment of long-lived assets, certain identifiable
intangibles, and goodwill related to those assets to be held and used and for
those to be disposed of. This statement requires that long-lived assets and
certain intangibles be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying value may not be recoverable. An
impairment loss should be recognized if the sum of the undiscounted future cash
flows is less than the carrying amount of the asset. Those assets to be
disposed of are to be reported at the lower of the carrying amount or fair
value, less costs to sell. Adoption of SFAS No. 121 is required for fiscal
years beginning after December 15, 1995. Adoption of this statement should not
have a material effect on the Companys consolidated financial statements at
the date of adoption.
<PAGE>
In October 1995, the FASB issued Statement of Financial Accounting
Standards Number 123 ("SFAS No. 123"), "Accounting for Stock-Based
Compensation." The statement defines a fair value method of accounting for an
employee stock option or similar equity instrument and encourages all entities
to adopt that method of accounting for all of their employee stock compensation
plans. It also allows an entity to continue to measure compensation cost for
those plans using the intrinsic value based method of accounting prescribed in
Accounting Principles Board Opinion Number 25 ("APB No. 25"), "Accounting for
Stock Issued to Employees." SFAS No. 123 requires that an employers
financial statements include certain disclosures about stock-based compensation
arrangements regardless of the method used to account for them. Entities
electing to remain with the accounting in APB 25 must make pro forma
disclosures of net income and, if presented, earnings per share, as if the fair
value based method of accounting defined in SFAS No. 123 had been applied. The
disclosure requirements of this statement are effective for financial
statements for fiscal years beginning after December 15, 1995, or for an
earlier fiscal year for which this statement is initially adopted for
recognizing compensation cost. Pro forma disclosures required for entities
that elect to continue to measure compensation cost using APB 25 must include
the effects of all awards granted in fiscal years that begin after December 15,
1994. The Company has determined that it will elect to continue to measure
compensation cost using APB 25, and therefore will make any appropriate
disclosures in its financial statements for the year ending December 31, 1996,
of net income and earnings per share as if the fair value based method of
accounting defined in SFAS No. 123 had been applied. Management has not yet
quantified these pro forma disclosures.
(m) RECLASSIFICATIONS. Certain amounts for prior years have been
reclassified to conform to the 1995 presentation. The reclassifications have
had no effect on net income or shareholders equity as previously presented.
Note 2. ACQUISITIONS
On December 15, 1995, First Bank completed its cash acquisition of the
Laurinburg and Rockingham branches of First Scotland Bank. As of December 15,
1995, assets acquired were approximately $15,814,000, including approximately
$8,898,000 in loans, while liabilities assumed were approximately $15,058,000,
including deposits of $14,960,000. The excess of the purchase price of
$1,296,000 to acquire these two branches, and the additional costs of closing
of $150,000, over the value assigned to the net assets acquired resulted in
recording an intangible asset of approximately $690,000. Pro forma results of
operations as though the Company had acquired First Scotland Bank at the
beginning of 1995 and 1994 are not considered material.
On August 25, 1994, First Bank completed its cash acquisition of Central
State Bank in High Point, North Carolina. First Bank paid cash of $538.05
($535.50 purchase price plus $2.55 in interest due to a closing delay) for each
of Central State's 13,000 shares outstanding. Intangible assets, principally
goodwill, of approximately $5,824,000 resulted from the excess of the total
purchase price of $6,962,000 and additional costs of closing of $517,000 over
the fair value of assets acquired of $35,005,000 less liabilities assumed of
$33,350,000. The transaction was accounted for as a purchase, and,
accordingly, the results of Central State were included in the consolidated
financial statements since the date of acquisition. At the date of
acquisition, Central State, a North Carolina state-chartered commercial bank,
had earning assets of approximately $32 million including $27 million in loans.
Central State also had approximately $32 million in deposits.
<PAGE>
Note 3. INVESTMENT SECURITIES
The book values and approximate fair values of investment securities at
December 31, 1995 and 1994 are summarized as follows:
<TABLE>
<CAPTION>
1995 1994
----------------------------------------------- -----------------------------------------------
Book Fair Unrealized Book Fair Unrealized
----------------------- -----------------------
(in thousands) Value Value Gains (Losses) Value Value Gains (Losses)
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Securities available for sale:
U.S. Treasury $ 9,495 $ 9,590 $ 113 $ (18)$ 10,580 $ 10,292 $ - $ (288)
U.S. Government agencies 38,792 39,054 374 (112) 36,477 35,666 3 (814)
Mortgage-backed 386 389 3 - - - - -
State and local governments 601 601 - - 172 172 - -
Other 23 23 - - 20 20 - -
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Total available for sale $ 49,297 $ 49,657 $ 490 $ (130)$ 47,249 $ 46,150 $ 3 $ (1,102)
=========== =========== =========== =========== =========== =========== =========== ===========
Securities held-to-maturity:
U.S. Treasury $ - $ - $ - $ - $ 88 $ 88 $ - $ -
U.S. Government agencies - - - - 2,200 2,143 - (57)
State and local governments 19,357 19,991 743 (109) 18,248 18,157 332 (423)
Other 383 383 - - 406 406 - -
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Total held-to-maturity $ 19,740 $ 20,374 $ 743 $ (109)$ 20,942 $ 20,794 $ 332 $ (480)
=========== =========== =========== =========== =========== =========== =========== ===========
</TABLE>
At December 31, 1995 and 1994, investment securities with book values of
$13,834,000 and $11,650,000, respectively, were pledged as collateral for
public deposits.
There were no security sales in 1995 or 1993. During 1994, sales of
securities available for sale with aggregate proceeds of $1,998,000 resulted
in no gain or loss. The realized gains of $37,000 in 1994 and $17,000 in 1993
resulted from issuer calls of debt securities.
Note 4. LOANS AND ALLOWANCE FOR POSSIBLE LOAN LOSSES
Loans at December 31, 1995 and 1994 are summarized as follows:
<TABLE>
<CAPTION>
(in thousands) 1995 1994
----------- -----------
<S> <C> <C>
Commercial, financial and agricultural $ 34,531 $ 33,948
Real estate - construction 10,033 9,869
Real estate - mortgage 138,862 114,705
Installment loans to individuals 27,324 25,503
Nonaccrual loans 772 1,724
----------- -----------
Total $ 211,522 $ 185,749
=========== ===========
</TABLE>
The above includes loans to executive officers and directors and to their
associates totaling approximately $2,316,000 and $2,423,000 at December 31,
1995 and 1994, respectively. During 1995, additions to such loans were
approximately $507,000 and repayments totaled approximately $614,000.
These loans were made on substantially the same terms, including interest rates
and collateral, as those prevailing at the time for comparable transactions
with other non-related borrowers. Management does not believe these loans
involve more than the normal risk of collectibility or present other
unfavorable features.
Nonperforming assets at December 31, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
(in thousands) 1995 1994
----------- -----------
<S> <C> <C>
Loans: Nonaccrual loans $ 772 $ 1,724
Restructured loans 668 252
----------- -----------
Total nonperforming loans 1,440 1,976
Foreclosed, repossessed and idled properties (included in other assets) 1,393 2,976
----------- -----------
Total nonperforming assets $ 2,833 $ 4,952
=========== ===========
</TABLE>
At December 31, 1995 and 1994 there were no loans 90 days or more past due
that were still accruing interest.
<PAGE>
If the nonaccrual loans and restructured loans as of December 31, 1995,
1994 and 1993 had been current in accordance with their original terms and had
been outstanding throughout the period or since origination, if held for part
of the period, gross interest income in the amounts of approximately $82,000,
$142,000 and $166,000 for nonaccrual loans and $71,000, $24,000 and $45,000
for restructured loans would have been recorded for 1995, 1994 and 1993,
respectively. Interest income on such loans that was actually collected and
included in net income in 1995, 1994 and 1993 amounted to approximately
$36,000, $67,000 and $8,000 for nonaccrual loans and $69,000, $24,000 and
$43,000 for restructured loans, respectively.
Activity in the allowance for possible loan losses for the years ended
December 31, 1995, 1994 and 1993 is as follows:
<TABLE>
<CAPTION>
(in thousands) 1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Balance, beginning of year $ 5,009 $ 2,797 $ 2,526
Provision charged to operations 900 387 590
Allowance of purchased bank 187 2,487 -
Recoveries of loans charged off 91 141 152
Loans charged off (1,600) (803) (471)
----------- ----------- -----------
Balance, end of year $ 4,587 $ 5,009 $ 2,797
=========== =========== ===========
</TABLE>
At December 31, 1995, the recorded investment in loans that are considered
to be impaired under SFAS No. 114 was $1,108,000, all of which were on a
nonaccrual basis at December 31, 1995. The related allowance for loan losses
for these impaired loans as determined in accordance with SFAS No. 114 was
$167,000. There were no impaired loans for which there was no related
allowance determined in accordance with this statement. The average recorded
investment in impaired loans during the year ended December 31, 1995, was
approximately $997,000. For the year ended December 31, 1995, the Company
recognized interest income on those impaired loans of approximately $27,000.
The amount of interest income recognized on a cash basis for impaired loans was
not material.
Note 5. PREMISES AND EQUIPMENT
Premises and equipment at December 31, 1995 and 1994 consist of the
following:
<TABLE>
<CAPTION>
(in thousands) 1995 1994
----------- -----------
<S> <C> <C>
Land $ 1,230 $ 968
Buildings 6,860 5,858
Furniture and equipment 6,964 6,624
Leasehold improvements 743 743
----------- -----------
Total 15,797 14,193
Less accumulated depreciation and amortization 7,754 7,055
----------- -----------
Net premises and equipment $ 8,043 $ 7,138
=========== ===========
Note 6. INCOME TAXES
As discussed in Note 1, the Company adopted SFAS No. 109 as of January 1,
1993. The cumulative effect of adopting SFAS No. 109 as of January 1, 1993
was not material, and therefore no cumulative effect was presented in the
statement of consolidated income for the year ended December 31, 1993.
The components of income tax expense (benefit) for the years ended
December 31, 1995, 1994 and 1993 are as follows:
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
(in thousands) 1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Current $ 767 $ 712 $ 970
Deferred (187) 443 51
----------- ----------- -----------
Total $ 580 $ 1,155 $ 1,021
=========== =========== ===========
</TABLE>
The sources and tax effects of temporary differences that give rise to
significant portions of the deferred tax assets (liabilities) at December 31,
1995, 1994 and 1993 are presented below:
<TABLE>
<CAPTION>
(in thousands) 1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Deferred tax assets:
Allowance for possible loan losses $ 1,525 $ 1,688 $ 872
Excess book over tax retirement plan cost 36 - -
Basis of investment in subsidiary 69 - -
Loan fees, net, deferred for financial reporting
purposes taxed when received for income tax purposes 32 49 52
Reserve for employee medical expense for financial
reporting purposes 52 41 42
Deferred compensation 49 91 -
Deferred payments under severance arrangements 323 - -
Unrealized loss on securities available for sale - 436 -
All other 16 132 46
----------- ----------- -----------
Gross deferred tax assets 2,102 2,437 1,012
Less: Valuation allowance (145) (76) (86)
----------- ----------- -----------
Net deferred tax assets 1,957 2,361 926
----------- ----------- -----------
Deferred tax liabilities:
Excess tax over book pension cost (266) (275) (187)
Depreciable basis of fixed assets (472) (545) (201)
Prepaid deposit insurance premiums - (107) -
Amortizable basis of intangible assets (103) (480) -
Unrealized gain on securities available for sale (138) - -
All other (13) (9) (9)
----------- ----------- -----------
Gross deferred tax liabilities (992) (1,416) (397)
----------- ----------- -----------
Net deferred tax asset (included in other assets) $ 965 $ 945 $ 529
=========== =========== ===========
</TABLE>
A portion of the change in the net deferred tax asset relates to
unrealized gains and losses on securities available for sale. The related
current period deferred tax liability of approximately $574,000 as of December
31, 1995 and deferred tax benefit of approximately $436,000 as of December 31,
1994 have been recorded directly to shareholders equity. In addition, the
Bank recorded an increase in its net deferred tax asset during 1995 of
approximately $390,000 related to purchase acquisitions. The balance of the
change in the net deferred tax asset of $187,000 is reflected as a deferred
income tax benefit in the statement of consolidated income.
The valuation allowance applies primarily to offset the recognition of
deferred tax benefits on certain temporary differences for state income tax
purposes. The valuation allowance increased approximately $69,000 during 1995
and decreased approximately $10,000 during 1994. Approximately $60,000 of this
increase during 1995 relates to purchase acquisitions.
The following is a reconcilement of federal income tax expense at the
statutory rate of 34% to the income tax provision reported in the financial
statements.
<TABLE>
<CAPTION>
(in thousands) 1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Tax provision at statutory rate $ 735 $ 1,408 $ 1,265
Increase (decrease) in income taxes resulting from:
Tax exempt interest income (371) (342) (329)
Non-deductible interest expense 40 28 27
Non-deductible portion of amortization of
intangible assets 160 75 52
Other, net 16 (14) 6
----------- ----------- -----------
Total $ 580 $ 1,155 $ 1,021
=========== =========== ===========
</TABLE>
<PAGE>
Note 7. LEASES
Certain bank premises are leased under operating lease agreements.
Generally, operating leases contain renewal options on substantially the same
basis as current rental terms. Rent expense charged to operations under all
operating lease agreements was $93,000 in 1995, $58,000 in 1994 and $45,000 in
1993.
Future obligations for minimum rentals under noncancelable operating
leases at December 31, 1995 are as follows:
<TABLE>
<CAPTION>
(in thousands)
<S> <C>
Year ending December 31:
1996 $ 48
1997 42
1998 19
1999 14
2000 14
Later years 74
-----------
Total $ 211
===========
</TABLE>
Note 8. EMPLOYEE BENEFIT PLANS
SALARY REDUCTION PROFIT SHARING PLAN. The Company sponsors a salary
reduction profit sharing plan pursuant to Section 401(k) of the Internal
Revenue Code. Employees who have completed one year of service are eligible to
participate in the plan. An eligible employee may contribute up to 14% of
annual salary to the plan. The Company contributes an amount equal to 50% of
the first 6% of the employee's salary contributed. Participants vest in
Company contributions at the rate of 20% after one year of service, and 20%
for each additional year of service, with 100% vesting after five years of
service. The Company's matching contribution expense was $102,000, $88,000
and $93,000 for the years ended December 31, 1995, 1994 and 1993, respectively.
The Company may make additional discretionary profit sharing contributions to
the plan.
INCENTIVE COMPENSATION PLAN. The Company also has an incentive
compensation plan covering certain management and staff employees. Payments
pursuant to the plan are based on achievement of certain performance goals.
The Company's incentive compensation plan expense was $407,000, $451,000 and
$403,000 for the years ended December 31, 1995, 1994 and 1993, respectively.
RETIREMENT PLAN. The Company sponsors a noncontributory defined benefit
retirement plan (the "Retirement Plan"), which is intended to qualify under
Section 401(a) of the Internal Revenue Code. Employees who have attained age
21 and completed one year of service are eligible to participate in the
Retirement Plan. The Retirement Plan provides for a monthly payment, at
normal retirement age 65, equal to one-twelfth of the sum of (i) 0.75% of
Final Average Annual Compensation (5 highest consecutive calendar years
earnings out of the last 10 years of employment) multiplied by the employee's
years of service not in excess of 40 years, and (ii) 0.65% of Final Average
Annual Compensation in excess of "covered compensation" multiplied by years of
service not in excess of 35 years. "Covered compensation" means the average
of the social security taxable wage base during the 35 year period ending with
the year the employee attains social security retirement age. Early
retirement, with reduced monthly benefits, is available at age 55 after 15
years of service. The Retirement Plan provides for 100% vesting after 5 years
of service, and provides for a death benefit to a vested participant's
<PAGE>
surviving spouse. The costs of benefits under the Retirement Plan, which are
borne by First Bancorp and/or its subsidiaries, are computed actuarially and
defrayed by earnings from the Retirement Plan's investments. The compensation
covered by the Retirement Plan includes total earnings before reduction for
contributions to a cash or deferred profit-sharing plan (such as the 401(k)
feature of the Profit Sharing Plan described above) and amounts used to pay
group health insurance premiums and includes bonuses (such as amounts paid
under the incentive compensation plan). Compensation for the purposes of the
Retirement Plan may not exceed statutory limits; the limits for 1995, 1994
and 1993 were $150,000, $150,000 and $235,840, respectively. Subsequent to
the acquisition of Central State, the Company merged Central State's
retirement plan into the Company's retirement plan. Therefore, the 1995 and
1994 amounts set forth in the tables below reflect the merged plans.
The following table sets forth the estimated funded status of the
Retirement Plan and amounts recognized in the Company's consolidated financial
statements as of December 31, 1995 and 1994, as computed by independent
actuarial consultants:
<TABLE>
<CAPTION>
(in thousands) 1995 1994
----------- -----------
<S> <C> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligation (ABO) including
vested benefits of $1,789 in 1995 and
$1,545 in 1994 $ (1,849) $ (1,579)
=========== ===========
Projected benefit obligation (PBO) for service
rendered to date $ (2,048) $ (2,235)
Plan assets at fair value--primarily listed
common stocks, U.S. Government and agency
securities, and collective funds 1,963 1,880
----------- -----------
Plan assets less than PBO (85) (355)
Unrecognized net (gain) loss from past experience
different from that assumed and effects of
changes in assumptions (7) 258
Unrecognized prior service cost 772 845
----------- -----------
Prepaid pension cost $ 680 $ 748
=========== ===========
</TABLE>
Net pension cost for the Retirement Plan included the following
components for the years ended December 31, 1995, 1994 and 1993:
<TABLE>
<CAPTION>
(in thousands) 1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Service cost--benefits earned during the period $ 108 $ 103 $ 66
Interest cost on projected benefit obligation 149 113 76
Actual return on plan assets (357) (119) (42)
Net amortization and deferral 279 126 84
----------- ----------- -----------
Net periodic pension cost $ 179 $ 223 $ 184
=========== =========== ===========
</TABLE>
The Company's contributions to the Retirement Plan are based on
computations by independent actuarial consultants and are intended to provide
the Company with the maximum deduction for income tax purposes.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN. Effective January 1, 1993, the
Company adopted a Supplemental Executive Retirement Plan (the "SERP Plan") for
the benefit of certain senior management executives of the Company. The
purpose of the SERP Plan is to provide additional monthly pension benefits to
ensure that each such senior management executive would receive lifetime
monthly pension benefits equal to 3% of his or her final average compensation
multiplied by his or her years of service (maximum of 20 years) to the Company
or its subsidiaries, subject to a maximum of 60% of his or her final average
compensation. The amount of a participant's monthly SERP benefit is reduced by
(i) the amount payable under the Company's qualified Retirement Plan (described
<PAGE>
above), and (ii) fifty percent (50%) of the participant's primary social
security benefit. Final average compensation means the average of the 5
highest consecutive calendar years of earnings during the last 10 years of
service prior to termination of employment.
The following table sets forth the estimated funded status of the SERP
Plan as of December 31, 1995 and 1994:
<TABLE>
<CAPTION>
(in thousands) 1995 1994
----------- -----------
<S> <C> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligation (ABO) including
vested benefits of $378 in 1995 and
$378 in 1994 $ (411) $ (419)
=========== ===========
Projected benefit obligation (PBO) for service
rendered to date $ (539) $ (525)
----------- -----------
Unrecognized net loss from past experience
different from that assumed and effects of
changes in assumptions 86 72
Unrecognized prior service cost 372 405
Adjustment to recognize minimum liability (275) (371)
----------- -----------
Accrued pension cost $ (356) $ (419)
=========== ===========
</TABLE>
Net pension cost for the SERP Plan included the following components for
the year ended December 31, 1995, 1994 and 1993:
<TABLE>
<CAPTION>
(in thousands) 1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Service cost--benefits earned during the period $ 17 $ 30 $ 20
Interest cost on projected benefit obligation 37 35 37
Net amortization and deferral 33 33 29
----------- ----------- -----------
Net periodic pension cost $ 87 $ 98 $ 86
=========== =========== ===========
</TABLE>
The Company's funding policy with respect to the SERP Plan is to fund the
related benefits through investments in insurance policies, which are not
considered plan assets for the purpose of determining the SERP Plan's funded
status.
