<PAGE>
===============================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
___________________
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended
June 30, 1997
___________________
Commission File Number 0-15572
FIRST BANCORP
------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
North Carolina 56-1421916
- --------------------------------------- ------------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) 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
------------------------
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
As of June 30, 1997, 3,016,370 shares of the registrant's Common
Stock, $5 par value, were outstanding. The registrant had no other classes of
securities outstanding.
Transitional Small Business Format [ ] YES [ X ] NO
===============================================================================
EXHIBIT INDEX BEGINS ON PAGE 19
<PAGE>
INDEX
FIRST BANCORP AND SUBSIDIARIES
Page
Part I. Financial Information
Item 1 - Financial Statements
CONSOLIDATED BALANCE SHEETS -
June 30, 1997 and 1996
(With Comparative Amounts at December 31, 1996) 3
STATEMENTS OF CONSOLIDATED INCOME -
For the Periods Ended June 30, 1997 and 1996 4
STATEMENTS OF CONSOLIDATED CASH FLOWS -
For the Periods Ended June 30, 1997 and 1996 5
STATEMENTS OF CHANGES IN CONSOLIDATED SHAREHOLDERS' EQUITY -
For the Periods Ended June 30, 1997 and 1996 6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 7
Item 2 - Management's Discussion and Analysis of Consolidated
Results of Operations and Financial Condition 8
Part II. Other Information
Item 6 - Exhibits and Reports on Form 8-K 15
Signatures 18
Exhibit Cross Reference Index 19
<PAGE>
Part I. Financial Information
Item 1 - Financial Statements
Consolidated Balance Sheets
FIRST BANCORP AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
Jun 30, Dec 31, Jun 30,
($ in thousands--unaudited) 1997 1996 1996
--------- --------- ---------
<S> <C> <C> <C>
ASSETS
Cash & due from banks, noninterest bearing $ 17,345 $ 15,882 $ 16,165
Due from banks, interest bearing 8 -- --
Federal funds sold -- 5,025 5,125
--------- --------- ---------
Total cash and cash equivalents 17,353 20,907 21,290
--------- --------- ---------
Securities available for sale (approximate
costs of $57,639, $53,721 and $51,448) 57,765 53,942 51,185
Securities held to maturity (approximate
fair values of $21,328, $22,717 and $19,947) 20,824 22,323 19,664
Presold mortgages in process of settlement 738 1,395 765
Loans, net of unearned income 247,220 223,032 219,838
Less: Allowance for possible loan losses (4,755) (4,726) (4,758)
--------- --------- ---------
Net loans 242,465 218,306 215,080
--------- --------- ---------
Premises and equipment, net 7,919 7,722 8,066
Accrued interest receivable 2,778 2,412 2,254
Intangible assets 5,319 5,834 6,119
Other 2,612 2,609 3,167
--------- --------- ---------
Total assets $ 357,773 $ 335,450 $ 327,590
========= ========= =========
LIABILITIES
Deposits: Demand $ 47,954 $ 45,002 $ 44,334
Savings, NOW and money market 119,472 107,605 103,890
Time deposits of $100,000 or more 33,547 33,526 33,864
Other time deposits 117,835 111,728 110,070
--------- --------- ---------
Total deposits 318,808 297,861 292,158
Accrued interest on deposits 1,914 1,882 1,787
Other 2,300 2,475 2,391
--------- --------- ---------
Total liabilities 323,022 302,218 296,336
--------- --------- ---------
SHAREHOLDERS' EQUITY
Common stock, $5 par value per share
Authorized: 12,500,000 shares
Issued and outstanding: 3,016,370,
3,016,370 and 3,014,170 shares 15,082 15,082 15,070
Capital surplus 3,831 3,831 3,820
Retained earnings 15,754 14,173 12,537
Unrealized gain (loss) on securities
available for sale, net of income taxes 84 146 (173)
--------- --------- ---------
Total shareholders' equity 34,751 33,232 31,254
--------- --------- ---------
Total liabilities and shareholders' equity $ 357,773 $ 335,450 $ 327,590
========= ========= =========
<FN>
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
Statements Of Consolidated Income
FIRST BANCORP AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED INCOME
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
($ in thousands except Jun 30, Jun 30,
per share data--unaudited) 1997 1996 1997 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans $ 5,874 $ 5,259 $ 11,223 $ 10,380
Interest on investment securities:
Taxable interest income 960 705 1,855 1,351
Exempt from income taxes 303 267 619 542
Other, principally federal funds sold 106 160 273 326
--------- --------- --------- ---------
Total interest income 7,243 6,391 13,970 12,599
--------- --------- --------- ---------
INTEREST EXPENSE
Time deposits of $100,000 or more 476 445 938 865
Other time and savings deposits 2,194 2,000 4,265 4,049
Federal funds purchased 3 -- 3 --
--------- --------- --------- ---------
Total interest expense 2,673 2,445 5,206 4,914
--------- --------- --------- ---------
NET INTEREST INCOME 4,570 3,946 8,764 7,685
Provision for possible loan losses 125 75 200 150
--------- --------- --------- ---------
NET INTEREST INCOME AFTER PROVISION
FOR POSSIBLE LOAN LOSSES 4,445 3,871 8,564 7,535
--------- --------- --------- ---------
OTHER INCOME
Service charges on deposit accounts 620 624 1,227 1,256
Commissions from insurance sales 75 87 149 195
Other charges, commissions and fees 156 233 418 450
Data processing fees 69 62 142 116
--------- --------- --------- ---------
Total other income 920 1,006 1,936 2,017
--------- --------- --------- ---------
OTHER EXPENSES
Salaries 1,522 1,397 3,038 2,677
Employee benefits 384 321 704 648
--------- --------- --------- ---------
Total personnel expense 1,906 1,718 3,742 3,325
Net occupancy expense 232 238 468 474
Equipment related expenses 218 208 429 416
Other 1,150 1,111 2,352 2,227
--------- --------- --------- ---------
Total other expenses 3,506 3,275 6,991 6,442
--------- --------- --------- ---------
INCOME BEFORE INCOME TAXES 1,859 1,602 3,509 3,110
Income taxes 620 559 1,144 1,062
--------- --------- --------- ---------
NET INCOME $ 1,239 $ 1,043 $ 2,365 $ 2,048
========= ========= ========= =========
PER SHARE AMOUNTS
Net income $ 0.41 $ 0.35 $ 0.78 $ 0.68
Cash dividends declared 0.13 0.11 0.26 0.22
<FN>
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
Statements Of Consolidated Cash Flows
FIRST BANCORP AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended
Jun 30,
($ in thousands--unaudited) 1997 1996
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 2,365 $ 2,048
Adjustments to reconcile net income to
net cash provided by operations:
Provision for loan losses 200 150
Net security premium amortization/discount accretion (13) (13)
Loan fees and costs deferred net of amortization 5 (15)
Depreciation of premises and equipment 352 372
Amortization of intangible assets 279 283
Realized and unrealized other real estate losses 16 49
Provision for deferred income taxes (16) 226
Changes in operating assets and liabilities:
Decrease (increase) in accrued interest receivable (366) 118
Decrease (increase) in intangible assets 236 (96)
Decrease in other assets 768 1,032
Increase (decrease) in accrued interest payable 32 (102)
Increase (decrease) in other liabilities (235) 472
--------- ---------
Net cash provided by operating activities 3,623 4,524
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of securities available for sale (16,370) (25,956)
Purchase of securities held to maturity (1,220) (1,626)
Proceeds from maturities/issuer calls of securities
available for sale 12,481 23,786
Proceeds from maturities/issuer calls of securities
held to maturity 2,704 1,740
Net increase in loans (24,446) (8,639)
Net purchases of premises and equipment (549) (395)
--------- ---------
Net cash used in investing activities (27,400) (11,090)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits 20,947 4,443