The following assumptions were used in determining the actuarial
information for the Retirement Plan and the SERP Plan for the years ended
December 31, 1995, 1994 and 1993:
<TABLE>
<CAPTION>
1995 1994 1993
----------------------- ----------------------- -----------------------
Retirement SERP Retirement SERP Retirement SERP
Plan Plan Plan Plan Plan Plan
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Weighted average discount rate 7.25% 7.25% 8.00% 8.00% 7.25% 7.25%
Expected long-term rate of return
on assets 8.00% 7.50% 8.25%
Rate of increase in compensation
levels 5.00% 5.00% 5.00% 5.00% 5.00% 5.00%
</TABLE>
Included in intangible assets at December 31, 1995 and 1994 are
approximately $275,000 and $371,000, respectively, which were recognized in
connection with the accrual of the additional minimum liabilities for the
Retirement Plan and the SERP Plan.
SPLIT DOLLAR LIFE INSURANCE PLAN. Effective January 1, 1993, the Company
adopted a Split Dollar Life Insurance Plan (the "Split Dollar Plan") whereby
individual whole life insurance is made available to certain senior management
executives designated and approved by the Board of Directors. Coverage ranges
from $100,000 to $250,000. The Company pays the premiums under this plan and
maintains a collateral interest in each participant's policy equal to the sum
of premiums paid. If a policy is terminated or becomes payable because of the
death of a participant, the premiums paid by the Company are recovered before
<PAGE>
any payment is made to the participant or the participant's beneficiary. In
addition, the Company will recover its investment in the policy before transfer
of the policy to the participant. Upon the death of a participant, the
participant's designated beneficiary will receive a death benefit equal to the
amount of coverage under his or her policy that is in excess of the amount of
cumulative premiums paid by the Company. The amounts of insurance premiums
paid by the Company in 1995, 1994 and 1993 under the Split-Dollar Plan on
behalf of all executive officers as a group were $27,000, $24,000 and $20,000,
respectively.
Note 9. COMMITMENTS AND CONTINGENCIES
See Note 7 with respect to future obligations under noncancelable
operating leases.
In the normal course of business there are various outstanding commitments
and contingent liabilities such as commitments to extend credit, which are not
reflected in the financial statements. As of December 31, 1995, the Company
had outstanding loan commitments of $34,751,000 (including unfunded commitments
of $7,723,000 on revolving credit plans). Additionally, standby letters of
credit of approximately $823,000 and $1,931,000 were outstanding at
December 31, 1995 and 1994, respectively. Management does not anticipate any
losses to result from these off-balance sheet financial instruments. These
commitments represent no more than the normal lending risk that the Company
commits to its borrowers. If these commitments are drawn, the Company will
obtain collateral if it is deemed necessary based on management's credit
evaluation of the counter party. Collateral held varies but may include
accounts receivable, inventory and commercial or residential real estate.
Management expects these commitments, if drawn, to be funded through normal
operations.
The Bank grants primarily commercial and installment loans to customers
throughout its market area, which consists of Cabarrus, Chatham, Davidson,
Guilford, Montgomery, Moore, Randolph, Richmond, Scotland and Stanly Counties
in North Carolina. The real estate loan portfolio can be affected by the
condition of the local real estate market. The commercial and installment
loan portfolios can be affected by local economic conditions.
The Company is not involved in any other legal proceedings which, in
management's opinion, could have a material effect on the consolidated
financial position of the Company.
During the quarter ended June 30, 1995, the Bank settled a lawsuit
whereby it had vigorously defended a claim by which a plaintiff homeowners'
association sought to nullify the Bank's lien on certain common areas of a
residential development including the water and sewer system. The Bank's lien
secured loans for $819,000. The court granted summary judgment in favor of
the Bank, but the plaintiff gave notice of appeal. The Bank foreclosed on the
property. During the quarter ended June 30, 1995, the Bank negotiated the
sale of the property to the plaintiff homeowners association. The terms of
the sale included satisfaction of all claims related to the property and a
dismissal of the litigation.
During the quarter ended December 31, 1995, First Bank reached a
settlement among all parties involved in litigation brought by Prudential
Securities, Inc. and filed on August 8, 1994 in the United States District
Court for the Middle District of North Carolina, against one of First Bank's
customers and First Bank, arising out of loans made by Prudential and secured
by certificates of deposit issued by First Bank. First Bank's records
indicated that the certificates of deposit were issued for amounts far less
<PAGE>
than those shown on the documents held by Prudential. The First Bank branch
manager involved in the issuance of the certificates of deposit died on August
5, 1994. After significant discovery and a mediation conference held in early
December of 1995, First Bancorp concluded that it was in the best interests of
its shareholders, customers and employees to settle the Prudential litigation
and other related litigation and avoid costly trials. Because First Bancorp's
fidelity bond coverage limit was not sufficient to cover the entire cost of
the settlement, the Company reported significant expenses in connection with
resolving the litigation. The settlement resulted in a nonrecurring fourth
quarter pretax charge of approximately $1,946,000 which equates to
approximately $1,185,000 after-tax, or 79 cents per share. Included in the
pretax charge were the out of pocket costs to settle claims in the pretax
amount of approximately $1,446,000 and additional provisions for loan losses
of $500,000 which First Bancorp recorded due to charge-offs of loans related
to the litigating parties. Before the settlement-related charge, First
Bank had already incurred approximately $789,000 in pretax expenses in 1995
for legal services and other expenses incurred in matters related to the
litigation.
Note 10. FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards Number 107 ("SFAS No. 107"),
Disclosures About Fair Value of Financial Instruments," requires that the
Company disclose estimated fair values for its financial instruments. Fair
value estimates as of December 31, 1995 and 1994 and limitations thereon are
set forth below for the Company's financial instruments. Please see Note 1
for a discussion of fair value methods and assumptions.
<TABLE>
<CAPTION>
December 31, 1995 December 31, 1994
----------------------------------- -----------------------------------
Carrying Estimated Carrying Estimated
(in thousands) Amount Fair Value Amount Fair Value
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Cash and due from banks $ 12,190 $ 12,190 $ 12,588 $ 12,588
Federal funds sold 11,826 11,826 6,660 6,660
Securities available for sale 49,657 49,657 46,150 46,150
Securities held-to-maturity 19,740 20,374 20,942 20,794
Presold mortgages in process of
settlement 826 826 631 631
Loans, net of allowance 206,935 211,612 180,740 181,160
Accrued interest receivable 2,372 2,372 2,235 2,235
Deposits 287,715 288,190 258,430 256,671
Accrued interest payable 1,889 1,889 1,144 1,144
</TABLE>
LIMITATIONS OF FAIR VALUE ESTIMATES. Fair value estimates are made at a
specific point in time, based on relevant market information and information
about the financial instrument. These estimates do not reflect any premium or
discount that could result from offering for sale at one time the Company's
entire holdings of a particular financial instrument. Because no market exists
for a significant portion of the Company's financial instruments, fair value
estimates are based on judgments regarding future expected loss experience,
current economic conditions, risk characteristics of various financial
instruments, and other factors. These estimates are subjective in nature and
involve uncertainties and matters of significant judgment and therefore cannot
be determined with precision. Changes in assumptions could significantly
affect the estimates.
Fair value estimates are based on existing on- and off-balance sheet
financial instruments without attempting to estimate the value of anticipated
future business and the value of assets and liabilities that are not considered
financial instruments. Significant assets and liabilities that are not
<PAGE>
considered financial assets or liabilities include net premises and equipment,
intangible and other assets such as foreclosed properties, deferred income
taxes, and prepaid expense accounts, income taxes currently payable and other
various accrued expenses. In addition, the income tax ramifications related to
the realization of the unrealized gains and losses can have a significant
effect on fair value estimates and have not been considered in any of the
estimates.
Note 11. COMMON STOCK
Pursuant to provisions of the Company's 1994 Stock Option Plan (the
Option Plan"), options to purchase up to 135,000 shares of First Bancorp's
common stock may be granted to employees ("Employee Options") and directors
("Nonemployee Director Options") of the Company and its subsidiaries. The
purposes of the Option Plan are (i) to align the interests of participating
employees and directors with the Company's shareholders by reinforcing the
relationship between shareholder gains and participant rewards, (ii) to
encourage equity ownership in the Company by participants and (iii) to provide
an incentive to employee participants to continue their employment with the
Company. For both Employee and Nonemployee Director Options, the option price
is the fair market value of the stock at the date of grant. Employee Options
vest over a five-year period, with the first 20% becoming vested on June 1,
1995. Director Options are granted over a five year period. All options are
to expire not more than 10 years from the date of grant. Activity in the
Option Plan was as follows:
<TABLE>
<CAPTION>
Employee Options
-----------------------------------------------------------------------
1995 Range of
Exercise Prices Shares Under Option
----------------------- -----------------------------------
High Low 1995 1994 1993
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Outstanding at beginning of year $ 21.25 $ 21.25 55,350 - -
Add (deduct):
Granted - - - 55,350 -
Canceled or expired 21.25 21.25 (10,100) - -
Exercised 21.25 21.25 (2,400) - -
----------- ----------- -----------
Outstanding at end of year 21.25 21.25 42,850 55,350 -
=========== =========== ===========
Options exercisable 8,570 - -
=========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
Nonemployee Director Options
-----------------------------------------------------------------------
1995 Range of
Exercise Prices Shares Under Option
----------------------- -----------------------------------
High Low 1995 1994 1993
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Outstanding at beginning of year $ 20.00 $ 20.00 5,500 - -
Add (deduct):
Granted 21.75 21.75 5,500 5,500 -
Exercised 20.00 20.00 (500) - -
----------- ----------- -----------
Outstanding at end of year 21.75 20.00 10,500 5,500 -
Options exercisable 10,500 5,500 -
=========== =========== ===========
</TABLE>
Note 12. REGULATORY RESTRICTIONS
The Company is regulated by the Board of Governors of the Federal Reserve
System ("FRB") and is subject to securities registration and public reporting
regulations of the Securities and Exchange Commission. The Bank is regulated
by the Federal Deposit Insurance Corporation ("FDIC"), the North Carolina State
Banking Commission and the FRB.
<PAGE>
The primary source of funds for the payment of dividends by First Bancorp
is dividends received from its subsidiary, First Bank. The Bank, as a North
Carolina banking corporation, may pay dividends only out of undivided profits
as determined pursuant to North Carolina General Statutes Section 53-87. As
of December 31, 1995, the Bank had undivided profits of approximately
$13,908,000 which were available for the payment of dividends. In addition,
approximately $14,540,000 of the Company's investment in the Bank as of
December 31, 1995 is restricted as to transfer to the Company without
obtaining prior regulatory approval.
The Company and the Bank must comply with regulatory capital requirements
established by the FRB and FDIC. These standards require the Company to
maintain minimum ratios of Tier 1 capital to total risk-weighted assets and
total capital to risk-weighted assets of 4.00% and 8.00%, respectively. Tier 1
capital is comprised of total shareholders equity calculated in accordance
with generally accepted accounting principles less intangible assets, and
total capital is comprised of Tier 1 capital plus certain adjustments, the
largest of which for the Company is the allowance for possible loan losses.
Risk-weighted assets refer to the on- and off-balance sheet exposures of the
Company adjusted for their related risk levels using formulas set forth in FRB
and FDIC regulations.
In addition to the risk-based capital requirements described above, the
Company is subject to a leverage capital requirement, which calls for a minimum
ratio of Tier 1 capital (as defined above) to quarterly average total assets of
3.00% to 5.00%, depending upon the institution's composite ratings as
determined by its regulators. The FRB has not advised the Company of any
requirement specifically applicable to it.
At December 31, 1995, the Company was in compliance with all of the
aforementioned capital requirements.
The average reserve balance maintained under the requirements of the
Federal Reserve was approximately $2,978,000 for the year ended December 31,
1995.
Note 13. SUPPLEMENTARY INCOME STATEMENT INFORMATION
Components of other expenses exceeding 1% of total income for any of the
years ended December 31, 1995, 1994 and 1993 are as follows:
<TABLE>
<CAPTION>
(in thousands) 1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Amortization of intangible assets $ 501 $ 315 $ 282
FDIC insurance 269 544 481
Legal and audit 955 342 182
Repossession and collection expense 150 380 214
Stationery and supplies 579 461 400
Telephone 275 250 228
</TABLE>
<PAGE>
Note 14. CONDENSED PARENT COMPANY INFORMATION
Condensed financial data for First Bancorp (parent company only) follows:
<TABLE>
<CAPTION>
CONDENSED BALANCE SHEETS As of December 31,
-----------------------------------
(in thousands) 1995 1994
----------- -----------
<S> <C> <C>
Cash on deposit with bank subsidiary $ 12 $ 3
Securities 459 84
Investments in subsidiaries, at equity:
First Bank and subsidiary 28,448 27,465
Montgomery Data Services, Inc. 79 345
First Bancorp Financial Services, Inc. 1,544 1,139
Land 7 7
Other assets (1) 3
----------- -----------
Total $ 30,548 $ 29,046
=========== ===========
Other liabilities (dividends payable) $ 271 $ 256
Shareholders equity 30,277 28,790
----------- -----------
Total $ 30,548 $ 29,046
=========== ===========
</TABLE>
<TABLE>
<CAPTION>
CONDENSED RESULTS OF OPERATIONS Year Ended December 31,
-----------------------------------------------------------
(in thousands) 1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Equity in earnings (losses) of subsidiaries:
Dividends - First Bank and subsidiary $ 1,546 $ 1,825 $ 950
- Montgomery Data Services, Inc. 375 75 25
Undistributed - First Bank and subsidiary 85 1,248 1,858
- Montgomery Data Services, Inc. (266) (1) 54
- First Bancorp Financial Services, Inc. (10) (17) (55)
All other income and expenses, net (148) (143) (131)
----------- ----------- -----------
Net income $ 1,582 $ 2,987 $ 2,701
=========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
CONDENSED CASH FLOWS Year Ended December 31,
-----------------------------------------------------------
(in thousands) 1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Operating Activities:
Net income $ 1,582 $ 2,987 $ 2,701
Equity in undistributed earnings of subsidiaries 191 (1,230) (1,857)
Changes in operating assets and liabilities:
Decrease (increase) in other assets 3 13 (17)
----------- ----------- -----------
Total - operating activities 1,776 1,770 827
----------- ----------- -----------
Investing Activities:
Purchase of investment securities (1,799) (1,211) (889)
Sales and maturities of investment securities 1,424 1,161 863
Increase in investment in subsidiaries (415) (775) -
----------- ----------- -----------
Total - investing activities (790) (825) (26)
----------- ----------- -----------
Financing Activities:
Payment of cash dividends (1,038) (947) (827)
Proceeds from issuance of common stock 61 - -
----------- ----------- -----------
Total - financing activities (977) (947) (827)
----------- ----------- -----------
Net increase (decrease) in
cash and cash equivalents 9 (2) (26)
Cash and cash equivalents, beginning of year 3 5 31
----------- ----------- -----------
Cash and cash equivalents, end of year $ 12 $ 3 $ 5
=========== =========== ===========
</TABLE>
<PAGE>
REPORT OF INDEPENDENT AUDITORS
[KPMG Peat Marwick, LLP logo here]
The Board of Directors and Shareholders
of First Bancorp
We have audited the accompanying consolidated balance sheets of First
Bancorp and subsidiaries as of December 31, 1995 and 1994, and the related
statements of consolidated income, consolidated cash flows and changes in
consolidated shareholders equity for each of the years in the three-year
period ended December 31, 1995, included on pages 32 through 51 herein. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these 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 First
Bancorp and subsidiaries at December 31, 1995 and 1994, and the results of
their operations and their cash flows for each of the years in the three-year
period ended December 31, 1995, in conformity with generally accepted
accounting principles.
As discussed in Note 1 to the Consolidated Financial Statements, on
January 1, 1994, the Company adopted the provisions of the Financial
Accounting Standards Board's Statement of Financial Accounting Standards No.
115, "Accounting for Certain Investments in Debt and Equity Securities."
/s/ KPMG Peat Marwick LLP
Charlotte, North Carolina
January 26, 1996
<PAGE>
MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL REPORTING
[First Bancorp logo here]
The management of First Bancorp is responsible for the preparation of the
financial statements, related financial data and other information in this
annual report. In order to meet this responsibility, the financial statements
have been prepared in accordance with generally accepted accounting principles
and include amounts based on management's estimates and judgment where
appropriate. Financial information appearing throughout this annual report is
consistent with the financial statements.
In meeting its responsibility both for the integrity and fairness of
these statements and information, management depends on the accounting system
and related internal controls that are designed to provide reasonable
assurances that transactions are authorized and recorded in accordance with
established procedures and that assets are safeguarded and proper and reliable
records are maintained.
The concept of reasonable assurance is based on the recognition that the
cost of internal controls should not exceed the related benefits. As an
integral part of the internal controls, the Company maintains a professional
staff of internal auditors who monitor compliance with and assess the
effectiveness of the internal controls and coordinate audit coverage with the
independent auditors.
The Audit Committee of First Bancorp, composed solely of outside
directors, meets regularly with the Company's management, internal auditors,
independent auditors and regulatory examiners to review matters relating to
financial reporting, internal controls and the nature, extent and results of
the audit effort. The independent auditors, internal auditors and banking
regulators have direct access to the Audit Committee with or without
management present.
/s/ James H. Garner /s/ Kirby A. Tyndall
- ----------------------- -----------------------
James H. Garner Kirby A. Tyndall
Chief Executive Officer Chief Financial Officer
First Bancorp First Bancorp
January 26, 1996 January 26, 1996
<PAGE>
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
During the two years ended December 31, 1995, and any subsequent interim
periods, there were no changes in accountants and/or disagreements on any
matters of accounting principles or practices or financial statement
disclosures.
PART III
Item 9. Directors and Executive Officers of the Registrant; Compliance with
Section 16(a) of the Exchange Act
Incorporated herein by reference is the information under the caption
Nominees and Executive Officers" from the Company's definitive proxy statement
to be filed pursuant to Regulation 14A.
Item 10. Executive Compensation
Incorporated herein by reference is the information under the caption
Compensation of Directors and Executive Officers" from the Company's
definitive proxy statement to be filed pursuant to Regulation 14A.
Item 11. Security Ownership of Certain Beneficial Owners and Management
Incorporated herein by reference is the information under the caption
Nominees and Executive Officers" from the Company's definitive proxy statement
to be filed pursuant to Regulation 14A.
Item 12. Certain Relationships and Related Transactions
Incorporated herein by reference is the information under the caption
Certain Transactions" from the Company's definitive proxy statement to be
filed pursuant to Regulation 14A.
Item 13. Exhibits and Reports on Form 8-K
(a) Exhibits
The following exhibits are filed with this report or, as noted,
are incorporated herein by reference:
3.i.a Copy of Articles of Incorporation of the Registrant and amendments
thereto, was filed as Exhibit 3(a) to the Registrant's Registration
Statement Number 33-12692, and is incorporated herein by reference.
3.i.b Copy of the amendment to Articles of Incorporation- adding a new
Article Nine, filed as exhibit 3(e) to the Company's Annual Report
on Form 10-K for the year ended December 31, 1988, and is
incorporated herein by reference.
3.ii Copy of the Bylaws of the Registrant, as amended, was filed as
Exhibit 3(b) to the Company's Annual Report on FORM 10-KSB for the
year ended December 31, 1994, and is incorporated herein by
reference.
4 Form of Common Stock Certificate was filed as Exhibit 4 to the
Registrant's Registration Statement Number 33-12692, and is
incorporated herein by reference.
| 5 Opinion of Counsel of Registrant, Robinson, Bradshaw & Hinson,
<PAGE>
10 Material Contracts
10.a Data processing Agreement dated October 1, 1984 by and between Bank
of Montgomery (First Bank) and Montgomery Data Services, Inc. was
filed as Exhibit 10(k) to the Registrant's Registration Statement
Number 33-12692, and is incorporated herein by reference.
10.b First Bank Salary and Incentive Plan, as amended, was filed as
Exhibit 10(m) to the Registrant's Registration Statement Number
33-12692, and is incorporated herein by reference.
10.c First Bancorp Savings Plus and Profit Sharing Plan (401(k) savings
incentive plan and trust), as amended on January 25, 1994 and July
19, 1994, was filed as Exhibit 10(c) to the Company's Annual Report
on Form 10-KSB for the year ended December 31, 1994, and is
incorporated herein by reference.
10.d Directors and Officers Liability Insurance Policy of First Bancorp,
dated July 16, 1991, was filed as Exhibit 10(g) to the Company's
Annual Report on Form 10-K for the year ended December 31, 1991,
and is incorporated herein by reference.
10.e Indemnification Agreement between the Company and its Directors and
Officers was filed as Exhibit 10(t) to the Registrant's
Registration Statement Number 33-12692, and is incorporated herein
by reference.