Cash dividends paid (724) (603)
--------- ---------
Net cash provided by financing activities 20,223 3,840
--------- ---------
DECREASE IN CASH AND CASH EQUIVALENTS (3,554) (2,726)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 20,907 24,016
--------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 17,353 $ 21,290
========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest $ 5,174 $ 5,016
Income taxes 1,015 671
Non-cash transactions:
Foreclosed loans transferred to other real estate 82 359
Loans to facilitate the sale of other real estate 17 93
Decrease in market value of securities
available for sale (94) (617)
<FN>
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
Statements Of Changes In Consolidated Shareholders' Equity
FIRST BANCORP AND SUBSIDIARIES
STATEMENTS OF CHANGES IN CONSOLIDATED SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock Share-
(in thousands- ------------------- Capital Retained holders'
-unaudited) Shares Amount Surplus Earnings Other Equity
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
BALANCES,
December 31, 1996 3,016 $ 15,082 $ 3,831 $ 14,173 $ 146 $ 33,232
Net income 2,365 2,365
Cash dividends
declared (784) (784)
Net adjustment
for securities
available for sale (62) (62)
--------- --------- --------- --------- --------- ---------
BALANCES,
June 30, 1997 3,016 $ 15,082 $ 3,831 $ 15,754 $ 84 $ 34,751
========= ========= ========= ========= ========= =========
BALANCES,
December 31, 1995 3,014 $ 15,070 $ 3,820 $ 11,152 $ 235 $ 30,277
Net income 2,048 2,048
Cash dividends
declared (663) (663)
Net adjustment
for securities
available for sale (408) (408)
--------- --------- --------- --------- --------- ---------
BALANCES,
June 30, 1996 3,014 $ 15,070 $ 3,820 $ 12,537 $ (173)$ 31,254
========= ========= ========= ========= ========= =========
<FN>
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
FIRST BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($ in thousands-
-unaudited) For the Periods Ended June 30, 1997 and 1996
NOTE 1
In the opinion of the Company, the accompanying unaudited consolidated
financial statements contain all adjustments (consisting of only normal
recurring accruals) necessary to present fairly the consolidated financial
position of the Company as of June 30, 1997 and 1996 and the consolidated
results of operations and consolidated cash flows for the periods ended
June 30, 1997 and 1996 and changes in consolidated shareholders' equity
for the period ended June 30, 1997. Reference is made to the notes to
consolidated financial statements for the year ended December 31, 1996 filed
with the Annual Report on Form 10-KSB for a discussion of accounting policies
and other relevant information with respect to the financial statements.
NOTE 2
The results of operations for the periods ended June 30, 1997 and 1996
are not necessarily indicative of the results to be expected for the full
year. Earnings per share were computed by dividing net income by the
weighted average common shares outstanding. Per share data and average
common shares outstanding have been restated for the 2-for-1 stock split paid
September 13, 1996. Common stock equivalents resulting from the Company's
stock option plan were not considered in the earnings per share computation
due to immateriality.
NOTE 3
Certain amounts reported in the period ended June 30, 1996 have been
reclassified to conform with the presentation for June 30, 1997. These
reclassifications had no effect on net income or shareholders' equity for
the periods presented.
NOTE 4
Based on management's evaluation of the loan portfolio, current economic
conditions and other risk factors, the Company's allowance for possible loan
losses was $4,755,000 as of June 30, 1997 compared to $4,726,000 and
$4,758,000 as of December 31, 1996 and June 30, 1996, respectively.
These reserve levels represented 1.92%, 2.12% and 2.16% of total loans as of
June 30, 1997, December 31, 1996 and June 30, 1996, respectively.
Nonperforming assets are defined as nonaccrual loans, loans past due 90 or
more days and still accruing interest, restructured loans and foreclosed,
repossessed and idled properties. For each of the periods presented, the
Company had no loans past due 90 or more days and still accruing interest.
Nonperforming assets are summarized as follows:
<TABLE>
<CAPTION>
Jun 30, Dec 31, Jun 30,
($ in thousands) 1997 1996 1996
--------- --------- ---------
<S> <C> <C> <C>
Nonperforming loans:
Nonaccrual loans $ 678 $ 1,836 $ 1,396
Restructured loans 712 703 793
--------- --------- ---------
Total nonperforming loans 1,390 2,539 2,189
Foreclosed, repossessed and idled
properties (included in other assets) 407 572 836
--------- --------- ---------
Total nonperforming assets $ 1,797 $ 3,111 $ 3,025
========= ========= =========
Nonperforming loans as a percentage of total loans 0.56% 1.14% 1.00%
Allowance for possible loan losses as a percentage
of nonperforming loans 342.09% 186.14% 217.36%
Nonperforming assets as a percentage of loans and
foreclosed, repossessed and idled properties 0.73% 1.39% 1.37%
Nonperforming assets as a percentage of
total assets 0.50% 0.93% 0.92%
</TABLE>
<PAGE>
Item 2 - Management's Discussion and Analysis of Consolidated
Results of Operations and Financial Condition
RESULTS OF OPERATIONS
Net income for the quarter ended June 30, 1997 increased 18.8% to
$1,239,000, or $0.41 per share, compared to $1,043,000, or $0.35 per share,
for the second quarter of 1996. The earnings increase was primarily achieved
through higher net interest income that principally resulted from increases
in volumes in the loan and securities portfolios. For substantially the same
reasons, net income for the six months ended June 30, 1997 increased 15.5% to
$2,365,000, or $0.78 per share, from $2,048,000, or $0.68 cents per share,
for the same period in 1996. Earnings per share for 1996 have been restated
to reflect the two-for-one stock split paid September 13, 1996 to
shareholders of record August 30, 1996.
Net interest income is the largest component of earnings, representing
the difference between interest and fees generated from earning assets and the
interest costs of deposits and other funds needed to support those assets.
Net interest income increased by $624,000, or 15.8%, when comparing the
second quarter of 1997 with the second quarter of 1996, primarily because of
the growth in the volumes of interest-earning assets. This growth allowed
earning assets to increase more rapidly than deposits. For substantially the
same reasons, net interest income for the six months ended June 30, 1997
increased by $1,079,000, or 14%, compared to the same period in 1996.
Under current conditions, future increases in 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 is experiencing a slight change
in its loan mix to variable rate loans from fixed rate loans as well as a
shift to savings, NOW and money market deposits from time deposits.
Generally, the Company's goal is to manage portfolio mixes to minimize
changes in net interest income due to changing market interest rates.
The provision for possible loan losses for the second quarter increased
$50,000, or 66.7%, to $125,000 from $75,000 for the second quarter of 1996.
For the six months ended June 30, 1997, provisions for possible loan losses
increased by $50,000, or 33.3%. The provisions were considered prudent in
light of the significant loan growth experienced by the Company. Also
supporting the higher provisions were increases in net charge-offs primarily
attributable to lower recoveries. Provisions for possible loan losses are
based on management's evaluation of the loan portfolio, as discussed under
"Financial Condition" below.
Noninterest income decreased $86,000, or 8.5%, for the second quarter.
For the six months ended June 30, 1997, noninterest income decreased $81,000,
or 4%. The Company sold no securities in the second quarters of 1997 or 1996.
Noninterest overhead expenses increased by $231,000, or 7.1%, for the
second quarter of 1997, primarily because of expenses associated with opening
branch offices in Seagrove, Lillington and Sanford--three new markets for the
Company. Personnel expenses increased $188,000, or 10.9%, and other
noninterest expenses increased $39,000. For substantially the same reasons,
noninterest expenses increased by $549,000, or 8.5%, for the six months ended
June 30, 1997.
Income taxes increased $61,000, or 10.9%, for the second quarter, while
the effective tax rates were 33.4% and 34.9% for the quarters ended June 30,
1997 and 1996, respectively. The decrease in the effective tax rate was
partially attributable to higher levels of tax-exempt interest income. For
substantially the same reasons, income taxes for the six months ended June
30, 1997 increased $82,000, or 7.7%, resulting in an effective tax rate of
32.6% compared to 34.1% for the same six month period of 1996.
<PAGE>
FINANCIAL CONDITION
The Company's total assets were $357.8 million at June 30, 1997, an
increase of $30.2 million, or 9.2%, from June 30, 1996. Interest-earning
assets increased by 10.1% compared to June 30, 1996. Loans, the primary
interest-earning asset, increased by 12.5% during this same period. Deposits
increased $26.7 million, or 9.1% to support the asset growth. The increases
in deposits were primarily in the categories of savings, NOW and money market
deposits. The Company is experiencing a shift in the mix of its deposits to
savings, NOW and money market accounts from time deposits. The Company's
cost of funds has remained relatively low compared to that of its
competitors. The Company does not rely heavily on large deposits of $100,000
or more to fund asset growth and has not traditionally engaged in obtaining
deposits through brokers. Since December 31, 1996, the Company experienced
increases of 7.1%, 6.7% and 7% in earning assets, total assets and deposits,
respectively.
NONPERFORMING ASSETS
Nonperforming assets are defined as nonaccrual loans, loans past due 90
or more days, restructured loans and foreclosed, repossessed and idled
properties. The following table summarizes the Company's nonperforming
assets at the dates indicated.
<TABLE>
<CAPTION>
Jun 30, Dec 31, Jun 30,
($ in thousands) 1997 1996 1996
--------- --------- ---------
<S> <C> <C> <C>
Nonperforming loans:
Nonaccrual loans $ 678 $ 1,836 $ 1,396
Restructured loans 712 703 793
--------- --------- ---------
Total nonperforming loans 1,390 2,539 2,189
Foreclosed, repossessed and idled
properties (included in other assets) 407 572 836
--------- --------- ---------
Total nonperforming assets $ 1,797 $ 3,111 $ 3,025
========= ========= =========
Nonperforming loans as a percentage of total loans 0.56% 1.14% 1.00%
Allowance for possible loan losses as a percentage
of nonperforming loans 342.09% 186.14% 217.36%
Nonperforming assets as a percentage of loans and
foreclosed, repossessed and idled properties 0.73% 1.39% 1.37%
Nonperforming assets as a percentage of
total assets 0.50% 0.93% 0.92%
</TABLE>
Management has reviewed the collateral for the nonperforming assets,
including nonaccrual loans, and has included this review among the factors
considered in the evaluation of the allowance for possible loan losses
discussed below.
<PAGE>
A loan is placed on nonaccrual status when, in management's judgment,
the collection of interest appears doubtful. Interest on loans that are
classified as nonaccrual is recognized when received. The accrual of
interest is discontinued on all loans that become 90 days past due with
respect to principal or interest. 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 June 30, 1997 and 1996 had
been current in accordance with their original terms and had been outstanding
throughout the six month periods (or since origination or acquisition if held
for part of the six month periods), gross interest income in the amounts of
approximately $33,000 and $70,000 for nonaccrual loans and $34,000 and
$36,000 for restructured loans would have been recorded for the six months
ended June 30, 1997 and 1996, respectively. Interest income on such
loans that was actually collected and included in net income in the six
months ended June 30, 1997 and 1996 amounted to approximately $9,000 and
$8,000 for nonaccrual loans and $31,000 and $30,000 for restructured loans
loans respectively. There have been no material changes in the levels of
impaired loans since December 31, 1996.
Nonperforming loans are defined as nonaccrual loans, loans past due 90
or more days and restructured loans. As of June 30, 1997, December 31, 1996
and June 30, 1996, nonperforming loans were approximately 0.56%, 1.14% and
1.00%, respectively, of the total loans outstanding at such dates.
Nonaccrual loans decreased $718,000, or 51%, to approximately $678,000
compared to June 30, 1996 and decreased approximately $1,158,000, or 63.1%,
since year-end. As of June 30, 1997, the borrower with the largest aggregate
balance of nonaccrual loan(s) owed an aggregate of approximately $119,000
while the overall average nonaccrual loan balance was approximately $16,000.
In addition to the nonperforming loan amounts discussed above,
management believes that an estimated $1,000,000-$1,500,000 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. These loans
were considered in determining the appropriate level of the allowance for
possible loan losses. See "Summary of Loan Loss Experience" below.
Loans classified for regulatory purposes as loss, doubtful, substandard,
or special mention that have not been disclosed in the 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.
As of June 30, 1997, the Company owned foreclosed and repossessed
assets totaling approximately $407,000, which consisted principally of
several parcels of foreclosed real estate. The Company's management has
reviewed recent appraisals of these properties and has concluded that their
fair values, less estimated costs to sell, equal or exceed their respective
carrying values at June 30, 1997.
<PAGE>
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.
Recoveries 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, evaluation of possible future losses and
current economic conditions.
The Company's bank subsidiary 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, otherwise referred to as its loan loss
reserve. In this program, a "watch list" is prepared and monitored monthly
by management and is tested quarterly by the bank's Internal Audit Department.
The list includes 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 examinations.
Based on management's evaluation of the loan portfolio and economic
conditions, a provision for possible loan losses of $125,000 was added to the
allowance for possible loan losses during the second quarter of 1997, which
brought the year-to-date provision to $200,000. The quarterly provision for
loan losses made during 1997 was greater than that made during the
corresponding period of 1996 because of the significant loan growth
experienced by the Company and increased net charge-offs primarily
attributable to lower recoveries. The year-to-date provision for possible
loan losses increased $50,000, or 33.3%, for substantially the same reasons.
At June 30, 1997, the allowance stood at $4,755,000, compared to $4,726,000
at December 31, 1996 and $4,758,000 at June 30, 1996. At June 30, 1997, the
allowance for possible loan losses was approximately 342% of total
nonperforming loans, compared to corresponding percentages of 186% at
December 31, 1996 and 217% at June 30, 1996.
The allowance for possible loan losses was 1.92%, 2.12% and 2.16% of
total loans as of June 30, 1997, December 31, 1996 and June 30, 1996
respectively. The reduction in this ratio to 1.92% at June 30, 1997 was
supported by lower levels of nonperforming loans. Management considers the
reserve levels adequate to cover possible loan losses on the loans
outstanding as of each reporting date. It must be emphasized, however, that
the determination of the reserve using the Company's procedures and methods
rests upon various judgments and assumptions about future economic conditions
and other factors affecting loans. No assurance can be given that the
Company will not in any particular period sustain loan losses that are
sizable in relation to the amounts reserved or that subsequent evaluations of
the loan portfolio, in light of conditions and factors then prevailing, will
not require significant changes in the allowance for possible loan losses or
future charges to earnings. In addition, various regulatory agencies, as an
integral part of their examination process, periodically review the Company's
allowances for possible loan losses and losses on other real estate. Such
agencies may require the Company to recognize additions to the allowances
based on their judgments about information available at the time of such
examinations.