10.f Employment and Consulting Agreement between the Company and John C.
Wallace dated January 1, 1993, was filed as Exhibit 10(i) to the
Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1993, and is incorporated herein by reference.
10.g First Bancorp Employees Pension Plan, as amended on August 16,
1994, was filed as Exhibit 10(g) to the Company's Annual Report on
Form 10-KSB for the year ended December 31, 1994, and is
incorporated herein by reference.
10.h First Bancorp Senior Management Supplemental Retirement Plan dated
May 31, 1993, was filed as Exhibit 10(k) to the Company's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1993, and is
incorporated herein by reference.
10.i First Bancorp Senior Management Split-Dollar Life Insurance
Agreements between the Company and the Company's Executive
Officers, as amended on December 22, 1994, was filed as Exhibit
10(i) to the Company's Annual Report on Form 10-KSB for the year
ended December 31, 1994, and is incorporated herein by reference.
10.j Software License and Equipment Purchase and Software Maintenance
Agreements between First Bancorp and Systematics, Inc. for the
procurement and use of data processing equipment and software dated
May 17, 1993, was filed as Exhibit 10(m) to the Company's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1993, and is
incorporated herein by reference.
10.k First Bancorp 1994 Stock Option Plan was filed as Exhibit 10(n) to
the Company's Quarterly Report on Form 10-QSB for the quarter ended
March 31, 1994, and is incorporated herein by reference.
<PAGE>
10.l Purchase and Assumption Agreement between First Bank and First
Scotland Bank, dated August 16, 1995, was filed as Exhibit 10(l)
to the Company's Quarterly Report on Form 10-QSB for the quarter
ended September 30, 1995, and is incorporated herein by reference.
10.m Severance Agreement between the Company and James A. Gunter dated
October 12, 1995.
10.n Settlement Agreement dated December 29, 1995 among the Company's
bank subsidiary, First Bank, Prudential Securities,
Incorporated and others.
10.o Severance Agreement between the Company and Patrick A. Meisky
dated December 29, 1995.
21 List of Subsidiaries of Registrant was filed as Exhibit 21 to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1994, and is incorporated herein by reference.
23.a Consent of Independent Auditors of Registrant, KPMG Peat Marwick
LLP.
27 Financial Data Schedules pursuant to Article 9 of Regulation S-X.
(b) The Registrant filed one report on Form 8-K during the quarter
ended December 31, 1995 regarding its announcement of expenses
related to its December 29, 1995 settlement of litigation and
its severance agreements with two former senior managers reached
during the fourth quarter.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, FIRST BANCORP has duly caused this Annual Report on Form
10-KSB to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Troy, and State of North Carolina, on the 19th day
of March, 1996.
First Bancorp
By: /s/ James H. Garner
-------------------
James H. Garner
President, Chief Executive Officer and Treasurer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed on behalf of the Company by the following persons
and in the capacities and on the dates indicated.
Executive Officers
/s/ James H. Garner
-------------------
James H. Garner
President, Chief Executive Officer and Treasurer
/s/ Anna G. Hollers /s/ Kirby A. Tyndall
----------------------- -----------------------
Anna G. Hollers Kirby A. Tyndall
Executive Vice President, Senior Vice President,
Executive Secretary Chief Financial Officer
March 19, 1996 March 19, 1996
Board of Directors
------------------
/s/ John C. Willis /s/ G. T. Rabe, Jr.
----------------------- -----------------------
John C. Willis G. T. Rabe, Jr.
Chairman of the Board, Director
Director March 19, 1996
March 19, 1996
/s/ Jesse S. Capel /s/ John J. Russell
----------------------- -----------------------
Jesse S. Capel John J. Russell
Director Director
March 19, 1996 March 19, 1996
/s/ Jack D. Briggs /s/ Frederick H. Taylor
----------------------- -----------------------
Jack D. Briggs Frederick H. Taylor
Director Director
March 19, 1996 March 19, 1996
/s/ David L. Burns /s/ Edward T. Taws, Jr.
----------------------- -----------------------
David L. Burns Edward T. Taws, Jr.
Director Director
March 19, 1996 March 19, 1996
/s/ John L. Frye, Sr. /s/ John C. Wallace
----------------------- -----------------------
John L. Frye, Sr. John C. Wallace
Director Director
March 19, 1996 March 19, 1996
/s/ Jack L. Harper /s/ A. Jordan Washburn
----------------------- -----------------------
Jack L. Harper A. Jordan Washburn
Director Director
March 19, 1996 March 19, 1996
<PAGE>
EXHIBITS
<PAGE>
EXHIBIT CROSS REFERENCE INDEX
Exhibit Page(s)
3.i.a Copy of Articles of Incorporation of the Registrant and
amendments thereto *
3.i.b Copy of the amendment to Articles of Incorporation-
adding a new Article Nine *
3.ii Copy of the Bylaws of the Registrant, as amended *
4 Form of Common Stock Certificate *
10 Material Contracts
10.a Data processing Agreement by and between First Bank and
Montgomery Data Services, Inc. *
10.b First Bank Salary and Incentive Plan, as amended *
10.c First Bancorp Savings Plus and Profit Sharing Plan,
(401(k) savings incentive plan and trust), as amended *
10.d Directors and Officers Liability Insurance Policy of
First Bancorp *
10.e Indemnification Agreement between the Company and its
Directors and Officers *
10.f Employment and Consulting Agreement between the
Company and John C. Wallace *
10.g First Bancorp Employees Pension Plan *
10.h First Bancorp Senior Management Supplemental Retirement
Plan *
10.i First Bancorp Senior Management Split-Dollar Life
Insurance Agreements *
10.j Software License and Equipment Purchase and Software
Maintenance Agreements between First Bancorp and
Systematics, Inc. *
10.k First Bancorp 1994 Stock Option Plan *
10.l Purchase and Assumption Agreement between First Bank and
First Scotland Bank *
10.m Severance Agreement between First Bancorp and James A.
Gunter 61- 74
10.n Settlement Agreement among the First Bank, Prudential
Securities, Incorporated and others 75-144
10.o Severance Agreement between First Bancorp and Patrick A.
Meisky 145-164
<PAGE>
Exhibit Page(s)
13 First Bancorp Annual Report to shareholders for the year
ended December 31, 1995 *
21 List of Subsidiaries of Registrant *
23.a Consent of Independent Auditors of Registrant,
KPMG Peat Marwick LLP 165
27 Financial Data Schedules pursuant to Article 9 of
Regulation S-X 166
* Incorporated herein by reference.
Exhibit 10.m
SEVERANCE AGREEMENT
This AGREEMENT is made and entered into as of the 12th day of
October, 1995, by and between FIRST BANCORP, a North Carolina
corporation (the "Company"), and JAMES A. GUNTER ("Gunter").
STATEMENT OF PURPOSE
Gunter has been employed by the Company as President and Chief
Executive Officer. Gunter is terminating his employment with the
Company as of October 12, 1995. In consideration for his service
to the Company and its subsidiaries (references herein to the
"Company" shall be deemed to refer to the Company and its
subsidiaries, unless the context requires otherwise), as well as
for the additional and further agreements hereunder, the Company
has agreed to provide to Gunter a severance package according to
the terms set forth below.
NOW THEREFORE, in consideration of the mutual covenants and
agreements contained herein and other good and valuable
consideration, the Company and Gunter hereby agree as follows:
1. Date of Termination. Gunter's employment with the
Company and its subsidiaries is hereby terminated as of October 12,
1995, (the "Termination Date") and Gunter hereby tenders his
resignation from any positions he now has with the Company and its
subsidiaries, including as an officer and director, all such
resignations to be effective as of the Termination Date.
2. Regular Severance Payment. The Company will pay to
Gunter his regular salary at the current rate (and will reimburse
<PAGE>
him for customary and reasonable expenses incurred on behalf of the
Company or its subsidiaries, all in accordance with the Company's
policies) through the Termination Date. In addition, the Company
will pay Gunter a bonus under the Company's Incentive Bonus Plan
calculated in accordance with the terms of such Plan, for the
period beginning January 1, 1995 and ending on September 30, 1995.
Such bonus payment will be made on such date as is mutually
agreeable to the parties and after the amount owed can be
calculated based on the reported financial results of the Company,
but in no event later than January 31, 1996. All payments under
this paragraph will be subject to applicable deductions and
withholding under federal and state law.
3. Accrued Vacation Pay. No later than the first regular
payday following the Termination Date specified in paragraph 1
above, the Company shall pay to Gunter the sum of $2,500 (less any
applicable tax withholding), which sum represents 5 days of accrued
vacation pay. Gunter acknowledges that this sum constitutes the
total vacation pay owed to him under the Company's policies as of
the date of his termination. Gunter shall not be eligible to
accrue additional vacation days after the Termination Date.
4. Additional Severance Payment. In addition to the amounts
set forth in paragraphs 2 and 3 above, but subject to paragraph 15
hereof and to Gunter's full compliance with the terms of this
Agreement including the conditions set forth below, the Company
shall continue to pay Gunter his base salary at the rate of
$130,000 per year from the Termination Date until the date eighteen
-2-
<PAGE>
(18) months after the Termination Date. These severance payments
shall be payable at a time and in accord with the regular payroll
practices of the Company for its salaried executive employees. All
such amounts shall be subject to and reduced by any applicable
federal and state withholding taxes.
5. Life Insurance Policies. The Company will pay to Gunter
the difference between (a) the premiums paid by the Company under
the Split Dollar Agreement involving life insurance on Gunter's
life and (b) the present value of Gunter's accrued benefit under
the Company's Supplemental Executive Retirement Plan. This amount
is calculated to be approximately $15,257. In addition, ownership
of the two life insurance policies covered by the Split Dollar
Agreement and all obligations relating thereto, including future
payment of premiums, will be transferred to Gunter. These
transfers and payments will be accomplished within sixty (60) days
of the date hereof.
6. Benefit Plans and Fringe Benefits. Except as provided
below, as of the Termination Date provided in paragraph 1 herein,
Gunter shall not have the right to participate in or receive any
benefit under any employee benefit plan of the Company or any of
its subsidiaries, any fringe benefit plan of the Company, or any
other plan, policy or arrangement of the Company providing benefits
or perquisites to employees of the Company generally or
individually; provided, however, that Gunter shall be entitled (i)
to exercise his right to continued coverage under the Company's
medical benefit plan as provided by COBRA (and with respect to
-3-
<PAGE>
which the Company will provide Gunter with a separate notice as
required by COBRA); and (ii) to elect the payment of benefits to
which he is entitled under any employee pension benefit plan of the
Company as provided under the terms of any such plan. Provided,
further, but subject to paragraph 15 hereof, if Gunter elects
continued medical insurance coverage pursuant to the terms of
COBRA, the Company will pay on behalf of Gunter that portion of the
COBRA payments that is equal to the greater of (i) the employer's
portion of the medical insurance premiums being paid by the Company
on Gunter's behalf immediately prior to the termination of his
employment and (ii) the amount that would have been paid as the
employer's portion of the medical insurance premiums for Gunter had
Gunter remained in the employment of the Company, but in no event
will the Company pay more than the full amount of the COBRA
payments necessary to provide coverage to Gunter and his dependents
under the Company's medical insurance plan. The Company's
obligation to make the payments described in this paragraph will
terminate upon the earlier of (i) Gunter obtaining other employment
pursuant to which Gunter and his dependents are eligible for
medical insurance coverage, or (ii) the date eighteen (18) months
after the Termination Date. The payments of the COBRA amounts
described in this paragraph by the Company are conditional upon
Gunter's compliance with all conditions to receipt of severance
payments specified in paragraph 4 above.
7. Disclosure of Confidential Information. Gunter
acknowledges that, during the course of his employment with the
-4-
<PAGE>
Company, he has been afforded access to certain confidential and
proprietary information of the Company. For purposes of this
paragraph, "confidential and proprietary information" shall mean
information not generally known or available to the public or in
the banking industry that was created by, disclosed or made
available to Gunter in the course of his employment by the Company.
Gunter covenants and agrees that from and after the date
hereof, for a period of three (3) years, he will not disclose any
confidential and proprietary information to any person, firm,
corporation, association or other entity for any reason or purpose
or for the benefit of any person, firm, corporation or other
entity, without the Company's prior written consent. Gunter
acknowledges that a violation of this covenant is a material breach
of this Agreement.
8. Return of Company Property. Gunter agrees to return
immediately to the Company keys, identification cards and security
pass cards, as well as all originals and copies of all documents,
software or any other materials or property relating to his
employment or obtained or created in the course of his employment
which constitute "confidential and proprietary information" as
defined above. Gunter further represents, as a material inducement
for the Company to enter into this Agreement, that he has not
retained in his possession any such software, documents or other
materials in machine or human readable form, including on any disc,
tape or hard-drive of any computer owned or possessed by Gunter.
-5-
<PAGE>
9. Public Statements and Reference. Gunter agrees not to
make any public statements, written or oral, regarding his
departure from the Company's employment except as may be approved
by the Company in advance, and further agrees not to take any
action that would or might disrupt, impair or affect adversely the
Company, or its employees, officers or directors, or place the
Company or such individuals in any negative light. Consistent with
paragraph 17 below, the Company agrees that it will respond to all
inquiries regarding employment of Gunter in a positive manner
consistent with his performance record at the Company since his
date of hire.
10. Remedies. The Company will not seek remedies against
Gunter under this Agreement unless the Company's Board of Directors
or its delegate(s), acting with the advice of counsel, has
determined in good faith that Gunter has breached the provisions
hereof or that such a breach is threatened. Gunter hereby
acknowledges that the remedies at law for any breach of the
covenants and obligations contained in this Agreement will be
inadequate and that, in the event of a breach or a threatened
breach of any of the provisions of this Agreement, the Company
shall be entitled to preliminary restraining orders, injunctions or
such equitable remedies as may be appropriate, in addition to all
other remedies (including the recovery of all payments made to
Gunter hereunder) available to the Company. In the event such
breach is proven, Gunter agrees to pay any attorneys' fees
reasonably incurred by the Company for the enforcement of this
-6-
<PAGE>
Agreement. In addition, Gunter agrees that a breach by him of any
of the covenants and agreements contained herein shall be deemed a
breach of all such covenants and agreements and shall entitle the
Company, among other things, to cease payments under paragraph 4
hereof and take such steps as may be necessary to recover payments
previously made to Gunter under paragraph 4 hereof.
11. Governing Law. This Agreement shall be construed in
accordance with and governed by the laws of the State of North
Carolina.
12. Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the Company, its successors and assigns and
Gunter and his heirs and legal representatives. This Agreement and
the rights hereunder may not be assigned by Gunter.
13. Severability. If, for any reason, any provision of this
Agreement is held invalid, such invalidity shall not affect any
other provision of this Agreement not held so invalid, and each
such other provision shall to the full extent consistent with law
continue in full force and effect. If any provision of this
Agreement shall be held invalid in part, such invalidity shall in
no way affect the rest of such provision not held so invalid and
the rest of such provision, together with all other provisions of
this Agreement, shall to the full extent consistent with law
continue in full force and effect. Provided, that if Gunter's
execution of the Release and Waiver attached hereto as Exhibit A
is, for any reason, declared null and void, Gunter shall reimburse,
indemnify and hold harmless the Company for any and all payments
-7-
<PAGE>
made to him or for his benefit under the provisions of paragraphs
4 through 6 of this Agreement.
14. Voluntary Agreement. Gunter hereby represents that he
has carefully read and completely understands the provisions of
this Agreement and that he has entered into this Agreement
voluntarily and without any coercion whatsoever.
15. Further Conditions. The obligations of the Company set
forth in paragraphs 4, 5 and 6 hereof are conditional upon Gunter's
execution no later than November 2, 1995 of a Release and Waiver in
the form attached hereto as Exhibit A, as well as his failure to
revoke the same following the expiration of seven days following
such execution. In the event that Gunter fails to execute such
Release and Waiver within such time or revokes the execution
thereof within seven days following such execution thereof, the
Company's obligations under paragraphs 4, 5 and 6 shall terminate,
and Gunter shall be obligated to repay all payments made by the
Company to Gunter under paragraphs 4, 5 and 6.
16. Litigation Assistance. Gunter agrees to cooperate with
and provide assistance to the Company and its legal counsel in
connection with any litigation (including arbitration or
administrative hearings) or investigation affecting the Company, in
which -- in the reasonable judgment of the Company's counsel --
Gunter's assistance or cooperation is needed. Gunter shall, when
requested by the Company, provide testimony or other assistance and
shall travel at the Company's request in order to fulfill this
obligation. Provided, however, that, in connection with such
-8-
<PAGE>
litigation or investigation, the Company shall attempt to
accommodate Gunter's schedule, shall provide him with reasonable
notice in advance of the times in which his cooperation or
assistance is needed, and shall reimburse Gunter for any reasonable
expenses incurred in connection with such matters, as well as for
any actual lost wages suffered as a result from absence from
employment.
17. Non-Disparagement. Gunter agrees that he shall not in
any way criticize or disparage the performance, competency or
ability of the Company, its subsidiaries or affiliated companies,
or the officers, directors, employees or agents of any of them at
any time after the execution of this Agreement. The Company agrees
that it will respond to all inquiries regarding employment of
Gunter in a positive manner consistent with his performance record
at the Company since his date of hire.
18. Admissions. Gunter acknowledges that the payment by the
Company of the severance benefits described herein is made in good
faith and shall never for any purpose be considered an admission of
liability on the part of the Company, by whom liability is
expressly denied, and no past or present wrongdoing on the part of
the Company shall be implied by such payment.
19. Entire Agreement. This Agreement contains the entire
agreement between the Company and Gunter and supersedes all prior
agreements relating to the subject matter hereof, and may be
changed only by a writing signed by the parties hereto. Any and
all prior representations, statements and discussions regarding the
-9-
<PAGE>
subject matter of this Agreement have been merged into and/or
replaced by the terms of this Agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement, or caused this Agreement to be duly executed by their
authorized representatives, under seal and with the intent that
this Agreement shall constitute a sealed instrument, as of the day
and year first above written.
FIRST BANCORP
ATTEST: [Corporate Seal] By: /s/ John C. Willis
[ of ] ------------------------
[First Bancorp ] John C. Willis, Chairman of the
Board
By: Anna G. Hollers
-----------------------
_________ Secretary
WITNESS: /s/ James A. Gunter (SEAL)
---------------------------
By: Anna G. Hollers James A. Gunter
----------------------
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<PAGE>
Exhibit A
RELEASE AND WAIVER OF CLAIMS
NOTE: THIS RELEASE AND WAIVER NEED NOT BE EXECUTED BY GUNTER
UNTIL NOVEMBER 2, 1995, BUT MUST BE EXECUTED BY THE CLOSE OF
BUSINESS THAT DAY TO ACTIVATE THE OBLIGATIONS OF THE COMPANY SET
FORTH IN PARAGRAPHS 4, 5 AND 6 OF THE SEVERANCE AGREEMENT DATED
OCTOBER 12, 1995 (the "SEVERANCE AGREEMENT").
As consideration for the payments specified in the Severance
Agreement, James A. Gunter ("Gunter") for himself, his heirs,
executors, administrators and assigns, releases and forever
discharges First Bancorp ("the Company"), its predecessors,
successors, affiliates and subsidiaries (including without
limitation First Bank) and their agents, officers, employees,
directors and attorneys, from and waives any and all rights with
respect to all manner of claims, actions, causes of action, suits,
judgments, rights, demands, debts, damages, or accountings of
whatever nature, legal, equitable or administrative, whether the
same are now known or unknown, which he ever had, now has or may
claim to have, upon or by reason of the occurrence of any matter,
cause or thing whatsoever up to the date of this Agreement,
including without limitation: (i) any claim whatsoever (whether
under federal or state statutory or common law) arising from or
relating to his employment or changes in his employment
relationship with the Company, including his separation,
termination or resignation therefrom, (ii) all claims and rights
for additional compensation or benefits of whatever nature,
<PAGE>
including vacation, bonus, sick leave, severance, stock options,
deferred compensation, health or medical benefits, group life
insurance, disability or other benefits; and (iii) all claims and
rights whatsoever under any employment agreement with the Company.