<PAGE>
For the periods indicated, the following table summarizes the Company's
balances of loans outstanding, average loans outstanding, changes in the
allowance arising from charge-offs and recoveries by category, and additions
to the allowance that have been charged to expense.
<TABLE>
<CAPTION>
Six Six
Months Year Months
Ended Ended Ended
Jun 30, Dec 31, Jun 30,
($ in thousands) 1997 1996 1996
--------- --------- ---------
<S> <C> <C> <C>
Loans outstanding at period end $ 247,220 $ 223,032 $ 219,838
========= ========= =========
Average loans outstanding during period $ 229,095 $ 217,900 $ 215,676
========= ========= =========
Allowance for possible loan losses at
beginning of period $ 4,726 $ 4,587 $ 4,587
Loans charged off:
Commercial, financial and agricultural (15) (209) (45)
Real estate - mortgage (199) (196) (104)
Installment loans to individuals (153) (311) (155)
--------- --------- ---------
Total charge-offs (367) (716) (304)
--------- --------- ---------
Recoveries of loans previously charged off:
Commercial, financial and agricultural 79 114 63
Real estate - mortgage 34 127 118
Installment loans to individuals 132 113 59
Other (49) 176 85
--------- --------- ---------
Total recoveries 196 530 325
--------- --------- ---------
Net recoveries (charge-offs) (171) (186) 21
Additions to the allowance charged to expense 200 325 150
--------- --------- ---------
Allowance for possible loan losses at
end of period $ 4,755 $ 4,726 $ 4,758
========= ========= =========
Ratios:
Annualized net charge-offs (recoveries)
to average loans during period 0.15% 0.09% -0.02%
Annualized net charge-offs (recoveries)
to loans at end of period 0.14% 0.08% -0.02%
Allowance for possible loan losses to
average loans during period 2.08% 2.17% 2.21%
Allowance for possible loan losses to
loans at end of period 1.92% 2.12% 2.16%
Annualized net charge-offs (recoveries)
to allowance for possible loan losses 7.19% 3.94% -0.88%
Net charge-offs (recoveries)
to provision for possible loan losses 85.50% 57.23% -14.00%
</TABLE>
Based on the results of the aforementioned loan analysis and grading
program and management's evaluation of the allowance for possible loan losses
at June 30, 1997, there have been no material changes to the allocation
of the allowance for possible loan losses among the various categories of
loans since December 31, 1996.
<PAGE>
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 required
reserve levels, pay expenses and operate the Company on an ongoing basis. The
Company's primary liquidity sources are cash and due from banks, federal funds
sold and other short-term investments. In addition, the Company (through its
bank subsidiary) has the ability, on a short-term basis, to purchase federal
funds from other financial institutions. The Company has not traditionally
had to rely on the purchase of federal funds as a source of liquidity. The
Company's management believes its liquidity sources are at an acceptable
level and remain adequate to meet its operating needs.
CAPITAL RESOURCES
The Company is required by its own policies and by applicable federal
regulations to maintain certain capital levels. The Company's ratio of stated
capital to total assets equaled or exceeded 10% as of June 30, 1997
and 1996 and December 31, 1996. In an effort to achieve a measurement of
capital adequacy that is sensitive to the individual risk profiles of
financial institutions, the various financial institution regulators have
minimum capital guidelines that categorize various components of capital and
types of assets and measure capital adequacy in relation to the financial
institution's relative level of those capital components and the level of
risk associated with various types of assets of that financial institution.
The guidelines call for minimum adjusted capital of 8% of risk-adjusted
assets. As of June 30, 1997, the Company's total risk-based capital
ratio was approximately 13.1%.
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 leverage capital, as defined in the regulations, to quarterly
average total assets of 3-5%. As of June 30, 1997, the Company's
leverage capital ratio was approximately 8.5%.
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.
<PAGE>
As of June 30, 1997, December 31, 1996 and June 30, 1996, the
Company was in compliance with all existing capital requirements, as
summarized in the following table:
<TABLE>
<CAPTION>
Jun 30, Dec 31, Jun 30,
($ in thousands) 1997 1996 1996
--------- --------- ---------
<S> <C> <C> <C>
Tier I capital:
Total stated shareholders' equity $ 34,751 $ 33,232 $ 31,254
Less: Intangible assets 5,319 5,834 6,119
Unrealized holding gain (loss)
on securities available for
sale, net of income taxes 84 146 (173)
--------- --------- ---------
Total Tier I leverage capital 29,348 27,252 25,308
Tier II capital:
Allowable allowance for loan losses 3,065 2,789 2,764
--------- --------- ---------
Total capital $ 32,413 $ 30,041 $ 28,072
========= ========= =========
Risk-adjusted assets $ 250,565 $ 229,084 $ 227,059
Tier I risk-adjusted assets (includes Tier I
capital adjustments) 245,162 223,104 221,113
Tier II risk-adjusted assets (includes Tiers I
and II capital adjustments) 248,227 225,893 223,877
Quarterly average total assets 350,746 333,337 325,912
Adjusted quarterly average total assets
(includes Tier I capital adjustments) 345,343 327,357 319,966
Risk-based capital ratios:
Tier I capital 11.97% 12.21% 11.45%
Minimum required Tier I capital 4.00% 4.00% 4.00%
Total risk-based capital 13.06% 13.30% 12.54%
Minimum required total risk-based capital 8.00% 8.00% 8.00%
Leverage capital ratios:
Tier I leverage capital ratio 8.50% 8.32% 7.91%
Minimum required Tier I leverage capital 3-5.00% 3-5.00% 3-5.00%
</TABLE>
FORWARD LOOKING STATEMENTS
The foregoing discussion may contain forward looking statements within
the meaning of the Private Securities Litigation Reform Act. The accuracy of
such forward looking statements could be affected by such factors as, but not
limited to, the financial success or changing strategies of the Company's
customers, actions of government regulators, or general economic conditions.
<PAGE>
Part II. Other Information
Item 4 - Submission of Matters to a Vote of Shareholders
The following proposals were considered and acted upon at the annual
meeting of shareholders of the Company held on April 24, 1997:
Proposal 1
A proposal to fix the number of directors to be elected at twelve
(12).
For 2,559,585 Against 7,744 Abstain 0
Proposal 2
A proposal to elect the following twelve (12) nominees to the
Board of Directors to serve until the 1998 Annual Meeting of
Shareholders, or until their successors are elected and qualified:
Voted Withheld
For Authority
Jack D. Briggs 2,564,909 2,420
David L. Burns 2,564,909 2,420
Jesse S. Capel 2,564,909 2,420
James H. Garner 2,564,909 2,420
George R. Perkins, Jr. 2,564,909 2,420
G. T. Rabe, Jr. 2,564,909 2,420
John J. Russell 2,564,909 2,420
Frederick H. Taylor 2,564,909 2,420
Edward T. Taws 2,564,909 2,420
Goldie H. Wallace 2,522,750 44,579
A. Jordan Washburn 2,564,909 2,420
John C. Willis 2,564,909 2,420
Proposal 3
A proposal to ratify the appointment of KPMG Peat Marwick LLP as
independent auditors of the Company for the current fiscal year.
For 2,560,440 Against 4,516 Abstain 2,373
No other business came before the meeting, or any adjournment or
adjournments thereof.
<PAGE>
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
The following exhibits are filed with this report or, as noted, are
incorporated by reference. Management contracts, compensatory
plans and arrangements are marked with an asterisk (*).
3.a.i 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.a.ii 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.b.i Copy of the Bylaws of the Registrant and amendments thereto, 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.
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 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 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. (*)
<PAGE>
10.g First Bancorp Senior Management Supplemental Executive 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.h First Bancorp Senior Management Split-Dollar Life Insurance
Agreements between the Company and the 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.i 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. (*)
10.j Severance Agreement between the Company and James A. Gunter dated
October 12, 1995, was filed as Exhibit 10(m) to the Company's
Annual Report on Form 10-KSB for the year ended December 31, 1995,
and is incorporated herein by reference. (*)
10.k Severance Agreement between the Company and Patrick A. Meisky
dated December 29, 1995, was filed as Exhibit 10(o) to the
Company's Annual Report on Form 10-KSB for the year ended
December 31, 1995, and is incorporated herein by reference. (*)
10.l Amendment to the First Bancorp Savings Plus and Profit Sharing Plan
(401(k) savings incentive plan and trust), dated December 17, 1996,
was filed as Exhibit 10(m) to the Company's Annual Report on Form
10-KSB for the year ended December 31, 1996, and is incorporated
herein by reference. (*)
10.m Purchase and Assumption Agreement dated June 18, 1997 between
First Union National Bank and First Bank.
27 Financial Data Schedules pursuant to Article 9 of Regulation S-X.
(b) There were no reports filed on Form 8-K during the quarter ended
June 30, 1997.
<PAGE>
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FIRST BANCORP
July 31, 1997 BY: James H. Garner
------------------- -----------------------------
James H. Garner
President
(Principal Executive Officer),
Treasurer and Director
July 31, 1997 BY: Anna G. Hollers
------------------- -----------------------------
Anna G. Hollers
Executive Vice President
and Secretary
<PAGE>
EXHIBIT CROSS REFERENCE INDEX
Exhibit Page(s)
3.a.i Copy of Articles of Incorporation of the Registrant *
3.a.ii Copy of the amendment to Articles of Incorporation *
3.b.i Copy of the Bylaws of the Registrant *
10.a Data processing Agreement by and between Bank of
Montgomery (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 First Bancorp Employees' Pension Plan *
10.g First Bancorp Senior Management Supplemental Executive
Retirement Plan *
10.h First Bancorp Senior Management Split-Dollar Life Insurance
Agreements between the Company and the Executive Officers *
10.i First Bancorp 1994 Stock Option Plan *
10.j Severance Agreement between the Company and James A. Gunter *
10.k Severance Agreement between the Company and Patrick A.
Meisky *
10.l Amendment to the First Bancorp Savings Plus and Profit
Sharing Plan (401(k) savings incentive plan and trust) *
10.m Purchase and Assumption Agreement between First Union
National Bank and First Bank. 20
27 Financial Data Schedules pursuant to Article 9 of
Regulation S-X 49
* Incorporated herein by reference.
Exhibit 10.m
PURCHASE AND ASSUMPTION AGREEMENT
This Agreement, dated as of JUNE 18, 1997, is by
and between First Bank, a commercial bank organized under the
laws of the state of North Carolina and having its principal
place of business in Troy, North Carolina ("Buyer"), and First
Union National Bank of North Carolina, a national banking
association having its principal place of business in Charlotte,
North Carolina ("Seller").
I. DEFINITIONS
1.1 Certain Defined Terms.
Some of the capitalized terms appearing in this
Agreement are defined below. The definition of a term expressed
in the singular also applies to that term as used in the plural
and vice versa.
"Affiliate" means a Person that directly or indirectly,
through one or more intermediaries, controls, is controlled by,
or is under common control with, a specified Person, except in
those cases where the controlling Person exercises control solely
in a fiduciary capacity.
"Amount of Premium" has the meaning set forth in
Section 3.1 of this Agreement.
"Assets" has the meaning set forth in Section 2.1 of
this Agreement.
"Benefit Plan" means any pension, profit-sharing, or
other employee benefit, fringe benefit, severance or welfare plan
maintained by or with respect to which contributions are made by,
Seller or any of its Affiliates with respect to Seller's
employees.
"Branch" means the branch office of Seller listed on
Schedule 1.1 to this Agreement.
<PAGE>
"Business Day" means any Monday, Tuesday, Wednesday,
Thursday or Friday on which Seller is open for business.
"Cash Reserve Lines of Credit" means those consumer
lines of credit made available to customers of the Branch as a
protection against overdrafts on Deposit Accounts.
"Cash Reserve Loans" means those loans outstanding on
the Closing Date pursuant to Cash Reserve Lines of Credit.
"Closing" means the purchase of the Assets by Buyer and
the assumption of the Liabilities by Buyer on the Closing Date.
"Closing Date" has the meaning set forth in Section 9.1
of this Agreement.
"Conversion Expenses" has the meaning set forth in
Section 3.3 of this Agreement.
"Deposit Accounts" means the deposit accounts at the
Branch, the balances of which are included in the Deposits or
would be so included if the Deposit Account had a positive
balance.
"Deposits" means all deposits (as defined in 12 U.S.C.
Section 1813(l)) which are booked at the Branch on the Closing
Date, including in each case accrued but unpaid interest and both
collected and uncollected funds, but excluding (i) deposits held
in accounts for which Seller acts as fiduciary (other than
deposits held by Retirement Plans), and (ii) deposits
constituting official checks, travelers checks, money orders or
certified checks.
"ERISA" means the Employee Retirement Income Security
Act of 1974, as amended.
"ERISA Affiliate" means any entity that is considered
one employer with Seller under Section 4001 of ERISA or Section
414 of the Internal Revenue Code of 1986, as amended.
"Federal Funds Rate" means, for any day, the rate per
annum (expressed on a basis of calculation of actual days in a
year) equal to the "near closing bid" federal funds rate
published in The Wall Street Journal on the Business Day
following the Closing Date.
<PAGE>
"Fixed Assets" means all fixtures (including signage
poles), leasehold improvements, furnishings (excluding artwork
owned by Seller), vaults, safe deposit boxes, equipment
(including, for example, all ATM machines, but excluding any
computer or telecommunications equipment), supplies (other than
forms and other supplies which bear Seller's name or logo), and
other personal property, which are owned or (to the extent of
Seller's interest as lessee) leased by Seller, which are located
at the Branch on the Closing Date.
"Governmental Entity" means any government or any
agency, bureau, board, commission, court, department, official,
political subdivision, tribunal or other instrumentality of any
government having authority in the United States, whether
federal, state or local.
"Liabilities" has the meaning set forth in Section 2.2
of this Agreement.
"Mediator" means the firm of KPMG Peat Marwick LLP or
if such firm declines to perform the functions of the Mediator
specified in this Agreement, then another firm of certified
public accountants mutually agreeable to Seller and Buyer.
"Overdrafts" means those overdrafts of the book balance
of any Deposit Accounts which are not subject to Cash Reserve
Lines of Credit.
"Person" means an association, a corporation, an
individual, a partnership, a trust or any other entity or
organization, including a Governmental Entity.
"Real Property" means the land (including the
improvements thereon) owned by Seller on which any Branch is
located.