THIS RELEASE AND WAIVER SPECIFICALLY INCLUDES, BUT IS NOT
LIMITED TO, GUNTER'S WAIVER AND RELEASE OF EMPLOYMENT
DISCRIMINATION RIGHTS AND CLAIMS ARISING UNDER THE FEDERAL AGE
DISCRIMINATION IN EMPLOYMENT ACT OF 1967, AS AMENDED. It also
includes any claim for breach of contract, implied or express,
impairment of economic opportunity, intentional or negligent
infliction of emotional distress, wage or benefit claim, prima
facie tort, defamation, libel, slander, negligent termination,
wrongful discharge, or any other tort, whether intentional or
negligent, or any claim or cause of action known or unknown under
Title VII of the Civil Rights Act of 1964, the Civil Rights Acts of
1866, 1871, or 1991, the Employee Retirement Income Security Act,
the Americans With Disabilities Act of 1993, all as amended, or any
other federal, state, county or municipal statute or ordinance
relating to any condition of employment or employment
discrimination. In the event that any government or government
agency files or processes a charge or action on behalf of Gunter
against the Company, Gunter hereby waives any and all right that he
may have to recover in any proceeding arising therefrom. Provided,
however, this Release shall not (i) include any claims relating to
the obligations created by the Severance Agreement, (ii) operate to
release Gunter's ownership of any common stock of the Company or
A-2
<PAGE>
Gunter's rights to exercise any matured or vested stock options
pursuant to the terms thereof, (iii) affect Gunter's vested and
accrued rights as a participant in the Company's pension plans,
(iv) affect any rights or claims that may arise out of events
occurring after the date this Release and Waiver is signed, (v)
release the Company from, nor waive Gunter's rights with respect
to, the Company's obligation, if any, to defend and indemnify him
in accordance with the provisions of the Company's bylaws or (vi)
prevent Gunter from obtaining reimbursement of business expenses
incurred prior to the date hereof which are otherwise subject to
reimbursement pursuant to the terms of the Company's policies.
CERTIFICATE
A. Gunter agrees and certifies that he has read this Release
and Waiver and that he fully understands its provisions.
B. Gunter agrees and certifies that he voluntarily enters
into this Release and Waiver, which is a legal and binding
contract, and that he has agreed to retire voluntarily.
C. Gunter acknowledges that his waiver of rights and claims
under this Release and Waiver includes a waiver of rights and
claims under the Federal Age Discrimination in Employment Act of
1967, as amended, and that such waiver and the waiver and release
of all other rights and claims contemplated by this Release and
Waiver are made knowingly and voluntarily.
D. This Release and Waiver must be accepted by Gunter no
later than November 2, 1995. Gunter acknowledges that he has been
given a period of at least twenty-one (21) days to consider this
A-3
<PAGE>
Release and Waiver and to consult with his attorney, accountant,
tax advisor, spouse or other persons prior to making a decision to
sign this Release and Waiver. Gunter acknowledges that the Company
has not pressured or coerced him to execute this Release and Waiver
prior to the expiration of 21 days from the date it was furnished
to him and that any decision to execute this Release and Waiver
prior to such time is done freely and voluntarily. Gunter
certifies that the Company has advised him in writing to consult
with an attorney regarding the legal consequences of this Release
and Waiver.
E. Gunter understands and acknowledges that he has seven (7)
days from the date he signs this Release and Waiver to change his
mind and revoke it by delivering a signed written statement to the
Company, notifying the Company of his wish to revoke this Release
and Waiver.
This Release and Waiver is hereby signed, under seal, by
Gunter, this 2nd day of November, 1995.
WITNESS: /s/ James A. Gunter (SEAL)
---------------------------
By: John C. Willis James A. Gunter
----------------------
A-4
Exhibit 10.n
SETTLEMENT AGREEMENT
This SETTLEMENT AGREEMENT made and entered into as of December
29, 1995, by and between PRUDENTIAL SECURITIES, INCORPORATED
("Prudential" or "Plaintiff"); CRANFORD B. GARNER, TIMOTHY E.
GARNER, C. B. GARNER BUILDING COMPANY, GARNER BUILDING COMPANY, and
PEGGY GARNER (the "Garners" or "Garner Defendants"); ESTATE OF JOHN
WILLIAM GORE, by and through its personal representative, KATHY
WOOD GORE ("Gore Estate"); FIRST BANK, TAMALA F. DAVENPORT and
SHIRLEY A. WALDROP ("First Bank Defendants"); WILLIS, VANEK & BALL,
P.A., administrator of WILLIS, VANEK & BALL, P.A. PROFIT SHARING
PLAN ("WV&B") acting herein by and through its assignee Prudential;
and DR. HAROLD K. TERRY (co-trustee and personally), LILLIAN SNOW,
MARGARET BRYANT and LOUISE THOMPSON ("Terry Defendants"); (each of
the parties hereto may be referred to generally as a "Party" and
collectively as the "Parties");
WITNESSETH
WHEREAS, a lawsuit is pending in the United States District
Court for the Middle District of North Carolina, Durham Division,
bearing case number 1:94CV00444 entitled, "PRUDENTIAL SECURUTIES,
INCORPORATED, PLAINTIFF, VS. CRANFORD B. GARNER, TIMOTHY E. GARNER,
C. B. GARNER BUILDING COMPANY, GARNER BUILDING COMPANY, PEGGY
GARNER, FIRST BANK, THE ESTATE OF JOHN WILLIAM GORE (BY AND THROUGH
ITS PERSONAL REPRESENTATIVE, CATHY WOOD GORE, TAMALA F. DAVENPORT,
SHIRLEY A. WALDROP, STANDARD BANK & TRUST COMPANY, AND WILLIS,
VANEK & BALL, P.A., ADMINISTRATOR OF WILLIS VANEK & BALL, P.A.
PROFIT SHARING PLAN, P. KATHLEEN MOORE (CO-TRUSTEE), DR. HAROLD K.
<PAGE>
TERRY (CO-TRUSTEE AND PERSONALLY), LILLIAN SNOW, MARGARET BRYANT
AND LOUSIE THOMPSON, DEFENDANTS" (hereinafter, the "Lawsuit"); and
WHEREAS, claims were asserted in the Lawsuit on behalf of
Prudential against all defendants and the defendants asserted
various cross-claims and counterclaims against other Parties, all
of which claims principally concerned and arose out of the alleged
actions of the Garner Defendants and John William Gore and his
relationship with the Garner Defendants ("Gore/Garner Acts") and
the relationships between Prudential and the Garner Defendants and
between First Bank and the Garner Defendants (the "Relationships");
and
WHEREAS, on or about January 11, 1993, Prudential loaned
$4,140,000.00 to Cranford B. Garner (the "PSI Loan"); on or about
February 4, 1993 Prudential Bank & Trust loaned approximately
$1,650,000 to Cranford B. Garner (the "PBT Loan"); on or about
September 13, 1993 Standard Bank extended a loan to Cranford B.
Garner in the amount of $175,000 (the "Standard Bank Loan"); on or
about January 31, 1994, WV&B extended a $300,000 loan to Cranford
B. Garner and his wife, Peggy Garner, which Peggy Garner denies,
(the "WV&B Loan"); on about March 10, 1994, the Terry Defendants
loaned Cranford B. Garner $350,000 (the "Terry Loan"); and
WHEREAS, prior to the date of this Agreement, one or more of
the Garner Defendants, by or through their various affiliates,
affiliated persons, employees, relatives and entities borrowed sums
of money, obtained credit, or received some or all of the proceeds
thereof from the following on one or more occasions (the "Related
2
<PAGE>
Loans"): Lionel J. Gelfand, one of which loans resulted in
litigation instituted by First Bank in Montgomery County, North
Carolina entitled FIRST BANK V. GARNER, GELFAND AND HAWKINS, 94 CVS
374; James L. Davis, one of which loans resulted in litigation
commenced by First Bank in Montgomery County, North Carolina
entitled FIRST BANK V. DAVIS AND GARNER, 94 CVS 375; Howard and
Miriam Bergman, one of which loans resulted in litigation commenced
by Howard Bergman in Moore County, North Carolina entitled BERGMAN
V. FIRST BANK AND GARNER, 94 CVS 807; Coastal Leasing Corporation;
First Federal Savings Bank; the Alpha Group; Institutional
Funding/Multifamily Resources of New Jersey; American Bankers
Insurance Company; Robeson Savings Bank; Highland Savings Bank;
First Carolina Bank; SOR Marina, Inc.; James Singletary; Roy
Reynolds; David Dowd; James Anderson; Lawrence Johnson; Arab
International Group; Midwest Indemnity Corp; First Union National
Bank; NationsBank; and
WHEREAS, one or more of the Garner Defendants, by or through
various affiliates, affiliated persons and entities, obtained loans
from First Bank, or received some or all of the proceeds thereof,
which loans resulted in the following state court lawsuits
commenced by First Bank (the "State Court Actions"): FIRST BANK V.
SUGAR FINANCIAL SERVICES, INC. AND STEPHEN A. SUGAR; Montgomery
County, 94 CvS 486; FIRST BANK V. JAMES M. ANDERSON AND TIMOTHY
GARNER, Moore County, 94 CvS 01193; FIRST BANK V. KENNETH A.
HAWKINS AND CRANFORD B. GARNER, Moore County, 94 CvS 01037; FIRST
BANK V. CRANFORD B. GARNER, D/B/A GARNER BUILDING CO., Montgomery
3
<PAGE>
County, 94 CvD 433; FIRST BANK V. WENDY W. GARNER, KENNETH A.
HAWKINS AND CRANFORD B. GARNER, Moore County, 94 CvS 01038; FIRST
BANK V. ENTERPRISE BUILDING CORP. AND CRANFORD GARNER, Montgomery
County, 94 CvS 447; FIRST BANK V. JAMES C. DICKERSON AND PRUDENTIAL
SECURITIES, INCORPORATED, Moore County, 94 CvS 01123; FIRST BANK V.
LESRO CONSTRUCTION CORP., RODGER SMALL AND REBECCA SMALL, Moore
County, 94 CvS 00172; FIRST BANK V. TAMARA J. SESSOMS, THOMAS D.
GODWIN AND CRANFORD B. GARNER, Montgomery County, 94 CvS 484; FIRST
BANK V. NANCY RENEE GARNER AND CRANFORD B. GARNER, Moore County, 94
CvS 01049; and
WHEREAS, First Bank represents that the State Court Actions
and the civil actions described in the Related Loans constitute
each and every civil action filed by First Bank in the courts of
North Carolina arising out of the Gore/Garner Acts and the
Relationships; and
WHEREAS, one or more of the Garner Defendants, by or through
various affiliates, affiliated persons, employees, relatives and
entities, received funds from First Bank loan or deposit accounts
in the names of following customers, some of which the Garner
Defendants contend they were unaware (the "First Bank Accounts"):
Cranford B. Garner, Peggy Garner, Nancy Renee Garner, James and
Grace Anderson, Howard and Miriam Bergman, James Dickerson,
Enterprise Building Corp., Wendy Garner, Kenneth Hawkins, Thomas
Howard, Lawrence Johnson, Lesro Construction Co., Rodger and
Rebecca Small, Sugar Financial Services, Alan Sugar, River Road
Properties, Tamara Sessoms, Thomas Godwin, Thomas Howard, Garner
4
<PAGE>
Building Company, C. B. Garner Building Company, Randolph Freese,
Donald Gregory, James Gilchrist, Calvin Edson, Hugh and Janice
Miller, Walter Mauch, Lanny Leonard, William Blum, Diversified
Properties, Alan Cassavant, Cassavant Homes, Winant Sidle, James
Fogarty, and
WHEREAS, the claims brought by and against Standard Bank &
Trust Company in the Lawsuit have been previously settled and
dismissed as evidenced by the Stipulation of Voluntary Dismissal
attached hereto as Exhibit A; and
WHEREAS, claims by or against P. Kathleen Moore will be
dismissed on or before December 29, 1995, pursuant to the
Stipulation of Voluntary Dismissal attached hereto as Exhibit B;
and
WHEREAS, Prudential has heretofore settled the claims of WV&B
and has taken an assignment of the claims of WV&B as evidenced by
the Settlement Agreement attached hereto as Exhibit C; and
WHEREAS, the Parties have agreed upon a compromise settlement
of all claims asserted in the Lawsuit, whether by complaint,
counterclaim, cross-claim, and they enter into this SETTLEMENT
AGREEMENT for the purpose of memorializing the settlement of all
such claims, as well as all other matters set forth herein;
NOW, THEREFORE, for and in consideration of the mutual
covenants and promises contained herein and in further
consideration of the monetary payments described below, the Parties
do hereby covenant, contract and agree with each other as follows:
5
<PAGE>
A. COVENANT NOT TO SUE
1. Prudential and First Bank, on behalf of themselves and
their officers, directors, agents, servants, employees,
representatives, attorneys, predecessors, successors, parent and
subsidiary corporations, and assigns, hereby covenant that they
will never institute, nor prosecute, nor aid in the prosecution
except as required by applicable statute, rule, or order, against
each other or any other Party (or any officer, director, agent,
servant, employee, representative, attorney, predecessor,
successor, parent or subsidiary corporation, or assign of any
Party) any suit at law or in equity, claim, demand, action, or
cause of action for compensation, damages, consequential damages,
punitive damages or statutory penalties, whatsoever, including, by
way of illustration and not limitation, all costs and expenses,
including attorney's fees, for or on account of any loss or injury,
past, present or future, arising directly out of the PSI Loan, the
PBT Loan, the Standard Bank Loan, the WV&B Loan, the Terry Loan,
the Related Loans, and the loans at issue in the pleadings in the
State Court Actions; the First Bank Accounts, or any assignment of
any asset made in connection with any of the aforesaid accounts or
loans, including those causes of action relating to said loans
asserted by any of the Parties hereto in the Fourth Amended
Complaint and First Bank's Answer to the Third Amended Complaint
filed with the Court in the Lawsuit; except that Prudential and
First Bank each may sue to enforce the terms of this Settlement
Agreement. This paragraph is a covenant not to sue, and not a
6
<PAGE>
release. Neither First Bank nor Prudential hereby covenants not to
sue regarding loans, assignments, or accounts not specifically
enumerated herein.
2. The Garner Defendants, Gore Estate, Tamala F. Davenport,
Shirley A Waldrop, WV&B (by and through its assignee, Prudential,
only regarding assigned claims) and the Terry Defendants,
themselves and their officers, directors, agents, servants,
employees, representatives, attorneys, predecessors, successors,
parent and subsidiary corporations, and assigns, (As to WV&B, by
and through its assignee, Prudential, only regarding assigned
claims) hereby covenant that they will never institute, nor
prosecute, nor aid in the prosecution except as required by
applicable statute, rule, or order, against each other or any other
Party (or any officer, director, agent, servant, employee,
representative, attorney, predecessor, successor, parent or
subsidiary corporation, or assign of any Party) any suit at law or
in equity, claim, demand, action, or cause of action for
compensation, damages, consequential damages, punitive damages or
statutory penalties, whatsoever, including, by way of illustration
and not limitation, all costs and expenses, including attorney's
fees, for or on account of any loss or injury, past, present or
future, whether known or unknown, and whether presently existing or
arising hereafter, for, by reason of, related to or arising out of
the PSI Loan, the PBT Loan, the Standard Bank Loan, the WV&B Loan,
the Terry Loan, the Related Loans, and the loans at issue in the
pleadings in the State Court Actions, the First Bank Accounts, any
7
<PAGE>
assignment of any asset made in connection with any of the
aforesaid accounts or loans, or the Relationships, including those
causes of action relating to said loans asserted by any of the
Parties hereto in the Fourth Amended Complaint and First Bank's
Answer to the Third Amended Complaint filed with the Court in the
Lawsuit, or any other of the Gore/Garner Acts; except that the
Garner Defendants, Gore Estate, Tamala F. Davenport, Shirley A
Waldrop, WV&B, and the Terry Defendants, each may sue to enforce
the terms of this Settlement Agreement. This paragraph is a
covenant not to sue, and not a release.
3. The covenants not to sue set forth in the preceding two
paragraphs shall in no way be construed so as to prevent any Party
from asserting any affirmative defense in any subsequent litigation
to which it is a party, including, but not limited to, defenses
based upon the Gore/Garner Acts and the Relationships.
4. Upon the execution of this SETTLEMENT AGREEMENT, and on
or before Friday, December 29, 1995, the Parties will execute and
file with the Court the Stipulation of Voluntary Dismissal attached
hereto as Exhibit B, dismissing, with prejudice, all claims which
were asserted or which are barred pursuant to this SETTLEMENT
AGREEMENT.
B. PAYMENT
5. Upon the execution of this SETTLEMENT AGREEMENT, and on
or before Friday, December 29, 1995, First Bank, on behalf of the
First Bank Defendants and the Garner Defendants, shall pay to
8
<PAGE>
Prudential, by wire transfer, the full sum of $4,325,000.00 in full
and complete settlement of Prudential's claims as set forth above.
6. Upon the execution of this SETTLEMENT AGREEMENT, and on
or before Friday, December 29, 1995, the claims of the Terry
Defendants will be fully settled by the following payments:
(a) Prudential shall pay the sum of $100,000.00 to
counsel for the Terry Defendants; and
(b) First Bank shall pay the sum of $340,000.00 to
counsel for the Terry Defendants, $25,000.00 of this amount being
paid on behalf of Prudential, which $25,000.00 will be recovered by
First Bank from Prudential as set forth herein in paragraph C.10(b)
hereof.
C. GARNER DEFENDANTS' ASSETS
7. Upon the execution of this SETTLEMENT AGREEMENT, and on
or before Friday, December 29, 1995, the Garner Defendants shall:
(a) transfer, assign and convey to First Bank or its
designee all shares of stock held by the Garner Defendants, or any
of them, individually or jointly, in Southern National Corporation,
including but not limited to, the 1,400 shares of Southern National
Corporation stock owned by Cranford Garner and evidenced by
Certificate Number SN34363, the 916 shares of Southern National
Corporation stock owned by Cranford and Peggy Garner, jointly, and
evidenced by Certificates Number SN34364, 4724, U9435, U41321,
AN19181, U14077, UT818166, 0006429, U4241, AN41162, AN64196, and
any dividend reinvestment accounts associated with said stock, a
portion of which stock First Bank contends is pledged as collateral
9
<PAGE>
for Enterprise Building Co., Inc., loan number 0070014949 at First
Bank, and which stock, or the proceeds thereof, shall be applied
against said loan balance; and
(b) transfer, assign and convey to First Bank or its
designee all right, title, and interest in First Bank Certificates
of Deposit 55010494, 55010498, 55010499, 55010952, 55010966 and
55,010,967
(c) execute and deliver the Assignment Agreement
documents attached hereto as Exhibit D so as to convey, transfer
and assign to First Bank or its designee all legal, equitable and
beneficial right, title and interest in and to GMP Properties,
Inc., including, but not limited to, all rights, benefits, income,
receivables or other monies that the Garner Defendants, or any one
of them, may have or may be entitled to which relate, in any way,
to GMP Properties, Inc. or its assets, and to cause GMP Properties,
Inc. to acknowledge receipt of such assignment;
(d) and by this SETTLEMENT AGREEMENT do, warrant and
represent that, as to Institutional Funding, Inc., and as of the
date of this SETTLEMENT AGREEMENT, neither they nor their spouses
or children have any such right, title or interest, including, but
not limited to, any present rights to any future payments,
dividends, receivables, or other monies, except in exchange for the
provision of labor or services, and, further, that neither they nor
their spouses or children have made any direct or indirect
investment in Institutional Funding, Inc., financial or otherwise,
including, but not limited to, any loan, gift, advance or capital
10
<PAGE>
contribution, and further represent that they have delivered to
Institutional Funding, Inc. this warranty and representation.
Should the Garner Defendants, or any one of them, or their spouses
or children, have any present right, title or interest, including,
but not limited to, any present rights to any future payment,
dividends, receivables, or other monies, if said payments,
dividends, receivables or other monies are based upon any direct or
indirect investment they have made in Institutional Funding, Inc.,
financial or otherwise, prior to the date of this SETTLEMENT
AGREEMENT, except in exchange for the provision of labor or
services, then the Garner Defendants agree to convey, transfer and
assign to First Bank or its designee all of their legal, equitable
and beneficial right, title and interest in and to Institutional
Funding, Inc., a North Carolina corporation, as of the date of this
SETTLEMENT AGREEMENT, including, but not limited to, all rights,
benefits, income, receivables or other monies that, as of the date
of this SETTLEMENT AGREEMENT, the Garner Defendants, or any one of
them, may have or may be entitled to which relate, in any way, to
Institutional Funding, Inc. or its assets, and to cause
Institutional Funding, Inc. to acknowledge receipt of such
assignment. Any legal, equitable and beneficial rights, title and
interest which is obtained by the Garner Defendants or their
spouses or children after December 29, 1995, is not subject to this
assignment;
(e) convey, transfer and assign to First Bank or its
designee all right, title and interest, whether legal or equitable,
11
<PAGE>
in and to GMP Properties, Inc. including, but not limited to, all
capital stock of GMP Properties, Inc.; and
(f) at First Bank's direction and in its sole
discretion, convey, transfer and assign to First Bank or its
designee all right, title and interest, whether legal or equitable,
that the Garner Defendants or any of them, or their spouses or
children, have in any asset (including cash, real property,
personal property, cash equivalents, receivables or other monies
due) in which single asset, standing alone, the Garner Defendants,
or any one of them, or their spouse or children, have an equity
interest in excess of $10,000.00 as of the date of this SETTLEMENT
AGREEMENT, except for those assets described in Exhibit E, which
assets the Garner Defendants shall retain.
8. Upon the execution of this SETTLEMENT AGREEMENT, and on
or before Friday, December 29, 1995, the Garner Defendants shall
convey, assign and transfer, by general warranty deed, all of their
right title and interest in the assets set forth below to First
Bank, which assets First Bank may sell or otherwise dispose of
pursuant to the exercise of its sole and exclusive discretion:
(a) 26.68 acres of real property located in
Fayetteville, Cumberland County, North Carolina and recorded in the
Cumberland County Public Registry in Book 3409, at page 0389;
(b) 30 acres of real property located near Carthage,
Moore County, North Carolina and recorded in the Moore County
Public Registry in Book 409, at page 132;
12
<PAGE>
(c) real property located at 750 S. Bennett Street,
Southern Pines, Moore County, North Carolina and recorded in the
Moore County Public Registry in Book 696, at page 310;
(d) real property located at 1113 E. Beach Drive, Long
Beach, Brunswick County, North Carolina and recorded in the
Brunswick County Public Registry in Book 645, at page 376;
(e) real property located at 1117 E. Beach Drive, Long
Beach, Brunswick County, North Carolina and recorded in the
Brunswick County Public Registry in Book 715, at page 584; and
(f) .47 acres of real property located in Niagara, Moore
County, North Carolina and recorded in the Moore County Public
Registry in Book 465, page 52(lot 114, .17 acres) and Book 665,
page 615 (lots 112 and 113, .30 acres).
9. Upon the execution of this SETTLEMENT AGREEMENT, and on
or before Friday, December 29, 1995, the Garner Defendants shall
transfer, assign and convey to First Bank and Prudential all right,
title and interest in that certain insurance policy insuring the
life of Cranford B. Garner, known as The Travelers Life Insurance
Policy Number L4657346 (the "Policy"), and shall cause First Bank
and Prudential to be designated as owners and beneficiaries under
the Policy, and to receive all notices and correspondence relating,
in any way, to said Policy. First Bank and Prudential shall each
hold an undivided one-half interest in the Policy and shall receive
any benefits under the Policy by joint check.
(a) On December 15, 1995, First Bank paid the December,
1995 premium payment due on the Policy in the amount of $1,411.24.
13
<PAGE>
First Bank may, at its option and in its sole discretion, continue
making premium payments when due under the Policy, but in no event
shall First Bank incur any liability to any Party or anyone on
account of its failure to make said payments.
(b) In the event First Bank chooses not to make any
particular premium payment, it shall give notice thereof to
Prudential at least 20 days prior to the due date of any premium
and Prudential shall have the option to continue making premium
payments under the Policy. Notice shall be in writing sent by
telecopy and Federal Express (or the equivalent) to General
Counsel, Prudential Securities, Incorporated, One Seaport Plaza,
New York, NY 10292-0129, telefax no. (212) 214-6810, and James P.
McLoughlin, Jr., Moore and Van Allen, P.L.L.C., 100 North Tryon
Street, Floor 47, Charlotte, NC 28202-4003, telefax no. (704) 331-
1159. Likewise, if Prudential chooses not to make any particular
premium payment, it shall give notice thereof to First Bank at
least 10 days prior to the due date of any premium and First Bank
shall have the option to continue making premium payments under the
Policy. Notice shall be in writing, sent by telecopy and Federal
Express (or the equivalent) to President, First Bank, P.O. Box 508,
Troy, NC 27371, telefax no. (910) 576-1070, and to David A. Senter,
Adams Kleemeier Hagan Hannah & Fouts, 301 North Elm Street, Suite
500, Greensboro, NC 27401, telefax no. (910) 273-5357.
10. The proceeds from First Bank's sale or other disposition
of the Garner assets as described in paragraphs 7 through 9 above,
including the receipt by First Bank and Prudential of any death
14
<PAGE>
benefits under the Policy, shall be disbursed in the following
order of priority:
(a) non-insurance assets:
1. First, First Bank shall recover 115% of its out
of pocket expenses, including attorney fees, incurred in the
liquidation of the assets after December 29, 1995;
2. Second, First Bank shall recover $350,000.00;
and
3. Third, any remaining proceeds, as evidenced by
a full, complete and accurate accounting provided by First Bank
shall be divided equally by First Bank and Prudential within a
reasonable time after receipt of said proceeds by First Bank, but
not to exceed ninety days.
(b) insurance assets:
1. First, First Bank shall recover 115% of its out
of pocket expenses, including attorney fees, incurred in the
liquidation of the assets after December 29, 1995; and Policy
premiums, plus simple interest thereon at the rate of First Bank's
prime rate less 1% from the date of payment until reimbursement;
2. Second, First Bank shall recover the $25,000.00
it paid on Prudential's behalf to the Terry Defendants as described
in paragraph B.6(b) hereof;
3. Third, Prudential shall recover 115% of the
Policy premiums it paid, plus simple interest thereon at the rate
of First Bank's prime rate less 1% from the date of payment until
reimbursement; and
15
<PAGE>
4. Fourth, any remaining proceeds, as evidenced by
a full, complete and accurate accounting provided by First Bank and
Prudential, shall be divided equally by First Bank and Prudential
within a reasonable time after receipt of said proceeds by First
Bank, but not to exceed ninety days.
11. The Garner Defendants agree to execute all other
documents and take any action necessary to effectuate the above
transfers, conveyances and assignments, to effectuate the renewal,
exchange, replacement or conversion of the Policy and to otherwise
effectuate the purposes and intentions of this SETTLEMENT
AGREEMENT, it being the intention of the Garner Defendants to
provide hereby a full and absolute warranty of further assurance to
First Bank.
12. The Parties agree to waive any claims against First Bank
for its conduct of the sale or disposition of the Garner Defendant
assets as set forth above.
D. GARNER DEFENDANTS' WARRANTIES AND REPRESENTATIONS
13. The Garner Defendants jointly and severally represent,
warrant, and covenant that the real and personal properties
described in paragraphs 7 through 9 constitute all assets
(including all cash or cash equivalents) in which the Garner
Defendants, or any of them, or their spouses or children, have any
legal or beneficial interest whatever, whether direct or indirect,
of greater than $10,000.00 in equity per asset with the sole
exception of those assets described in Exhibit E hereto.
16
<PAGE>
14. The Garner Defendants jointly and severally represent,
warrant, and covenant that except as set forth in Exhibit F hereto,
they have received no loans nor any proceeds of any loans whether
directly or indirectly, for which they have any current or future
obligation to repay. Further, the Parties represent that they have
no knowledge of any assignment, pledge or liens regarding the
Garner Defendants other than those set forth herein and in the
attached exhibits, and regarding property being transferred
pursuant to this SETTLEMENT AGREEMENT. As to any of the debts set
forth in Exhibit F, the Garner Defendants represent there has been
no pledge or assignment of any asset ever held, issued by or
deposited with First Bank or Prudential.
15. In the event the Garner Defendants breach the warranties,
representations and covenants set forth herein, this SETTLEMENT
AGREEMENT shall be null and void as to the Garner Defendants only.
In the event of such breach, as determined by a court of competent
jurisdiction, the Garner Defendants, except for Peggy Garner, shall
be jointly and severally liable to First Bank for the principal sum
of $5,271,039.20 plus court costs, attorneys' fees and interest
thereon at the maximum legal rate from and after December 29, 1995,
until paid, and the Garner Defendants, with the exception of Peggy
Garner, shall be jointly and severally liable to Prudential for the
principal sum of $1,589,000.00 plus court costs, attorneys' fees
and interest thereon at the maximum legal rate from and after
December 29, 1995, until paid. In such event, Prudential and First
Bank shall also be entitled to pursue any other claims against the
17
<PAGE>
Garner Defendants at law or in equity. The merit of any claims
against Peggy Garner shall be reserved to be decided by Court
action. The Garner Defendants shall be barred from asserting as a
defense to any claim hereunder, any statute of limitations, statute
of repose, laches, estoppel or similar defense for a period of two
years from the date First Bank or Prudential discovered or should
have discovered such breach. In the event that First Bank or
Prudential recovers from the Garner Defendants, or any of them, any
sums pursuant to this paragraph, Prudential and First Bank shall be
entitled to share in such recovery, after recoupment of expenses
incurred in obtaining said recovery.
E. MISCELLANEOUS
16. Prudential warrants and represents that it is the
assignee and owner of the claims of WV&B as set forth in the
Lawsuit and that it has full power and authority to release any
such claims and sign this SETTLEMENT AGREEMENT, the Stipulation of
Dismissal of the Lawsuit, and the "Consent Motion for Order
Transferring PaineWebber Accounts from Cranford B. Garner to
Counsel for James L. Davis" on behalf of WV&B.
17. The Parties agree that this SETTLEMENT AGREEMENT is a
compromise and settlement of disputed claims, and is not to be
construed as an admission of liability by any of the Parties,
liability being expressly denied by the same.
18. Kathy Wood Gore hereby warrants and covenants that she is
the duly appointed, qualified and acting personal representative of
18
<PAGE>
the Estate of John William Gore, all as evidenced by the Letters
Testamentary attached hereto as Exhibit G.
19. The Parties agree that they have executed this SETTLEMENT
AGREEMENT based on their own knowledge and their own investigation
of the facts, and that, aside from the warranties and
representations made herein, this SETTLEMENT AGREEMENT is not
executed in reliance upon any statement of any person connected
with, representing or represented by any of the Parties to whom
covenants not to sue have been given herein.
20. The Parties declare that they have carefully read this
SETTLEMENT AGREEMENT, that they have been fully advised in
connection with this SETTLEMENT AGREEMENT by legal counsel of their
own choice, that this SETTLEMENT AGREEMENT has been fully explained
to them prior to its execution and that they understand its terms
and legal effect, and they sign this SETTLEMENT AGREEMENT of their
own free will.
21. The Parties agree that the breach of any term or
provision of this SETTLEMENT AGREEMENT by any Party hereto shall
give all other non-breaching Parties the right to bring suit
against the breaching Party and recover all costs and expenses,
including attorneys' fees, incurred by the non-Breaching Party in
the prosecution of said suit. The Parties further agree that any
breach of this SETTLEMENT AGREEMENT will cause damage that will be
impractical and exceedingly difficult to measure in full. The
Parties therefore agree that this SETTLEMENT AGREEMENT may be
enforced by means of a temporary restraining order or preliminary
19
<PAGE>
injunction, or both, and that all other available remedies at law
or in equity, including, but not limited to, money damages and
specific performance, may be had for breach of this SETTLEMENT
AGREEMENT.
22. The Parties agree that this SETTLEMENT AGREEMENT shall be
governed and construed according to the laws of the State of North
Carolina.
23. The Parties agree that in executing this SETTLEMENT
AGREEMENT they are relying upon all representations and warranties
made herein by the Parties.
24. The Parties have had the opportunity to participate in
the drafting of this SETTLEMENT AGREEMENT, which is the result of
negotiations among the Parties. It is, therefore, specifically
agreed that, in the event of any dispute with respect to the proper
interpretation of any term of this SETTLEMENT AGREEMENT, no one
Party shall be deemed to be the drafter.
25. The Parties agree that this SETTLEMENT AGREEMENT contains
the ENTIRE AGREEMENT between the Parties as a whole and the terms
hereof are contractual in nature and not merely recitals and shall
not be modified or amended except by written instruments signed by
all the Parties or their representatives.
26. The Parties agree that this SETTLEMENT AGREEMENT may be
executed in a number of counterparts, each of which shall be
considered an original instrument, but all of which together shall
be considered but one and the same instrument. This SETTLEMENT
20
<PAGE>
AGREEMENT shall be binding on all signatories hereto, even if
executed in any number of counterparts.
IN WITNESS WHEREOF, the individual Parties hereto have
hereunto set their hands and adopted the word "(SEAL)" following
their names as personal seals, and the corporate Parties hereto
have caused this SETTLEMENT AGREEMENT to be entered into and
executed by the properly authorized corporate officers this the
28th day of December, 1995.
INTENTIONALLY LEFT BLANK
21
<PAGE>
FIRST BANK
By: /s/ Jackie Morris
---------------------
Title: Vice President
ATTEST:
Anna G. Hollers
- -----------------------
__________ Secretary
(Affix corporate seal)
STATE OF North Carolina
ACKNOWLEDGEMENT AND VERIFICATION
Guilford COUNTY
I, LESLIE R. CLAPP Notary Public for said County and
State, certify that ANNA HOLLERS personally came before me
this 28TH day of December, 1995, and having been duly sworn,
states that she is Secretary of First Bank a corporation;
that she has read the foregoing SETTLEMENT AGREEMENT and knows the
contents thereof, and the same is true of her own knowledge; and
that by authority duly given and as an act of the Corporation, the
foregoing SETTLEMENT AGREEMENT was signed in its name by its
VICE President, sealed with its corporate seal, and
attested by her as its Secretary.
WITNESS my hand and official seal, this the 28TH day of
December, 1995.
Leslie R. Clapp
-----------------------
Notary Public
[ OFFICIAL SEAL ]
[ LESLIE R. CLAPP ]
My Commission Expires: 1/16/97 [ NOTARY PUBLIC ]
[GUILFORD COUNTY, NC]
[Comm. Exp. 1/16/97 ]
<PAGE>
/s/ Shirley A. Waldrop
-------------------------
SHIRLEY A. WALDROP
STATE OF North Carolina
VERIFICATION
Guilford COUNTY
Shirley A. Waldrop, being first duly sworn, deposes and says
that she has read the foregoing SETTLEMENT AGREEMENT and knows the
contents thereof and that the same is true of her own knowledge.
This the 28TH day of December, 1995.
/s/ Shirley A. Waldrop
-------------------------
Shirley A. Waldrop
Sworn to and subscribed before me,
this the 28TH day of December, 1995.
[ OFFICIAL SEAL ]
Leslie R. Clapp [ LESLIE R. CLAPP ]
- ----------------------- [ NOTARY PUBLIC ]
Notary Public [GUILFORD COUNTY, NC]
[Comm. Exp. 1/16/97 ]
My Commission Expires: 1/16/97
<PAGE>
/s/ Tamala F. Davenport
-------------------------
TAMALA F. DAVENPORT
STATE OF North Carolina
VERIFICATION
Guilford COUNTY
Tamala F. Davenport, being first duly sworn, deposes and says
that she has read the foregoing SETTLEMENT AGREEMENT and knows the
contents thereof and that the same is true of her own knowledge.
This the 28TH day of December, 1995.
/s/ Tamala F. Davenport
-------------------------
Tamala F. Davenport
Sworn to and subscribed before me,
this the 28TH day of December, 1995.
[ OFFICIAL SEAL ]
Leslie R. Clapp [ LESLIE R. CLAPP ]
- ----------------------- [ NOTARY PUBLIC ]
Notary Public [GUILFORD COUNTY, NC]
[Comm. Exp. 1/16/97 ]
My Commission Expires: 1/16/97
<PAGE>
________________________________
/s/ Cathy Wood Gore
-------------------------
ESTATE OF JOHN WILLIAM GORE, by and
through its personal representative,
KATHY WOOD GORE
STATE OF North Carolina
VERIFICATION
Moore COUNTY
Kathy Wood Gore, being first duly sworn, deposes and says that
she has read the foregoing SETTLEMENT AGREEMENT and knows the
contents thereof and that the same is true of her own knowledge.
This the 29TH day of December, 1995.
/s/ Cathy Wood Gore
-------------------------
KATHY WOOD GORE
Sworn to and subscribed before me,
this the 29TH day of December, 1995.
[ OFFICIAL SEAL ]
Wendy R. Lampiasi [ Wendy R. Lampiasi ]
- ----------------------- [ NOTARY PUBLIC ]
Notary Public [ MOORE COUNTY, NC ]
My Commission Expires: 8-22-98
<PAGE>
/s/ Lillian Snow
-------------------------
LILLIAN SNOW
STATE OF North Carolina
VERIFICATION
New Hanover COUNTY
Lillian Snow, being first duly sworn, deposes and says that
she has read the foregoing SETTLEMENT AGREEMENT and knows the
contents thereof and that the same is true of her own knowledge.
This the 27TH day of December, 1995.
/s/ Lillian Snow
-------------------------
Lillian Snow
Sworn to and subscribed before me,
this the 27TH day of December, 1995.
[ OFFICIAL SEAL ]
Jean B. Scoffins [ JEAN B. SCOGGINS ]
- ----------------------- [ NOTARY PUBLIC ]
Notary Public [BRUNSWICK COUNTY NC]
[Comm. Exp. 2-27-96 ]
My Commission Expires: 2-27-96
<PAGE>
/s/ Louise Thompson
-------------------------
LOUISE THOMPSON
STATE OF North Carolina
VERIFICATION
New Hanover COUNTY
Louise Thompson, being first duly sworn, deposes and says that
she has read the foregoing SETTLEMENT AGREEMENT and knows the
contents thereof and that the same is true of her own knowledge.
This the 27TH day of December, 1995.
/s/ Louise Thompson
-------------------------
Louise Thompson
Sworn to and subscribed before me,
this the 27TH day of December, 1995.
[ OFFICIAL SEAL ]
Jean B. Scoffins [ JEAN B. SCOGGINS ]
- ----------------------- [ NOTARY PUBLIC ]
Notary Public [BRUNSWICK COUNTY NC]
[Comm. Exp. 2-27-96 ]
My Commission Expires: 2-27-96
<PAGE>
/s/ Margaret Bryant
-------------------------
MARGARET BRYANT
STATE OF Vermont
VERIFICATION
Bennington COUNTY
Margaret Bryant, being first duly sworn, deposes and says that
she has read the foregoing SETTLEMENT AGREEMENT and knows the
contents thereof and that the same is true of her own knowledge.
This the 28TH day of December, 1995.
/s/ Margaret Bryant
-------------------------
Margaret Bryant
Sworn to and subscribed before me,
this the 28TH day of December, 1995.
_____ A. Hathaway [signature illegible, no official seal]
- -----------------------
Notary Public
My Commission Expires: 2-10-99
<PAGE>
/s/ Dr. Harold K. Terry
-------------------------
DR. HAROLD K. TERRY
STATE OF Florida
VERIFICATION
Dade COUNTY
Dr. Harold K. Terry, being first duly sworn, deposes and says
that he has read the foregoing SETTLEMENT AGREEMENT and knows the
contents thereof and that the same is true of his own knowledge.
This the 27TH day of December, 1995.
/s/ Dr. Harold K. Terry
-------------------------
Dr. Harold K. Terry
Sworn to and subscribed before me,
this the 27TH day of December, 1995.
[ OFFICIAL SEAL ]
Adelheid E. James [ ADELHEID E. JAMES ]
- ----------------------- [ NOTARY PUBLIC ]
Notary Public [ DADE COUNTY FL ]
[Comm Exp Jul24,1996]
My Commission Expires: July 24, 1996
<PAGE>
PRUDENTIAL SECURITIES INCORPORATED
By: /s/ Patricia A. Roy
-------------------------
Title: Senior Vice President
ATTEST:
Lisa J. Fennile [signature illegible]
- --------------------
Assistant, Secretary
(Affix Corporate Seal)
VERIFICATION
STATE OF NEW YORK
NEW YORK COUNTY
Patricia A. Roy, being first duly sworn, deposes and says that
she is the Senior Vice President of Prudential Securities
Incorporated; that she has read the foregoing Settlement Agreement
and knows the contents thereof, and that the same is true of her
own knowledge.
This the 22nd day of December, 1995.
/s/ Patricia A. Roy
-------------------------
Patricia A. Roy
Senior Vice President
PRUDENTIAL SECURITIES INCORPORATED
Sworn To and subscribed before me,
this the 22nd day of December, 1995.