"Retirement Plans" means those non-discretionary individual
retirement accounts and qualified retirement plan accounts
relating to the Deposits for which Seller acts as custodian or
trustee.
<PAGE>
"Training Expenses" means the overtime and out-of-
pocket expenses (meals and mileage) incurred by Seller as a
result of Buyer's training schedule prior to Closing.
"Welfare Benefit Plans" means those Benefit Plans which
are "welfare benefit plans" as defined by ERISA.
II. PURCHASE OF ASSETS AND ASSUMPTION OF LIABILITIES
2.1 Purchase of Assets.
Subject to the terms and conditions of this Agreement,
Seller agrees to sell, assign and transfer possession of and all
right, title and interest of Seller in and to the following assets
to Buyer (the "Assets") and Buyer agrees to purchase the same from
Seller, as of the close of business on the Closing Date:
(a) the Real Property;
(b) the Fixed Assets;
(c) cash on hand in the Branch;
(d) the Cash Reserve Loans;
(e) the Overdrafts; and
(f) Seller's rights under the Cash Reserve Lines of
Credit and any safe deposit box rental agreements relating
to safe deposit boxes located at the Branch.
2.2 Assumption of Liabilities.
Buyer agrees to assume, pay, perform and discharge the
following liabilities of Seller (the "Liabilities") as of the
close of business on the Closing Date:
(a) the Deposits and all terms and agreements relating
to the Deposit Accounts;
(b) Seller's duties and responsibilities relating to
the Deposits with respect to: (i) the abandoned property
laws of any state, (ii) any legal process which is served on
<PAGE>
Seller on or before the Closing Date with respect to claims
against or for the Deposits that is not against Seller over
and above the amount of the Deposits; or (iii) any other
applicable law;
(c) Seller's duties and responsibilities with respect
to the Cash Reserve Lines of Credit;
(d) Seller's duties and responsibilities with respect
to the safe deposit boxes located at the Branch; and
(e) Seller's duties and responsibilities with respect
to the Retirement Plans.
Buyer shall not assume any other liabilities of Seller
which relate to or arise out of the operation of the Branch
before the Closing Date.
2.3 Transfer of Records.
(a) At the Closing, Seller also shall transfer to
Buyer possession and all right, title and interest of Seller
in and to all books and records relating to the Assets and
the Liabilities which are maintained at the Branch.
(b) All books and records relating to the Assets and
the Liabilities held by either Seller or Buyer after the
Closing Date shall be maintained in accordance with (and for
the period provided in) that party's standard recordkeeping
policies and procedures. Throughout such period, the party
holding such books and records shall comply with the
reasonable request of the other party to provide copies of
specified documents, at the expense of the requesting party.
The requesting party shall give reasonable notice of any
such request.
2.4 Tax Matters.
(a) Notwithstanding Section 2.5, Buyer shall pay to
Seller or the relevant taxing jurisdiction (as appropriate
under the circumstances), or reimburse Seller if Seller
shall have paid, any sales and use taxes and any interest
and penalties thereon which are payable or arise as a result
<PAGE>
of this Agreement or the consummation of any of the
transactions contemplated by this Agreement.
(b) Notwithstanding Section 2.5, Buyer shall pay to
Seller or the relevant taxing jurisdiction (as appropriate
under the circumstances), or reimburse Seller if Seller
shall have paid, any real property transfer, recording and
similar documentary taxes arising out of the transfer of the
Real Property and the Fixed Assets.
2.5 Proration of Certain Expenses.
Subject to the provisions of Section 2.4, all rentals,
real estate taxes, personal property taxes (tangible or
intangible), and utility, water and sewer charges and
assessments, as well as semiannual assessments paid to the Bank
Insurance Fund or the Savings Association Insurance Fund with
respect to the Deposits, shall be prorated between Buyer and
Seller as of the close of business on the Closing Date.
2.6 Back Office Conversion.
Seller and Buyer shall cooperate with each other and
shall use their reasonable best efforts (consistent with their
internal day-to-day operations) in order to cause the timely
transfer of information concerning the Assets and the Liabilities
which is maintained on Seller's data processing systems so that
Buyer can incorporate such information into Buyer's data
processing systems no later than the opening of business on the
Business Day following the Closing Date.
2.7 Processing of Certain Items After Closing.
A draft of the written practices and procedures under
which Buyer and Seller shall handle all items (including, for
example, automated clearing house and electronic funds transfer
items) relating to the Assets and the Liabilities, which are
presented or returned following the Closing Date, and any claims
relating to such items are attached to this Agreement as Exhibit
A, including certain other matters relating to consummation of
the transactions contemplated hereby (the "Working Agreement").
As promptly as practicable following the execution of this
Agreement, the parties agree to finalize the Working Agreement.
<PAGE>
2.8 Information Returns.
Buyer shall file all required information returns with
the Internal Revenue Service with respect to interest paid on the
Deposits after the Closing Date, interest received on the Cash
Reserve Loans after the Closing Date, and any other information
returns required with respect to the Assets and the Liabilities
for the periods beginning after the Closing Date. Seller will
file all required information returns with the Internal Revenue
Service and any information returns required by state or local
tax authorities with respect to interest paid on the Deposits on
or before the Closing Date, interest received on the Cash Reserve
Loans on or before the Closing Date, and any other information
returns required with respect to the Assets and the Liabilities
for periods ending on or before the Closing Date.
III. CONSIDERATION
3.1 Calculation.
In consideration of Buyer's purchase of the Assets and
its assumption of the Liabilities, Seller agrees to pay to Buyer
an amount equal to the Deposits, plus accrued interest thereon,
less the sum of the following, in each case calculated as of the
close of business on the Closing Date:
(a) $6,158.00, representing the purchase price of the
Fixed Assets;
(b) $235,666, representing the purchase price of the
Real Property and the Building;
(c) the principal amount of the Cash Reserve Loans,
plus accrued interest thereon;
(d) the amount of cash on hand at the Branch;
(e) the principal amount of the Overdrafts;
(f) the net amount (which may be a negative amount) of
taxes payable by Buyer and Seller under Section 2.4 (i.e.,
the amount payable by Buyer less the amount payable by
Seller);
<PAGE>
(g) the net amount (which may be a negative amount) of
any adjustments under Section 2.5 (i.e., the amount payable
by Buyer less the amount payable by Seller);
(h) an amount equal to 10.1 percent of the average of
the Deposits for the last 30 days preceding Closing Date;
(the "Amount of Premium")
(i) the Training Expenses; and
(j) the Conversion Expenses (which are payable under
Section 3.3 rather than by way of the Settlement payment or
the Adjustment Payment).
3.2 Settlement.
(a) Not later than the Saturday following the Closing
Date, Seller shall deliver to Buyer the Closing Statement
prepared in accordance with Seller's customary practices and
procedures used in preparing financial statements,
substantially in the form of Exhibit B to this Agreement,
which shall be completed as of the close of business on the
Friday before the Closing Date and be the basis of the
payment to be made to Buyer's account on the Monday
following the Closing Date (the "Settlement Payment").