Chris Freeze
- -----------------------
Notary Public
My Commission Expires: 7-18-97
[ OFFICIAL SEAL ]
[ Chris Freeze ]
[Notary Public, State of New York ]
[ No. 24-4983930 ]
[ Qualified in Kings County ]
[ Commission Expires July 8, 1997 ]
<PAGE>
GARNER BUILDING COMPANY
By: /s/ Cranford Garner
-------------------------
Title: President
ATTEST:
Timothy E. Garner
- --------------------
Vice President
(Affix Corporate Seal)
STATE OF North Carolina
ACKNOWLEDGEMENT AND VERIFICATION
Guilford COUNTY
I, KAREN B. MILLER, Notary Public for said County and
State, certify that TIMOTHY E. GARNER personally came before
me this 28TH day of December, 1995, and having been duly sworn,
states that he is VICE PRESIDENT of Garner Building Company a
corporation; that he has read the foregoing SETTLEMENT AGREEMENT
and knows the contents thereof, and the same is true of his own
knowledge; and that by authority duly given and as an act of the
Corporation, the foregoing SETTLEMENT AGREEMENT was signed in its
name by its President, sealed with its corporate seal,
and attested by him as its VICE PRESIDENT.
WITNESS my hand and official seal, this the 28TH day of
December, 1995.
Karen B. Miller
-------------------------
Notary Public
My Commission Expires: 5/26/98
[ OFFICIAL SEAL ]
[ KAREN B. MILLER ]
[ NOTARY PUBLIC ]
[ GUILFORD COUNTY, NC ]
[Commission Expires 5/26/98]
<PAGE>
/s/ Timothy E. Garner
-------------------------
TIMOTHY E. GARNER
STATE OF North Carolina
VERIFICATION
Guilford COUNTY
Timothy E. Garner, being first duly sworn, deposes and says
that he has read the foregoing SETTLEMENT AGREEMENT and knows the
contents thereof and that the same is true of his own knowledge.
This the 28TH day of December, 1995.
/s/ Timothy E. Garner
-------------------------
Timothy E. Garner
Sworn to and subscribed before me,
this the 28TH day of December, 1995.
Karen B. Miller
- -----------------------
Notary Public
My Commission Expires: 5-26-98
[ OFFICIAL SEAL ]
[ KAREN B. MILLER ]
[ NOTARY PUBLIC ]
[ GUILFORD COUNTY, NC ]
[Commission Expires 5/26/98]
<PAGE>
/s/ Peggy Garner
-------------------------
PEGGY GARNER
STATE OF North Carolina
VERIFICATION
Guilford COUNTY
Peggy Garner, being first duly sworn, deposes and says that
she has read the foregoing SETTLEMENT AGREEMENT and knows the
contents thereof and that the same is true of her own knowledge.
This the 28TH day of December, 1995.
/s/ Peggy Garner
-------------------------
Peggy Garner
Sworn to and subscribed before me,
this the 28TH day of December, 1995.
Karen B. Miller
- -----------------------
Notary Public
My Commission Expires: 5-26-98
[ OFFICIAL SEAL ]
[ KAREN B. MILLER ]
[ NOTARY PUBLIC ]
[ GUILFORD COUNTY, NC ]
[Commission Expires 5/26/98]
<PAGE>
/s/ Cranford B. Garner
-------------------------
CRANFORD B. GARNER
STATE OF North Carolina
VERIFICATION
Guilford COUNTY
Cranford B. Garner, being first duly sworn, deposes and says
that he has read the foregoing SETTLEMENT AGREEMENT and knows the
contents thereof and that the same is true of his own knowledge.
This the 28TH day of December, 1995.
/s/ Cranford B. Garner
-------------------------
Cranford B. Garner
Sworn to and subscribed before me,
this the 28TH day of December, 1995.
Karen B. Miller
- -----------------------
Notary Public
My Commission Expires: 5-26-98
[ OFFICIAL SEAL ]
[ KAREN B. MILLER ]
[ NOTARY PUBLIC ]
[ GUILFORD COUNTY, NC ]
[Commission Expires 5/26/98]
<PAGE>
C.B. GARNER BUILDING COMPANY
By: /s/ Cranford Garner
-------------------------
Title: President
ATTEST:
Timothy E. Garner
- --------------------
Vice President
(Affix Corporate Seal)
STATE OF North Carolina
ACKNOWLEDGEMENT AND VERIFICATION
Guilford COUNTY
I, KAREN B. MILLER, Notary Public for said County and
State, certify that TIMOTHY E. GARNER personally came before
me this 28TH day of December, 1995, and having been duly sworn,
states that he is VICE PRESIDENT of C.B. Garner Building Company a
corporation; that he has read the foregoing SETTLEMENT AGREEMENT
and knows the contents thereof, and the same is true of his own
knowledge; and that by authority duly given and as an act of the
Corporation, the foregoing SETTLEMENT AGREEMENT was signed in its
name by its President, sealed with its corporate seal,
and attested by him as its VICE PRESIDENT.
WITNESS my hand and official seal, this the 28TH day of
December, 1995.
Karen B. Miller
-------------------------
Notary Public
My Commission Expires: 5/26/98
[ OFFICIAL SEAL ]
[ KAREN B. MILLER ]
[ NOTARY PUBLIC ]
[ GUILFORD COUNTY, NC ]
[Commission Expires 5/26/98]
end settlement
begin exhibit A-settlement
<PAGE>
EXHIBIT A
UNITED STATES DISTRICT COURT FOR [Filing Stamp Here]
THE MIDDLE DISTRICT OF NORTH CAROLINA [ Filed ]
DURHAM DIVISION [JUN 16 1995; 9:30]
No. 1: 94-CV-00444 [Clerk US Dist. Ct]
[ Greensboro, NC ]
PRUDENTIAL SECURITIES, )
INCORPORATED, )
)
Plaintiff, )
)
vs. ) Stipulation of Dismissal
) With Prejudice Pursuant
) to F.R.Civ. P. 41(a)
CRANFORD B. GARNER, TIMOTHY )
E. GARNER, C.B. GARNER BUILDING )
COMPANY, GARNER BUILDING COMPANY, )
PEGGY GARNER, FIRST BANK, )
the ESTATE OF JOHN WILLIAM )
GORE (by and through its )
personal representative, Kathy Wood )
Gore), TAMALA F. DAVENPORT, SHIRLEY )
A. WALDROP, STANDARD BANK & TRUST )
COMPANY, and WILLIS, VANEK & BALL, )
P.A., administrator of WILLIS, VANEK )
& BALL, P.A. PROFIT SHARING PLAN, )
)
Defendants. )
NOW COME the parties to this action, by counsel, pursuant to Rule 41(a)
of the Federal Rules of Civil procedure, and stipulate as follows:
1. All causes of action and claims for relief which have been asserted,
or which would be barred if not asserted, against Standard Bank & Trust
Company ("Standard Bank") by each and every other party to this action are
hereby voluntarily dismissed with prejudice.
2. All causes of action and claims for relief which have been asserted,
or which would be barred if not asserted, by Standard Bank against each and
every other party to this action are hereby voluntarily dismissed with
prejudice.
3. All causes of action and claims for relief which have been asserted,
or which
<PAGE>
would be barred if not asserted, by any party against each and every other
party to this action in connection with the Garner Note, the Enterprise Note
and the Assignment (as defined in the terms of the Settlement Agreement of
record in this action) are hereby dismissed with prejudice. No other claims
by any party against any other party is affected by this stipulation.
4. Each party will bear its own costs and attorneys' fees.
5. In connection with this Stipulation of Dismissal, the parties to this
action have entered into a settlement agreement dated March 8, 1995, the terms
of which are incorporated herein by reference as though fully set forth.
This the 15 day of June, 1995.
WYCHE & STORY
Registered Limited Liability Partnership
/s/ Claire B. Casey
--------------------------------
N. Hunter Wyche, Jr.
N.C. State Bar No. 9533
Claire B. Casey
N.C. State Bar No. 19686
Attorneys for Standard Bank & Trust
Company
Post Office Drawer 1389
Raleigh, NC 276O2-l389
Telephone: (919) 821-7700
2
<PAGE>
MOORE & VAN ALLEN, PLLC
/s/ James P. McLoughlin, Jr.
--------------------------------
James P. McLoughlin, Jr.
N.C. State Bar No. 13795
Attorneys for Prudential Securities, Inc.
lOO N. Tryon Street Floor 47
Charlotte, NC 28202-4003
Telephone: (7O4) 331-1OOO
3
<PAGE>
VAN CAMP, WEST, HAYES & MEACHAM, P.A.
/s/ Thomas M. Van Camp
--------------------------------
Thomas M. Van Camp
N.C. State Bar No. 16872
Attorneys for Cranford B. Garner,
Timothy E.
Garner, C.B. Garner Building Company,
Garner Building Company and Peggy Garner
Post Office Drawer 429
Carthage, NC 28327
Telephone: (910) 947-l7ll
4
<PAGE>
ADAMS, KLEEMEIER, HAGAN,
HANNAH & FOUTS
/s/ David A. Senter
--------------------------------
David A. Senter
N.C. State Bar No. 12549
Attorneys for First Bank, Tamala F.
Davenport
and Shirley A. Waldrop
Post Office box 3463
Greensboro, NC 27402
Telephone: (91O) 373-1600
5
<PAGE>
EVERETT, GASKINS, HANCOCK & STEVENS
/s/ E.D. Gaskins, Jr.
--------------------------------
E.D. Gaskins, Jr.
N.C. State Bar No. 1606
Attorneys for Willis, Vanek & Ball,
P.A.,
Administrator of Willis, Vanek & Ball,
P.A.
Profit Sharing Plan
Post Office Box 911
Raleigh, NC 27602
Telephone: (919) 755-OO25
6
<PAGE>
EVANS & RIFFLE LAW OFFICES
/s/ John B. Evans
--------------------------------
John B. Evans
N.C. State Bar No. 6139
Attorneys for the Estate of John William
Gore
One Pinehurst Commons
Post Office Box 2409
Pinehurst, NC 28374
(910) 295-5550
7
<PAGE>
BROOKS, PIERCE, McLENDON,
HUMPHREY & LEONARD, L.L.P.
/s/ James C. Adams, II
--------------------------------
Jim W. Phillips, Jr.
State Bar No. 12516
James C. Adams, II
State Bar No. 18063
Attorneys for Defendants P. Kathleen
Moore, (co-
trustee),Dr. Harold K. Terry (co-trustee
and
personally), Lilian Snow, Margaret
Bryant
and Louise Thompson
Post Office Box 26000
Greensboro, North Carolina 27420
Telephone: 910/373-8850
8
end exhibit A-settlement
begin exhibit B-settlement
EXHIBIT B
IN THE UNITED STATES MIDDLE DISTRICT COURT
FOR THE MIDDLE DISTRICT OF NORTH CAROLINA
DURHAM DIVISION
Case No. 1:94CV00444
PRUDENTIAL SECURITIES, )
INCORPORATED, )
)
Plaintiff, )
)
v. )
)
CRANFORD B. GARNER, TIMOTHY E. )
GARNER, C. B. GARNER BUILDING )
COMPANY, GARNER BUILDING COMPANY, )
FIRST BANK, the ESTATE OF JOHN )
WILLIAM GORE (by and through its )
personal representative, Kathy )
Wood Gore), TAMALA F. DAVENPORT, )
SHIRLEY A. WALDROP, WILLIS, VANEK )
& BALL, P.A., administrator of )
WILLIS, VANEK & BALL, P.A. PROFIT )
SHARING PLAN, PEGGY GARNER, )
P. KATHLEEN MOORE (co-trustee), )
DR. HAROLD K. TERRY (co-trustee )
and personally), LILIAN SNOW, )
MARGARET BRYANT and LOUISE )
THOMPSON, )
)
Defendants. )
STIPULATION OF DISMISSAL WITH PREJUDICE
---------------------------------------
(Rule 41(a)(1)(ii))
-------------------
This action was previously dismissed as to Standard Bank &
Trust Company by way of Stipulation of Voluntary Dismissal dated
June 16, 1995. With the exception of Standard Bank & Trust
Company, all parties who have appeared in this action and P.
Kathleen Moore, by and through their undersigned counsel, do hereby
stipulate and agree that this action, including all claims, cross-
claims and counterclaims asserted in this action, shall be, and
the same hereby is, DISMISSED WITH PREJUDICE. The parties further
stipulate and agree that the preliminary injunction previously
<PAGE>
entered in this action on January 31, 1995 may be dissolved. Each
party shall bear his, her or its own costs.
This the ____ day of December, 1995.
-----------------------------
James P. McLoughlin, Jr.
Counsel for Prudential Securities,
Incorporated
OF COUNSEL:
MOORE & VAN ALLEN
47th Floor
100 North Tryon Street
Charlotte, NC 28202-4003
Telephone: 704/331-1000
2
<PAGE>
-----------------------------
Thomas M. Van Camp
Counsel for Cranford B. Garner,
Timothy E. Garner, C. B. Garner
Building Company, Garner Building
Company, and Peggy Garner
OF COUNSEL:
VAN CAMP WEST HAYES
& MEACHUM, P.A.
Post Office Drawer 429
Carthage, NC 28327
Telephone: 910/947-1711
3
<PAGE>
-----------------------------
John B. Evans
Counsel for the Estate of John
William Gore (by and through its
personal representative, Kathy Wood
Gore)
OF COUNSEL:
EVANS & RIFFLE
Law Offices
Post Office Box 2409
Pinehurst, NC 28374
Telephone: 910/295-5550
4
<PAGE>
-----------------------------
David A. Senter
Counsel for First Bank, Tamala F.
Davenport, and Shirley A. Waldrop
OF COUNSEL:
ADAMS KLEEMEIER HAGAN HANNAH & FOUTS
A Professional Limited Liability Company
North Carolina Trust Center
301 N. Elm Street - Suite 500
Post Office Box 3463
Greensboro, NC 27402
(910) 373-1600
5
<PAGE>
-----------------------------
E. D. Gaskins, Jr.
Counsel for Willis, Vanek & Ball, P.A.,
Administrator of Willis, Vanek & Ball,
P.A. Profit Sharing Plan
OF COUNSEL:
EVERETT GASKINS HANCOCK
& STEVENS
Post Office Box 911
Raleigh, NC 27602
6
<PAGE>
-----------------------------
Jim W. Phillips, Jr.
Counsel for P. Kathleen Moore
(co-trustee), Dr. Harold K. Terry
(co-trustee and Personally),
Lilian Snow, Margaret Bryant and
Louise Thompson
OF COUNSEL:
BROOKS PIERCE MCLENDON
HUMPHREY & LEONARD, LLP
Post Office Box 26000
Greensboro, NC 27420
Telephone: 910/373-8850
7
<PAGE>
The foregoing STIPULATION OF DISMISSAL is hereby APPROVED and
the preliminary injunction heretofore entered in this cause on
January 31, 1995, is hereby dissolved as of the entry of this
Stipulation on December 28, 1995, and it is so ORDERED. It is
further ORDERED that the parties make the transfers set forth in
the Release and Setttlement Agreement entered into between them.
DATE: December ____, 1995 -----------------------------
William L. Osteen
United States District Judge
8
<PAGE>
end exhibit B-settlement
begin exhibit C-settlement
<PAGE>
EXHIBIT C
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF NORTH CAROLINA
DURHAM DIVISION
CASE NO. 1:94-CV-00444
PRUDENTIAL SECURITIES )
INCORPORATED, )
)
Plaintiff, )
)
v. )
) SETTLEMENT AGREEMENT
CRANFORD B. GARNER, et al., )
)
Defendants. )
___________________________________)
This Settlement Agreement is made as of the 27th day of November, 1995
between the Willis Vanek & Ball, P.A. Pension and Profit Sharing Plan (the
"Plan") and Prudential Securities Incorporated ("Prudential").
The parties to this Settlement Agreement have agreed to resolve the
issues between them.
THEREFORE, the Plan and Prudential agree as follows:
1. On January 5, 1996 Prudential shall pay to the Plan the total sum of
$345,000 in principal, interest and reimbursement of litigation costs,
including attorneys' fees, by check made payable to the Plan.
2. The Plan hereby assigns to Prudential all of its right, title and
interest in the loan to Cranford B. Garner and Peggy Garner, including the
note, the assignment, and any collateral pledged by Cranford B. Garner and
Peggy Garner as security for the loan. Further, the Plan assigns any and all
claims, causes of action, rights, and remedies it may have against any person
whatever (including First Bank, Cranford B. Garner and Peggy
<PAGE>
Garner) with respect to the loan, the note, the assignment, and any and all
collateral pledged by Cranford B. Garner and Peggy Garner for the loan.
3. On January 5, 1996, Prudential shall deliver to the Plan a fully
executed Covenant Not to Sue, in the form attached hereto. On January 5,
1996, the Plan shall deliver to Prudential a reciprocal Covenant Not to Sue.
4. On January 5, 1996, or as soon thereafter as is practical, Prudential
shall take all necessary steps to effect a dismissal without prejudice of all
claims they have asserted one against the other. The Plan shall cooperate as
reasonably required to effect the dismissals.
5. The Plan will cooperate with Prudential as reasonably necessary in
pursuit of the claims assigned to Prudential.
6. After trial or settlement of this case, if Prudential receives any
monies in excess of its principal balance and interest thereon at the North
Carolina legal rate, Prudential shall pay to the Plan any additional monies
received up to a maximum of $37,000 to further reimburse the Plan for its
litigation expenses, including attorneys' fees. Payment shall be made within
15 business days of receipt and clearance of said monies pursuant to the
settlement or judgement. If for any reason Prudential is compelled to return
the funds (by virtue of a bankruptcy filing or otherwise) the Plan shall
return the monies up to $37,000 to Prudential. If said funds are subsequently
returned to Prudential, said funds will be returned to the Plan.
7. The parties hereto agree that they have executed the Settlement
Agreement based on their own knowledge and their own investigation of the
facts, and that this Settlement Agreement and attached Covenants Not to Sue
are the complete and exclusive agreements among the parties regarding these
matters and none is executed in reliance upon
- 2 -
<PAGE>
any statement of any person connected with, representing or represented by any
of the parties hereby released.
8. The parties agree that this Settlement Agreement may be executed in a
number of counterparts, each of which shall be considered an original
instrument, but all of which together shall be considered but one and the
same instrument. This Settlement Agreement shall be binding on all
signatories hereto, even if executed in any number of counterparts.
FOR PRUDENTIAL SECURITIES, INC.
Chris Freeze By: /s/ Patricia A. Roy
- ----------------------- ----------------------------
Witness
FOR THE PLAN:
By:
- ----------------------- ----------------------------
Witness Trustee
By:
- ----------------------- ----------------------------
Witness Trustee
By:
- ----------------------- ----------------------------
Witness Trustee
By:
- ----------------------- ----------------------------
Witness Trustee
- 3 -
<PAGE>
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF NORTH CAROLINA
DURHAM DIVISION
CASE NO. 1:94-CV-00444
PRUDENTIAL SECURITIES )
INCORPORATED, )
)
Plaintiff, )
)
v. )
) COVENANT NOT TO SUE
CRANFORD B. GARNER, et al., )
)
Defendants. )
___________________________________)
This covenant is executed as of November 27, 1995 by the Willis, Vanek &
Ball, P.A. Profit Sharing Plan (hereinafter the "Plan") by its Trustees.
In consideration of the Settlement Agreement executed between the Plan
and Prudential Securities Incorporated (hereinafter, with its officers,
directors and agents, "Prudential") dated November 27, 1995 the Plan
covenants as follows:
1. The Plan will never institute any action, or suit at law or in equity
against Prudential, nor institute, nor prosecute against Prudential, (nor aid
in the prosecution except as required by applicable statute, rule, or order)
any claim, demand, action, or cause of action for damages, costs, expenses,
or compensation for or on account of any damage, loss or injury, whether
known or unknown, past, present or future arising out of the loan made by the
Plan to Cranford B. Garner and Peggy Garner dated as of January 31, 1994 in
the principal amount of $300,000 (the "Plan's Loan"); except that the Plan
may sue to enforce the terms of the Settlement Agreement with Prudential
dated November 27, 1995.
- 1 -
<PAGE>
2. The Plan expressly acknowledges that in the Settlement Agreement it
has assigned to Prudential all rights of action, claims, and demands against
any and all persons or entities, arising from the Plan's Loan.
3. This instrument is a covenant not to sue, and not a release.
4. This covenant shall enure to the benefit of Prudential, its
employees, officers and directors. It shall bind the Plan, its trustees and
its beneficiaries. This covenant shall not prevent he Plan from taking any
action, including prosecuting a lawsuit, or breach for the Settlement
Agreement.
5. The Settlement Agreement and the Covenants Not to Sue attached
thereto reflect the entire covenant between the Plan and Prudential. No
statements, promises, or inducements made by any person that are not contained
in this covenant and the Settlement Agreement shall be valid or binding.
6. Covenantor has carefully read the foregoing and knows and understands
it.
FOR THE PLAN:
By:
- ----------------------- ----------------------------
Witness Trustee
By:
- ----------------------- ----------------------------
Witness Trustee
By:
- ----------------------- ----------------------------
Witness Trustee
By:
- ----------------------- ----------------------------
Witness Trustee
- 2 -
<PAGE>
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF NORTH CAROLINA
DURHAM DIVISION
CASE NO. 1:94-CV-00444
PRUDENTIAL SECURITIES )
INCORPORATED, )
)
Plaintiff, )
)
v. )
) COVENANT NOT TO SUE
CRANFORD B. GARNER, et al., )
)
Defendants. )
___________________________________)
This covenant is executed as of November 27, 1995 by Prudential
Securities, Incorporated (hereinafter, with its officers, directors and
agents, "Prudential").
In consideration of the Settlement Agreement executed between Prudential
and the Willis, Vanek & Ball, P.A. Profit Sharing Plan (hereinafter the
"Plan") and dated November 27, 1995 covenants as follows:
1. Prudential will never institute any action, or suit at law or in
equity against the Plan, nor institute, nor prosecute against the Plan, (nor
aid in the prosecution except as required by applicable statute, rule, or
order) any claim, demand, action, or cause of action for damages, costs,
expenses, or compensation for or on account of any damage, loss or injury,
whether known or unknown, past, present or future arising out of the loan made
by the Plan to Cranford B. Garner and Peggy Garner dated as of January 31,
1994 in the principal amount of $300,000 (the "Plan's Loan"); except that
Prudential may sue to enforce the terms of the Settlement Agreement with the
Plan dated November 27, 1995.
2. This instrument is a covenant not to sue, and not a release.
- 1 -
<PAGE>
3. This covenant shall enure to the benefit of the Plan, its trustees
and its beneficiaries. It shall bind Prudential its employees, officers and
directors. This covenant shall not prevent Prudential from taking any
action, including prosecuting a lawsuit, or breach for the Settlement
Agreement.
4. The Settlement Agreement and the Covenants Not to Sue attached
thereto reflect the entire covenant between Prudential and the Plan. No
statements, promises, or inducements made by any person that are not contained
in this covenant and the Settlement Agreement shall be valid or binding.
5. Covenantor has carefully read the foregoing and knows and understands
it.
PRUDENTIAL SECURITIES INCORPORATED:
Chris Freeze By: /s/ Patricia A. Roy
- ----------------------- ----------------------------
Witness Title: SR. VICE PRESIDENT
-------------------------
- 2 -
<PAGE>
end exhibit C-settlement
begin exhibit D-settlement
<PAGE>
EXHIBIT D
ASSIGNMENT AGREEMENT
THIS ASSIGNMENT is made this the ______ day of December, 1995, by
CRANFORD B. GARNER, TIMOTHY E. GARNER, C. B. GARNER BUILDING COMPANY, a North
carolina corporation, GARNER BUILDING COMPANY, a North Carolina corporation,
and PEGGY GARNER (hereinafter referred to collectively as "Assignor") to FIRST
BANK ("Assignee") in connection with the execution of the Release and
Settlement Agreement dated as of the date hereof by and among Assignor,
Assignee and others.
Pursuant to the terms of the Settlement Agreement, Assignor has agreed to
assign to Assignee all of Assignor's right, title and interest in and to GMP
Properties, Inc. ("GMP"). The parties acknowledge that the purpose of this
Assignment Agreement is to effectuate the assignment of all of Assignor's
right, title and interest in and to GMP, including, but not limited to, all
current and future rights to payments or monies paid to, or on behalf of, the
Assignor. Assignor understands and acknowledges that Assignor's execution of
this Assignment Agreement is a material condition to Assignee's agreement to
settle its claims against Assignor pursuant to the terms of the Settlement
Agreement.
NOW, THEREFORE, for and in consideration paid to Assignors, the adequacy
and sufficiency of which are acknowledged, the Assignor agrees as follows:
1. Each Assignor hereby assigns to Assignee all of his legal, equitable
and beneficial right, title and interest in and to GMP including, but not
limited to, all interests in, and rights with respect to, all distributions,
income, receivables or other monies due to Assignee from GMP Properties, Inc.
2. Each of the undersigned hereby directs GMP Properties, Inc. to make
payable and deliver to Assignee all payments to First Bank that may now or
hereafter become due to any Assignor.
3. This Assignment shall be binding upon the assigns, successors, heirs,
executors and administrators of each Assignor. This Assignment is made free
and clear of all liens, claims, advances, assignments, or encumbrances of any
kind. This Assignment is not made as collateral security, but is an outright
conveyance and assignment and is not subject to redemption or rescission.
4. Assignor agrees to execute and endorse to Assignee all instruments
and such other and further documents as may from time to time in the sole
opinion of Assignee be necessary, to effectuate and complete the assignment,
transfer and all such other purposes and intentions of this Agreement, it
being the intention of the Assignor to provide hereby a full and absolute
warranty of further assurance to the Assignee. If the Assignor fails to
execute any such documents within ten (10) days of being requested to do so by
the Assignee, the Assignor
<PAGE>
appoints the Assignee or any officer of the Assignee as the Assignor's
attorney-in-fact for purposes of executing such documents in the Assignor's
name, place and stead, which power of attorney shall be considered as coupled
with an interest and irrevocable. This power of attorney shall not be
affected by the subsequent disability or incompetence of the principal and
shall be irrevocable.
5. The Assignor acknowledges that any breach of this Agreement will
cause damage to Assignee that will be impractical and exceedingly difficult to
measure in full. The Assignor and Assignee therefore agree that this
Agreement may be enforced by means of a temporary restraining order or
preliminary injunction, or both, and that all other available remedies at law
or in equity including, but not limited to, money damages and specific
performance, may be had for breach of this Agreement.
6. This Agreement shall be governed and construed in accordance with the
laws of the State of North Carolina.
7. This Agreement shall bind and inure to the benefit of the parties
hereto, their successors, heirs, executors, administrators, legatees, personal
and representatives, and permissible assigns and transferees.
8. Whenever the context of this Agreement permits, the masculine gender
shall include the feminine and neuter genders and any reference to singular or
plural shall be interchangeable with the other.
IN WITNESS WHEREOF, each Assignor has signed this instrument as of the
date set forth above.
--------------------------------
CRANFORD B. GARNER
--------------------------------
TIMOTHY E. GARNER
--------------------------------
PEGGY GARNER
<PAGE>
C. B. GARNER BUILDING COMPANY
By:_____________________________
Name:___________________________
Title:__________________________
ATTEST:
- -----------------------
____________ Secretary
[Affix Corporate Seal]
GARNER BUILDING COMPANY
By:_____________________________
Name:___________________________
Title:__________________________
ATTEST:
- -----------------------
____________ Secretary
[Affix Corporate Seal]
<PAGE>
NORTH CAROLINA
GUILFORD COUNTY
I, ____________________________________, a Notary Public for said county
and state, do hereby certify that CRANFORD B. GARNER personally appeared
before me and acknowledged the execution of the foregoing instrument.
Witness my hand and notarial seal, this the _________ day of December,
1995.
--------------------------------
Notary Public
My commission expires:
- -----------------------
NORTH CAROLINA
GUILFORD COUNTY
I, ____________________________________, a Notary Public for said county
and state, do hereby certify that TIMOTHY E. GARNER personally appeared
before me and acknowledged the execution of the foregoing instrument.
Witness my hand and notarial seal, this the _________ day of December,
1995.
--------------------------------
Notary Public
My commission expires:
- -----------------------
<PAGE>
NORTH CAROLINA
GUILFORD COUNTY
I, ____________________________________, a Notary Public for said county
and state, do hereby certify that PEGGY GARNER personally appeared before me
and acknowledged the execution of the foregoing instrument.
Witness my hand and notarial seal, this the _________ day of December,
1995.
--------------------------------
Notary Public
My commission expires:
- -----------------------
NORTH CAROLINA
GUILFORD COUNTY
I, ____________________________________, a Notary Public for said county
and state, do hereby certify that __________________________________________
personally appeared before me this day and acknowledged that he is
____________ Secretary of C. B. GARNER BUILDING COMPANY, a North Carolina
corporation, and that by authority duly given and as the act of the
corporation, the foregoing instrument was signed in its name by its __________
President, sealed with its corporate seal and attested by him as its
____________ Secretary.
Witness my hand and notarial seal, this the _________ day of December,
1995.
--------------------------------
Notary Public
My commission expires:
- -----------------------
<PAGE>
NORTH CAROLINA
GUILFORD COUNTY
I, ____________________________________, a Notary Public for said county
and state, do hereby certify that __________________________________________
personally appeared before me this day and acknowledged that he is
____________ Secretary of GARNER BUILDING COMPANY, a North Carolina
corporation, and that by authority duly given and as the act of the
corporation, the foregoing instrument was signed in its name by its __________
President, sealed with its corporate seal and attested by him as its
____________ Secretary.
Witness my hand and notarial seal, this the _________ day of December,
1995.
--------------------------------
Notary Public
My commission expires:
- -----------------------
<PAGE>
IRREVOCABLE STOCK POWER
------------------------------
Date
FOR VALUE RECEIVED, the undersigned does (do) hereby sell, assign and
transfer to First Bank One Thousand Four Hundred Twenty-Eight (1,428) shares
of the common stock of GMP Properties, Inc. represented by Certificate No. 4
standing in the name of the undersigned on the books of said Company.
The undersigned does (do) hereby irrevocably constitute and appoint
_______________________________________ Attorney to transfer the said stock(s)
on the books of said Company, with full power of substitution in the premises.
-------------------------------------------
Cranford B. Garner
[MEDALLION STAMP]
SIGNATURE GUARANTEED
BY:________________________________________
(Authorized signature - authorizing resolutions
must be filed with New York Stock Exchange)
IMPORTANT: The signature(s) to this power must correspond with the name(s) as
written upon the face of the Stock Certificate(s) or Bond(s) in every
particular, without alteration or enlargement or any change whatever and must
be guaranteed by a commercial bank or a trust company having its principal
office or a correspondent in the City of New York or by a firm having
membership in the New York Stock Exchange. The commercial bank or trust
company guaranteeing the signature(s) must affix its Medallion Stamp as
indicated.
<PAGE>
[Letterhead of First Bank]
December ___, 1995
GMP Properties, Inc.
Re: Cranford Garner - Assignment of Interest
Gentlemen:
You are hereby notified that Cranford B. Garner, Timothy E. Garner, C. B.
Garner Building Company, Garner Building Company and Peggy Garner
(collectively, the "Garners") have executed and delivered to us an assignment
of all their legal, equitable and beneficial right, title and interest in and
to GMP Properties, Inc. including, but not limited to, an assignment of all
the capital stock of GMP Properties, Inc. held in the name of Cranford B.
Garner and the right to all distributions, income, receivables or other monies
due. A copy of such assignment is attached hereto.
Accordingly, you are hereby advised and directed to pay over to First
Bank all amounts currently due or otherwise payable to the Garners and all
amounts that may hereafter be due to or otherwise paid to the Garners for any
reason whatsoever.
Please acknowledge your receipt of this notice of assignment and return
the same to David A. Senter, Esq. Adams Kleemeier Hagan Hannah & Fouts, P. O.
Box 3463, Greensboro, NC 27402 on or before ____________________, 199___.
<PAGE>
FIRST BANK
By:_____________________________
Name:___________________________
Title:__________________________
Acknowledged and agreed to
this the __________ day of
___________________, 199___.
GMP PROPERTIES, INC.
By:_____________________________
Name:___________________________
Title:__________________________
begin exhibit D-settlement
begin exhibit E-settlement
<PAGE>
EXHIBIT E
GARNER ASSETS WITH POSSIBLE EQUITY VALUE
IN EXCESS OF $10,000 WHICH GARNERS WILL RETAIN
AFTER THE EXECUTION OF TUE SETTLEMENT AGREEMENT
-----------------------------------------------
1. Real property at 1615 Midland Road, Southern Pines, North Carolina
2. Real property at 235 Fairway Drive, Southern Pines, North Carolina
3. Lake Tillery lot
4. MiniVan driven by Wendy Garner
5. Note Receivable from Charles Yow - $25,000
6. GMP contingent receivable of $30,000 (First Bank gets assignment of GMP
interest pursuant to the Federal Settlement Agreement)
end exhibit E-settlement
begin exhibit F-settlement
<PAGE>
EXHIBIT F
*LIST OF GARNER DEFENDANTS' ACTUAL AND CONTINGENT LIABILlTIES
AFTER SETTLEMENT AGREEMENT IS EXECUTED
--------------------------------------
C.B. Garner Building Company
- ----------------------------
Payroll taxes $ 6,362.96**
Employment Security Commission 58,216.98**
Xerox 5,764.64
Accountant Eddie Strange 11,272.01
Chamber of Commerce 275.00
Van Murray Chevrolet 237.00
UPS 348.00
Target Programs 489.00
Summey Travel 2,059.00
Home Life 3,903.00
Gore Tire 788.00
Newspaper 148.00
American Contractors 5,515.00
BP Oil 8,000.00
Sprint Cellular 1,200.00
BEQ job -- contingent liability -- future debt unknown
FTCC job -- contingent liability -- debt unknown
Thomas Godwin 30,000.00
Tim Garner and Cranford Garner:
- -------------------------------
FDIC $659,000.00
NBNA Credit Card (Tim Garner) 69,000.00
BB&T Credit Card (Tim Garner) 5,400.00
BB&T Credit Card (Cranford Garner) 2,100.00
Citibank (Tim Garner) 5,500.00
Diners Club (Tim Garner) 750.00
Chase Bank (Tim Garner) 10,000.00
American Express (Cranford Garner) 7,900.00
Van Camp, West, Hayes & Meacham -- significant debt
The preceding debts DO NOT include any of the debts that are listed on the
deeds of trust for the properties being transferred in connection with this
settlement, or taxes due and owing on the particular pieces of property being
transferred. The list of debts also does not include liens or mortgages on
Cranford and Peggy Garner s home or on Tim and Wendy Garner's home.
* These debts are not exact and to the penny, but are accurate
approximations. These debts do not include normal household debt such as
utility bills, etc.
** These are the taxes that are due as a result of the FTC and BEQ job, and
the fact that pay requests have been withheld.
end exhibit F-settlement
begin exhibit G-settlement
<PAGE>
EXHIBIT G
STATE OF NORTH CAROLINA File No. 94-E-436
-------------------
In The General Court 0f Justice
MOORE County Superior Court Division
- ---------------
In The Matter Of The Estate Of:
Name LETTERS
JOHN WILLIAM GORE, JR. TESTAMENTARY
-------------------
G.S. 28A-6-1
The Court in the exercise of its jurisdiction of the probate of wills and the
administration of estates, and upon application of the fiduciary. has adjudged
legally sufficient the qualification of the fiduciary named below and orders
that Letters be issued in the above estate.
The fiduciary is fully authorized by the laws of North Carolina to receive and
administer all of the assets belonging to the estate, and these Letters are
issued to attest to that authority and to certify that it is now in full force
and effect.
Witness my hand and the Seal of the Superior Court.
Name And Title Of Fiduciary Date Of Qualification
Cathy Wood Gore, Personal Representative August 17, 1994
Address Clerk Of Superior Court
683 Connell Road Catherine P. Graham
City, State, Zip
Carthage, NC 28327 EX OFFICIO JUDGE OF PROBATE
Name And Title Of Fiduciary
Address Date Of Issuance
Dec 20, 1995
City, State. Zip Signature
Ginger C. Keith
SEAL [X] Deputy CSC [ ] Assistant CSC
AOC-E-403
Rev 6/87
Exhibit 10.o
SEVERANCE AND NONCOMPETITION AGREEMENT
This AGREEMENT is made and entered into as of December 29,
1995, by and between FIRST BANCORP, a North Carolina corporation
(the "Company"), and PATRICK A. MEISKY ("Meisky").
STATEMENT OF PURPOSE
Meisky has been employed by the Company as Regional President
for the High Point Region pursuant to an Employment and
Noncompetition Agreement dated August 26, 1994 between Meisky and
the Company (the "Employment Agreement"). Meisky is terminating
his employment with the Company as of December 29, 1995 and
agreeing not to compete with the Company for the term described
herein. In consideration for his service to the Company and its
subsidiaries (references herein to the "Company" shall be deemed to
refer to the Company and its subsidiaries, unless the context
requires otherwise), as well as for the additional and further
agreements hereunder, the Company has agreed to provide to Meisky
a severance package according to the terms set forth below. The
Employment Agreement is terminated as of the date hereof.
NOW THEREFORE, in consideration of the mutual covenants and
agreements contained herein and other good and valuable
consideration, the Company and Meisky hereby agree as follows:
1. Date of Termination. Meisky's employment with the
Company and its subsidiaries is hereby terminated as of December
29, 1995, (the "Termination Date") and Meisky hereby tenders his
resignation from any positions he now has with the Company and its
<PAGE>
subsidiaries, including as an officer, director or member of any
advisory boards or committees, all such resignations to be
effective as of the Termination Date.
2. Regular Severance Payment. The Company will pay to
Meisky his regular salary at the current rate (and will reimburse
him for customary and reasonable expenses incurred on behalf of the
Company or its subsidiaries, all in accordance with the Company's
policies) through the Termination Date. All payments under this
paragraph will be subject to applicable deductions and withholding
under federal and state law.
3. Accrued Vacation Pay. Meisky acknowledges that he is not
entitled to any vacation pay as of the date hereof. Meisky shall
not be eligible to accrue additional vacation days after the
Termination Date.
4. Additional Severance Payment. In addition to the amounts
set forth in paragraphs 2 and 3 above, but subject to paragraph 18
hereof and to Meisky's full compliance with the terms of this
Agreement including the conditions set forth below, the Company
shall pay to Meisky (a) a lump sum payment in the amount of
$125,000 payable not later than January 2, 1996, and (b) periodic
payments at a rate equal to $130,000 per year from the Termination
Date until August 26, 1999, payable at such times and in accord
with the regular payroll practices of the Company for its salaried
executive employees. All amounts paid under this paragraph 4 shall
be subject to and reduced by any applicable federal and state
withholding taxes.
-2-
<PAGE>
5. Life Insurance Policies. The Company will relinquish its
right to be reimbursed for premiums paid under the Split Dollar
Agreement involving life insurance on Meisky's life, and ownership
of the life insurance policy covered by the Split Dollar Agreement
and all obligations relating thereto, including future payment of
premiums, will be transferred to Meisky. In addition, ownership of
the life insurance policy on the life of Meisky in the principal
face amount of $300,000, acquired by the Company in the merger
between First Bank and Central State Bank, including the cash value
thereof, will be transferred to Meisky, along with all obligations
relating thereto, including the future payment of premiums. These
transfers and payments will be accomplished within sixty (60) days
of the date hereof.
6. Benefit Plans and Fringe Benefits. Except as provided
below, as of the Termination Date provided in paragraph 1 herein,
Meisky shall not have the right to participate in or receive any
benefit under any employee benefit plan of the Company or any of
its subsidiaries, any fringe benefit plan of the Company, or any
other plan, policy or arrangement of the Company providing benefits
or perquisites to employees of the Company generally or
individually; provided, however, that Meisky shall be entitled (i)
to exercise his right to continued coverage under the Company's
medical benefit plan as provided by COBRA (and with respect to
which the Company will provide Meisky with a separate notice as
required by COBRA); and (ii) to elect the payment of benefits to
which he is entitled under any employee pension benefit plan of the
-3-
<PAGE>
Company as provided under the terms of any such plan. (In
accordance with this paragraph 6(ii), Meisky elects to receive all
retirement funds derived from the Central State Bank pension fund
which was acquired by the Company by previous merger. The Company
agrees to pay said retirement funds to Meisky as reasonably as
practicable in a manner reasonably acceptable to Meisky's tax
advisory.) Provided, further, but subject to paragraph 18 hereof,
if Meisky elects continued medical insurance coverage pursuant to
the terms of COBRA, the Company will pay COBRA premiums on behalf
of Meisky until the earlier of (i) Meisky obtaining other
employment pursuant to which Meisky is eligible for medical
insurance coverage, (ii) Meisky obtaining other medical insurance
or (iii) the date ninety (90) days after the Termination Date. The
payments of the COBRA amounts described in this paragraph by the
Company are conditional upon Meisky's compliance with all
conditions to receipt of severance payments specified in paragraph
4 above.