(b) The parties shall cooperate in the preparation of
the Adjusted Closing Statement within 30 days after the
Closing Date which shall be prepared in accordance with
Seller's customary practices and procedures used in
preparing financial statements, substantially in the form of
Exhibit C to this Agreement, which shall be completed as of
the close of business on the Closing Date. On the Business
Day after Buyer and Seller agree to the Adjusted Closing
Statement, or Buyer and Seller receive notice of any
determination of the Adjusted Closing Statement under
subsection (c) (the "Adjusted Settlement Date"), Seller
shall pay to Buyer (or Buyer shall pay to Seller, as the
case may be) an amount (the "Adjustment Payment") equal to
the amount due stated on the Adjusted Closing Statement,
plus interest from the day after the Closing Date until the
calendar day before the Adjustment Payment is made at a
<PAGE>
rate per annum (calculated daily based on a 360-day year)
equal to the Federal Funds Rate.
(c) If the parties are unable to agree on the Adjusted
Closing Statement within 30 days after the Closing Date,
either party may submit the matter to the Mediator, which
shall determine all disputed portions of the Adjusted
Closing Statement in accordance with the terms and
conditions of this Agreement within 30 days after the
submission. The parties shall each pay half of the fees and
expenses of the Mediator, except that the Mediator may
assess the full amount of its fees and expenses against
either party if it determines that party negotiated the
Adjusted Closing Statement in bad faith. The Adjusted
Closing Statement, as agreed upon by the parties and/or
determined under this subsection, shall be final and binding
upon the parties.
(d) The Settlement Payment and the Adjustment Payment
shall each be made by wire transfer of immediately available
funds to the account of the party receiving the payment,
which account shall be identified by the party receiving the
funds to the other party not less than two Business Days
prior to such payment.
3.3 Payment of Conversion Expenses.
(a) Buyer hereby agrees to pay to Seller a
nonrefundable fee (except as provided below) in the amount
of $50,000 for each Branch to be acquired hereunder in
consideration of Seller's expenses relating to the
conversion of Seller's back office system to that of Buyer
(the "Conversion Expenses"). The Conversion Expenses shall
be payable by wire transfer of immediately available funds
by the close of business on the Friday preceding the 30th
calendar day before the Closing Date.
(b) Any Conversion Expenses paid by Buyer shall be
refundable to Buyer only upon the termination of this
Agreement by Buyer pursuant to Section 10.1(a).
IV. SELLER'S REPRESENTATIONS AND WARRANTIES
<PAGE>
Seller makes the following representations and warranties
to Buyer.
4.1 Power and Authority.
(a) Seller has the corporate power and authority to
enter into and perform this Agreement. The execution and
delivery of this Agreement has been duly authorized by all
necessary corporate action by Seller. Upon execution and
delivery by both parties, this Agreement will constitute a
valid and binding obligation of Seller, enforceable in
accordance with its terms, subject to conservatorship,
receivership, and a court's right under general principles
of equity to refuse to direct specific performance.
(b) The performance of this Agreement by Seller will
not violate any provision of the Articles of Association or
Bylaws of Seller, or any applicable law, rule, regulation,
or order or any contract or instrument by which Seller is
bound, except for such violations which alone, or taken in
the aggregate, would not reasonably be expected to have a
material adverse effect on the financial condition, business
or operations of the Branch, or the consummation of the
transactions contemplated by this Agreement (a "Seller
Material Adverse Effect").
4.2 Litigation and Regulatory Proceedings.
There are no actions, complaints, petitions, suits or
other proceedings, or any decree, injunction, judgment, order or
ruling, entered, promulgated or pending or (to Seller's
knowledge) threatened against Seller or any of the Assets or the
Liabilities, which alone, or taken in the aggregate, reasonably
would be expected to have a Seller Material Adverse Effect. No
governmental agency has notified Seller that it would oppose or
not approve or consent to the transactions contemplated by this
Agreement and Seller knows of no reason for any such opposition,
disapproval or nonconsent.
4.3 Consents and Approvals.
Except for required regulatory approvals, no consents,
approvals, filings or registrations with any third party or any
<PAGE>
public body, agency or authority are required in connection with
Seller's consummation of the transactions contemplated by this
Agreement, other than any required lessor consents to the
assignment of the Real Property Leases and as may be required as
a result of any facts or circumstances relating solely to Buyer.
4.4 Real Property.
(a) Schedule 4.4 contains a list of all the Real
Property.
(b) Seller owns and has and will convey to Buyer at
Closing good and marketable and insurable fee simple title
to the Real Property, free and clear of all liens, claims,
options, leases, charges, assessments, covenants,
restrictions, easements, encroachments and other title
defects and encumbrances, except for easements and
restrictions of record, applicable zoning laws, and liens
for taxes and assessments not delinquent.
4.5 Fixed Assets.
Seller has good and marketable title to the Fixed
Assets, free and clear of all encumbrances, claims, charges,
security interests, or liens, if any, which do not materially
detract from the value of or interfere with the use of the Fixed
Assets.
4.6 Ownership of Cash Reserve Loans.
Seller has full power and authority to hold each Cash
Reserve Loan, and has good title to the Cash Reserve Loans free
and clear of all liens and encumbrances. Seller is authorized to
sell and assign the Cash Reserve Loans to Buyer and, upon such
assignment, Buyer will have the rights of Seller with respect to
the Cash Reserve Loans in accordance with the terms and
conditions thereof.
4.7 Validity of and Compliance with Real Property Leases.
The Real Property Leases are valid and existing leases
under which Seller, as lessee, is entitled to possession of the
leased premises. To Seller's knowledge, no event has occurred
<PAGE>
and is continuing, which constitutes a default under any of the
Real Property Leases. Subject to Seller obtaining any necessary
landlord consents, the assignment of such leases will transfer to
Buyer all of Seller's rights under the Real Property Leases.
4.8 Compliance with Certain Laws.
The Deposit Accounts and the Cash Reserve Lines of
Credit were opened, extended or made, and have been maintained,
in accordance with all applicable federal and state laws,
regulations, rules and orders, and the Branch has been operated
in compliance with Seller's policies and procedures and all
applicable federal and state laws, regulations, rules and orders,
except for such instances of noncompliance which do not have, and
are not reasonably likely to have, a Seller Material Adverse
Effect.
4.9 FDIC Insurance.
The Deposits are insured by the Federal Deposit
Insurance Corporation through the Bank Insurance Fund and the
Savings Association Insurance Fund to the extent permitted by
law, and all premiums and assessments required to be paid in
connection therewith have been paid when due by Seller.
V.BUYER'S REPRESENTATIONS AND WARRANTIES
Buyer makes the following representations and warranties
to Seller.
5.1 Power and Authority.
(a) Buyer has the corporate power and authority to
enter into and perform this Agreement. The execution and
delivery of this Agreement has been duly authorized by all
necessary corporate action by Buyer. Upon execution and
delivery by both parties, this Agreement will constitute a
valid and binding obligation of Buyer, enforceable in
accordance with its terms subject to conservatorship,
receivership, and a court's right under general principles
of equity to refuse to direct specific performance.
<PAGE>
(b) The performance of this Agreement by Buyer will
not violate any provision of the Articles of Association,
Bylaws or similar governing documents of Buyer, or any
applicable law, rule, regulation, or order or any contract
or instrument by which Buyer is bound except for such
violations which alone, or taken in the aggregate, would not
reasonably be expected to have a material adverse effect on
the consummation of the transactions contemplated by this
Agreement (a "Buyer Material Adverse Effect").
5.2 Litigation and Regulatory Proceedings.
There are no actions, complaints, petitions, suits or
other proceedings, or any decree, injunction, judgment, order or
ruling, entered, promulgated or pending or (to Buyer's knowledge)
threatened against Buyer or any of its properties or assets which
alone, or taken in the aggregate, reasonably would be expected to
have a Buyer Material Adverse Effect. No governmental agency has
notified Buyer that it would oppose or not approve or consent to
the transactions contemplated by this Agreement, and Buyer knows
of no reason for any such opposition, disapproval or nonconsent.