7. Stock Appreciation Rights. On the Termination Date, the
Company will grant to Meisky stock appreciation rights equivalent
to 2,000 shares of the Company's common stock, subject to the terms
described and in the form of the Memorandum attached hereto as
Exhibit B. Notwithstanding anything to the contrary herein or in
Exhibit B, the maximum compensation to be paid to Meisky for such
stock appreciation rights will be $40,000. All rights to receive
stock appreciation rights under the Employment Agreement are hereby
terminated.
-4-
<PAGE>
8. Noncompetition. From the Termination Date until August
26, 1999, Meisky agrees as follows:
(i) Except as otherwise provided in this paragraph 8,
Meisky shall not, directly or indirectly, promote, be employed by,
participate or engage in any activity or business which is in
competition with the business of the Company, or any of its
subsidiaries and affiliated companies, including acting, either
singly or jointly or as agent for, or as an employee of, any person
or persons, firm or corporation which directly or indirectly (as a
director, shareholder or investor, partner, lessor, lessee,
proprietor, principal agent, independent contractor,
representative, consultant or otherwise), within the counties in
which the Company, its subsidiaries or affiliates have offices or
are located and doing business on the date hereof. Ownership by
Executive of 5% or less of the outstanding capital stock of any
corporation which is actively publicly traded will not be a
violation of this covenant;
(ii) Meisky covenants that he will not employ or assist
others by active solicitation to recruit and employ employees of
the Company or any of the Company's subsidiaries or affiliate
companies without the written consent of the Company; and
(iii) Except as otherwise provided in this paragraph 8,
Meisky agrees that he will not, directly or indirectly, on behalf
of himself or any third party, make any sales contacts with, or
actively solicit business from any customer of the Company or its
subsidiaries or affiliate companies, for any products or services
-5-
<PAGE>
competitive with those offered by the Company or its subsidiaries
or affiliated companies within counties in which the Company, its
subsidiaries or affiliates have offices or are located and doing
business on the date hereof.
Provided, however, that it shall not constitute a violation of
this paragraph 8 for Meisky to perform services for a purchaser of
or successor to the business of First Bank Insurance Services, Inc.
in the operation of an insurance agency only. It is further
understood that the Company and Meisky may in good faith enter into
such future agreement as may be mutually acceptable to them
providing for the brokerage of loans by Meisky under which Meisky
would be compensated by the Company for services rendered to the
Company, and Meisky's performance under such an agreement would not
constitute a breach of the covenants contained in this paragraph 8.
The Company's obligations under paragraphs 4 through 7 hereof
are expressly conditioned upon Meisky's strict compliance with the
provisions of this paragraph 8.
9. Disclosure of Confidential Information. Meisky
acknowledges that, during the course of his employment with the
Company, he has been afforded access to extensive confidential and
proprietary information of the Company. For purposes of this
paragraph, "confidential and proprietary information" shall mean
information not generally known or available to the public that was
created by, disclosed or made available to Meisky in the course of
his employment by the Company.
-6-
<PAGE>
Meisky covenants and agrees that from and after the date
hereof, for a period of five (5) years, he will not disclose any
confidential and proprietary information to any person, firm,
corporation, association or other entity for any reason or purpose
or for the benefit of any person, firm, corporation or other
entity, without the Company's prior written consent. Meisky
acknowledges that a violation of this covenant is a material breach
of this Agreement.
10. Return of Company Property. Meisky agrees to return
immediately to the Company keys, identification cards and security
pass cards, as well as all originals and copies of all documents,
software or any other materials or property relating to his
employment or obtained or created in the course of his employment.
Meisky further represents, as a material inducement for the Company
to enter into this Agreement, that he has not retained in his
possession any such software, documents or other materials in
machine or human readable form, including on any disc, tape or
hard-drive of any computer owned or possessed by Meisky. It is
agreed, however, that the Company will transfer to Meisky the
office furniture (desk, chairs, tables, lamps, accessories and
framed pictures) being used by Meisky in his High Point office.
11. Public Statements and Reference. Meisky agrees not to
make any public statements, written or oral, regarding his
departure from the Company's employment except as may be approved
by the Company in advance, and further agrees not to take any
action that would or might disrupt, impair or affect adversely the
-7-
<PAGE>
Company, or its employees, officers or directors, or place the
Company or such individuals in any negative light.
12. Non-Disparagement. Meisky agrees that he shall not in
any way, directly or indirectly, in public, in private, to any
employee of the Company or to any other person, criticize or
disparage the performance, competency or ability of the Company,
its subsidiaries or affiliated companies, or the officers,
directors, employees or agents of any of them at any time after the
execution of this Agreement. Meisky acknowledges that a breach of
this covenant will release the Company from its obligations under
paragraphs 4 through 7 hereof. In the event an allegation arises
concerning a breach of Meisky's covenant as set forth in paragraph
12, the allegations concerning said breach shall be investigated by
a committee composed of the Company's President (James H. Garner),
Executive Vice President (Anna Hollers), Chairman of the Board
(John Willis) and director Jordan Washburn, and said committee
shall determine whether the alleged breach is material before the
Company is released from its obligations under paragraphs 4 through
7 hereof. The Company agrees that it will respond to all inquiries
regarding employment of Meisky in a positive manner consistent with
his performance record at the Company since his date of hire.
13. Remedies. Meisky hereby acknowledges that the remedies
at law for any breach of the covenants and obligations contained in
this Agreement will be inadequate and that, in the event of a
breach or a threatened breach of any of the provisions of this
Agreement, the Company shall be entitled to preliminary restraining
-8-
<PAGE>
orders, injunctions or such equitable remedies as may be
appropriate, in addition to all other remedies available to the
Company. In addition, Meisky agrees that a breach by him of any of
the covenants and agreements contained herein shall be deemed a
breach of all such covenants and agreements and shall entitle the
Company, among other things, to cease payments under paragraph 4
hereof and take such steps as may be necessary to recover payments
previously made to Meisky under paragraph 4 hereof.
14. Governing Law. This Agreement shall be construed in
accordance with and governed by the laws of the State of North
Carolina.
15. Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the Company, its successors and assigns and
Meisky and his heirs and legal representatives. This Agreement and
the rights hereunder may not be assigned by Meisky.
16. Severability. If, for any reason, any provision of this
Agreement is held invalid, such invalidity shall not affect any
other provision of this Agreement not held so invalid, and each
such other provision shall to the full extent consistent with law
continue in full force and effect. If any provision of this
Agreement shall be held invalid in part, such invalidity shall in
no way affect the rest of such provision not held so invalid and
the rest of such provision, together with all other provisions of
this Agreement, shall to the full extent consistent with law
continue in full force and effect. Provided, that if Meisky's
execution of the Release and Waiver attached hereto as Exhibit A
-9-
<PAGE>
is, for any reason, declared null and void, Meisky shall reimburse,
indemnify and hold harmless the Company for any and all payments
made to him or for his benefit under the provisions of paragraphs 4
through 7 of this Agreement.
17. Voluntary Agreement. Meisky hereby represents that he
has carefully read and completely understands the provisions of
this Agreement and that he has entered into this Agreement
voluntarily.
18. Further Conditions. The obligations of the Company set
forth in paragraphs 4 through 7 hereof are conditional upon
Meisky's execution no later than January 19, 1996 of a Release and
Waiver in the form attached hereto as Exhibit A, as well as his
failure to revoke the same following the expiration of seven days
following such execution. In the event that Meisky fails to
execute such Release and Waiver within such time or revokes the
execution thereof within seven days following such execution
thereof, the Company's obligations under paragraphs 4 through 7
shall terminate, and Meisky shall be obligated to repay all
payments made by the Company to Meisky under paragraphs 4 through
7
19. Litigation Assistance. Meisky agrees to cooperate with
and provide assistance to the Company and its legal counsel in
connection with any litigation (including arbitration or
administrative hearings) or investigation affecting the Company, in
which -- in the reasonable judgment of the Company's counsel --
Meisky's assistance or cooperation is needed. Meisky shall, when
-10-
<PAGE>
requested by the Company, provide testimony or other assistance and
shall travel at the Company's request in order to fulfill this
obligation. Provided, however, that, in connection with such
litigation or investigation, the Company shall attempt to
accommodate Meisky's schedule, shall provide him with reasonable
notice in advance of the times in which his cooperation or
assistance is needed, and shall reimburse Meisky for any reasonable
expenses incurred in connection with such matters, as well as for
any actual lost wages suffered (minimum $300 per day) as a result
from absence from employment.
20. Admissions. Meisky acknowledges that the payment by the
Company of the severance benefits described herein is made in good
faith and shall never for any purpose be considered an admission of
liability on the part of the Company, by whom liability is
expressly denied, and no past or present wrongdoing on the part of
the Company shall be implied by such payment.
21. Entire Agreement. This Agreement contains the entire
agreement between the Company and Meisky and supersedes all prior
agreements relating to the subject matter hereof (including the
Employment Agreement), and may be changed only by a writing signed
by the parties hereto. Any and all prior representations,
statements and discussions regarding the subject matter of this
Agreement have been merged into and/or replaced by the terms of
this Agreement.
-11-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement, or caused this Agreement to be duly executed by their
authorized representatives, under seal and with the intent that
this Agreement shall constitute a sealed instrument, as of the
day and year first above written.
FIRST BANCORP
ATTEST: [Corporate Seal] By: /s/ James H. Garner
[ of ] ------------------------
[First Bancorp ] James H. Garner, President
By: Anna G. Hollers
----------------------
_________ Secretary
WITNESS: /s/ Patrick A. Meisky (SEAL)
---------------------------
By: Freda Trotter Patrick A. Meisky
----------------------
-12-
<PAGE>
Exhibit A
RELEASE AND WAIVER OF CLAIMS
NOTE: THIS RELEASE AND WAIVER NEED NOT BE EXECUTED BY MEISKY
UNTIL JANUARY 19, 1996, BUT MUST BE EXECUTED BY THE CLOSE OF
BUSINESS THAT DAY TO ACTIVATE THE OBLIGATIONS OF THE COMPANY SET
FORTH IN PARAGRAPHS 4 THROUGH 7 OF THE SEVERANCE AND NONCOMPETITION
AGREEMENT DATED DECEMBER 29, 1995 (the "SEVERANCE AGREEMENT").
As consideration for the payments specified in the Severance
Agreement, Patrick A. Meisky ("Meisky") for himself, his heirs,
executors, administrators and assigns, releases and forever
discharges First Bancorp ("the Company"), its predecessors,
successors, affiliates and subsidiaries (including without
limitation First Bank) and their agents, officers, employees,
directors and attorneys, from and waives any and all rights with
respect to all manner of claims, actions, causes of action, suits,
judgments, rights, demands, debts, damages, or accountings of
whatever nature, legal, equitable or administrative, whether the
same are now known or unknown, which he ever had, now has or may
claim to have, upon or by reason of the occurrence of any matter,
cause or thing whatsoever up to the date of this Agreement,
including without limitation: (i) any claim whatsoever (whether
under federal or state statutory or common law) arising from or
relating to his employment or changes in his employment
relationship with the Company, including his separation,
termination or resignation therefrom, (ii) all claims and rights
for additional compensation or benefits of whatever nature,
<PAGE>
including vacation, bonus, sick leave, severance, stock options,
deferred compensation, health or medical benefits, group life
insurance, disability or other benefits, except as may be provided
for in the Severance Agreement; and (iii) all claims and rights
whatsoever under any employment agreement with the Company.
THIS RELEASE AND WAIVER SPECIFICALLY INCLUDES, BUT IS NOT
LIMITED TO, MEISKY'S WAIVER AND RELEASE OF EMPLOYMENT
DISCRIMINATION RIGHTS AND CLAIMS ARISING UNDER THE FEDERAL AGE
DISCRIMINATION IN EMPLOYMENT ACT OF 1967, AS AMENDED. It also
includes any claim for breach of contract, implied or express,
impairment of economic opportunity, intentional or negligent
infliction of emotional distress, wage or benefit claim, prima
facie tort, defamation, libel, slander, negligent termination,
wrongful discharge, or any other tort, whether intentional or
negligent, or any claim or cause of action known or unknown under
Title VII of the Civil Rights Act of 1964, the Civil Rights Acts of
1866, 1871, or 1991, the Employee Retirement Income Security Act,
the Americans With Disabilities Act of 1993, all as amended, or any
other federal, state, county or municipal statute or ordinance
relating to any condition of employment or employment
discrimination. In the event that any government or government
agency files or processes a charge or action on behalf of Meisky
against the Company, Meisky hereby waives any and all right that he
may have to recover in any proceeding arising therefrom. Provided,
however, this Release shall not (i) include any claims relating to
the obligations created by the Severance Agreement, (ii) operate to
A-2
<PAGE>
release Meisky's ownership of any common stock of the Company or
Meisky's rights to exercise any matured or vested stock options
pursuant to the terms thereof, (iii) affect Meisky's vested and
accrued rights as a participant in the Company's pension plans,
(iv) affect any rights or claims that may arise out of events
occurring after the date this Release and Waiver is signed, (v)
release the Company from, nor waive Meisky's rights with respect
to, the Company's obligation, if any, to defend and indemnify him
in accordance with the provisions of the Company's bylaws or (vi)
prevent Meisky from obtaining reimbursement of business expenses
incurred prior to the date of the Severance Agreement which are
otherwise subject to reimbursement pursuant to the terms of the
Company's policies.
CERTIFICATE
A. Meisky agrees and certifies that he has read this Release
and Waiver and that he fully understands its provisions.
B. Meisky agrees and certifies that he voluntarily enters
into this Release and Waiver, which is a legal and binding
contract, and that he has agreed to terminate his employment with
the Company voluntarily.
C. Meisky acknowledges that his waiver of rights and claims
under this Release and Waiver includes a waiver of rights and
claims under the Federal Age Discrimination in Employment Act of
1967, as amended, and that such waiver and the waiver and release
of all other rights and claims contemplated by this Release and
Waiver are made knowingly and voluntarily.
A-3
<PAGE>
D. This Release and Waiver must be accepted by Meisky no
later than January 19, 1996. Meisky acknowledges that he has been
given a period of at least twenty-one (21) days to consider this
Release and Waiver and to consult with his attorney, accountant,
tax advisor, spouse or other persons prior to making a decision to
sign this Release and Waiver. Meisky acknowledges that the Company
has not pressured or coerced him to execute this Release and Waiver
prior to the expiration of 21 days from the date it was furnished
to him and that any decision to execute this Release and Waiver
prior to such time is done freely and voluntarily. Meisky
certifies that the Company has advised him in writing to consult
with an attorney regarding the legal consequences of this Release
and Waiver.
E. Meisky understands and acknowledges that he has seven (7)
days from the date he signs this Release and Waiver to change his
mind and revoke it by delivering a signed written statement to the
Company, notifying the Company of his wish to revoke this Release
and Waiver.
This Release and Waiver is hereby signed, under seal, by
Meisky, this 2nd day of January, 1996.
/s/ Patrick A. Meisky (SEAL)
---------------------------
Patrick A. Meisky
WITNESS
By: Freda Trotter
----------------------
A-4
<PAGE>
EXHIBIT B
TO SEVERANCE AND NONCOMPETITION AGREEMENT
MEMORANDUM OF STOCK APPRECIATION RIGHTS
This Memorandum evidences rights granted to PATRICK A. MEISKY
("Meisky") with respect to the increase in value of shares of
the common stock of First Bancorp ("Bancorp").
1. Stock Appreciation Rights. Bancorp hereby grants to
Meisky 2,000 Stock Appreciation Rights. For purposes of this
Agreement, a "Stock Appreciation Right" means the right to receive,
upon exercise of the right, the amount (if any) by which the Market
Value of a share of Bancorp's common stock (a "Share") exceeds the
Base Price. The Base Price is the closing price of a share of
Bancorp's common stock on August 26, 1994 (known as the "Base
Date") as quoted on NASDAQ. The Market Value of a Share is the
price of a Share in the most recent trade (as of the date of
exercise) in any public market for such Shares or, in the absence
of any public market for the Shares, the book value of a Share as
of the end of the fiscal quarter immediately preceding the date of
exercise.
2. Term. The term of these Stock Appreciation Rights is ten
years from the Base Date, until August 26, 2004.
3. Payment. The amount payable to Meisky on account of the
exercise of any Stock Appreciation Rights will be payable in full
not more than 30 days after exercise.
4. Transferability. These Stock Appreciation Rights may not
be transferred by Meisky, except upon Meisky's death by will or by
the laws of descent and distribution.
5. Exercise. These Stock Appreciation Rights remain
exercisable until they terminate pursuant to paragraph 2.
During Meisky's lifetime, only the Meisky may exercise the
Stock Appreciation Rights. If Meisky dies prior to the termination
of the Stock Appreciation Rights, without having exercised them,
the Stock Appreciation Rights may be exercised by the estate or a
person who acquired the right to exercise the Stock Appreciation
Rights by bequest or inheritance or by reason of the death of
Meisky.
The Stock Appreciation Rights may be exercised in full or in
part from time to time and shall be exercised by delivery to the
Secretary of Bancorp of a Notice of Exercise in the form attached
to this Memorandum.
<PAGE>
6. Administration. Bancorp has the authority to construe
and interpret these Stock Appreciation Rights and to require of any
person exercising these Stock Appreciation Rights, at the time of
such exercise, the execution of any paper or the making of any
representation or the giving of any commitment that Bancorp shall,
in its discretion, deem necessary or advisable by reason of the
securities laws of the United States or any state, or the execution
of any paper or the payment of any sum of money in respect of taxes
or the undertaking to pay or have paid any such sum that Bancorp
shall, in its discretion, deem necessary by reason of the Internal
Revenue Code or any rule or regulation thereunder, or by reason of
the tax laws of any state.
7. Capital Adjustments. The number of Stock Appreciation
Rights granted hereby, and the amount receivable upon exercise
thereof, will be subject to an appropriate and equitable
adjustment, as determined by Bancorp, to reflect any stock
dividend, stock split or share combination, and will be subject to
such adjustment as Bancorp may deem appropriate to reflect any
exchange of shares, recapitalization, merger, consolidation,
separation, reorganization, liquidation or the like, of or by
Bancorp.
8. Rights as a Shareholder. Meisky, or a transferee of any
Stock Appreciation Rights, shall have no rights as a shareholder
with respect to such Stock Appreciation Rights.
9. Appreciation Limit. Notwithstanding anything to the
contrary contained herein, the maximum amount of gross compensation
to be paid to Meisky on account of this Stock Appreciation Right
shall be $40,000.00.
B-2
<PAGE>
To evidence their agreement to the terms and conditions of
these Stock Appreciation Rights, Bancorp and the Meisky have signed
this Memorandum.
BANCORP:
FIRST BANCORP
By: /s/ James H. Garner
------------------------
MEISKY:
/s/ Patrick A. Meisky
------------------------
Patrick A. Meisky
B-3
<PAGE>
NOTICE OF EXERCISE
I hereby exercise the ____________ (Number) of the Stock
Appreciation Rights granted to me on _________________.
The date of this exercise is _____________________.
I agree to provide Bancorp with such other documents and
representations as it deems appropriate.
---------------------------
B-4
<PAGE>
Exhibit 23.a
INDEPENDENT AUDITORS CONSENT
The Board of Directors
First Bancorp
We consent to incorporation by reference in the Amendment No. 1 to the
Registration Statement of First Bancorp on Form S-8 relating to the First
Bancorp 1994 Stock Option Plan, of our report dated January 26, 1996,
relating to the consolidated balance sheets of First Bancorp and
subsidiaries as of December 31, 1995 and 1994, and the related statements of
consolidated income, consolidated cash flows and changes in consolidated
shareholders equity for each of the years in the three-year period ended
December 31, 1995, which report appears in the December 31, 1995 Annual
Report and is incorporated by reference in the FORM 10-KSB of First Bancorp.
Our report dated January 26, 1996, refers to the fact that on January 1,
1994, First Bancorp adopted the provisions of the Financial Accounting
Standards Board's Statement of Financial Accounting Standards No. 115,
Accounting for Certain Investments in Debt and Equity Securities."
/s/ KPMG Peat Marwick LLP
Charlotte, North Carolina
March 21, 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<MULTIPLIER> 1,000
<PERIOD-START> JAN-01-1995
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
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0
0
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</TABLE>