5.3 Consents and Approvals.
Except for required regulatory approvals, no consents,
approvals, filings or registrations with any third party or any
public body, agency or authority are required in connection with
Buyer's consummation of the transactions contemplated by this
Agreement other than what may be required as a result of any
facts or circumstances relating solely to Seller.
VI. ADDITIONAL AGREEMENTS OF SELLER
6.1 Access to Seller's Premises, Records and Personnel.
(a) Upon execution of this Agreement, Seller shall
give Buyer and its representatives such access to the Branch
as Buyer may reasonably request, provided that Buyer does
not unreasonably interfere with the Branch's business
operations. Seller shall not be required to provide access
to or to disclose information where such access or
disclosure might violate or prejudice the rights of any
customer or employee or would be contrary to law, rule,
<PAGE>
regulation or any legal or regulatory order or process or
any fiduciary duty or binding agreement entered into prior
to the date of this Agreement.
(b) Anything contained in this Agreement to the
contrary notwithstanding, Seller shall not be required to
disclose, or to cause the disclosure to Buyer or its
representatives (or provide access to any offices,
properties, books or records of Seller, that could result in
the disclosure to such Persons or others), of any tax
returns and/or any work papers relating thereto or any other
confidential information relating to income or franchise
taxes or other taxes of Seller, or trade secrets, patent or
trademark applications, or product research and development
belonging to or performed by or for Seller, nor shall Seller
be required to permit or to cause others to permit Buyer or
its representatives to copy or remove from the offices or
properties of Seller any documents, drawings or other
materials that might reveal any such confidential
information; provided, however, Buyer shall have access to
tax returns to the extent that liability for the taxes at
issue could be imposed on Buyer.
(c) At Buyer's request, Seller shall authorize and
permit certain of its officers and members of management to
engage in discussions with Buyer for the purposes of
discussing the Branch's business and negotiating and
concluding management employment contracts, employee benefit
plans, and new incentive plans and Buyer shall maintain the
confidentiality of any information furnished by such
officers or members of management of Seller pursuant to such
discussions with Buyer.
6.2 Matters Relating to Branch Closing.
In the event that Buyer intends to close the Branch on
the Closing Date or before ninety (90) days thereafter, Buyer and
Seller agree to the following:
(a) Subject to subsection (b), Seller and Buyer shall
prepare Branch closing notices to Seller's customers, to be
mailed by Seller at Buyer's request and expense, at such
time as shall be mutually agreed upon between Buyer and
<PAGE>
Seller. Seller and Buyer also shall prepare another notice
to Seller's customers, to be mailed by Seller at Buyer's
request and expense, of Buyer's impending acquisition of the
Branch within ten Business Days following Seller's receipt
of notice that Buyer has obtained any and all required
regulatory approvals for the transactions contemplated by
this Agreement or such earlier date as Seller and Buyer may
mutually agree upon. After Seller mails this notice, Buyer
shall be permitted to provide to Seller material to be sent,
at Buyer's expense, to the depositors, borrowers and other
customers of the Branch concerning the proposed acquisition
and Buyer's products. Each party's communication shall be
subject to the approval of the other party, which approval
shall not be unreasonably withheld.
(b) Unless Buyer shall certify in writing at the time
that (x) Buyer is not aware of the occurrence of any event
or condition, which, if not corrected, would be reasonably
expected to result in the failure of any condition to
Closing under Sections 9.3 or 9.4; (y) Buyer has no reason
to believe that any regulatory approval required under
Section 9.3(a) will not be forthcoming, and (z) no challenge
has been threatened or filed and is pending with respect to
any such regulatory approval:
(i) Buyer shall not take any action with respect
to the Branch which would require that notices be
posted or provided to customers or regulators, as
required by 12 U.S.C. Section 1831r-1, on or prior to
the Closing Date; and
(ii) Seller shall not be required to participate
in the closing of any Branch or in any notice to
customers relating to such a closing.
6.3 Regulatory Approvals.
Seller agrees to use its reasonable best efforts to
obtain promptly any regulatory approval on which its consummation
of the transactions contemplated by this Agreement is
conditioned. Seller also agrees to cooperate with Buyer in
obtaining any regulatory approval which Buyer must obtain before
the Closing. Seller shall notify Buyer promptly of any
<PAGE>
significant development with respect to any application it files
under this Section. Seller also shall provide Buyer with a copy
of any regulatory approval it receives under this Section,
promptly after Seller's receipt of the same.
6.4 Conduct of Business.
Except as provided in this Agreement or as may
otherwise be agreed upon by Buyer, Seller will continue to carry
on the business at the Branch until the Closing in the ordinary
course of business, consistent with prudent business practices.
Seller shall not terminate the operation of any Branch, unless
those operations cease due to events beyond Seller's control.
Seller will notify Buyer of any event of which Seller obtains
knowledge which would make any of Seller's representations under
Article IV of this Agreement false in any material respect.
VII. ADDITIONAL AGREEMENTS OF BUYER
7.1 Regulatory Approvals.
Buyer agrees to use its reasonable best efforts to
obtain promptly any regulatory approval on which its consummation
of the transactions contemplated by this Agreement is
conditioned. Buyer also agrees to cooperate with Seller in
obtaining any regulatory approval which Seller must obtain before
the Closing. Buyer shall notify Seller promptly of any
significant development with respect to any application it files
under this Section. Buyer also shall provide Seller with a copy
of any regulatory approval it receives under this Section,
promptly after Buyer's receipt of the same.
7.2 Change of Name, Etc.
Immediately after the Closing, Buyer will (a) change
the name and logo on all documents and facilities relating to the
Assets and the Liabilities to Buyer's name and logo, (b) notify
all persons whose Cash Reserve Loans or Deposits are transferred
under this Agreement of the consummation of the transactions
contemplated by this Agreement, and (c) provide all appropriate
notices to the Federal Deposit Insurance Corporation and any
other regulatory authorities required as a result of the
consummation of such transactions. Buyer agrees not to use any
<PAGE>
forms or other documents bearing Seller's name or logo after the
Closing without the prior written consent of Seller, and, if such
consent is given, Buyer agrees that all such forms or other
documents to which such consent relates will be stamped or
otherwise marked in such a way that identifies Buyer as the party
using the form or other document. As soon as practicable and, in
any event, within seven calendar days after the Closing Date,
Buyer will issue new checks reflecting its transit and routing
number to customers of the Branch with check writing privileges.
Buyer shall use its best efforts to encourage these customers to
begin using such checks and cease using checks bearing Seller's
name.
7.3 Real Property.
Except as expressly set forth herein, Buyer hereby
acknowledges and agrees that: (i) Buyer is expressly purchasing
the Real Property in its existing condition "AS IS, WHERE IS, AND
WITH ALL FAULTS" with respect to any facts, circumstances,
conditions and defects; (ii) Seller has no obligation to repair
or correct any such facts, circumstances, conditions or defects
or to compensate Buyer for same; (iii) Seller has specifically
bargained for the assumption by Buyer of all responsibility to
inspect and investigate the Real Property and of all risk of
adverse conditions; and (iv) Buyer has or will have prior to the
Closing undertaken all such physical inspections and examinations
of the Real Property as Buyer deems necessary or appropriate as
to the condition of the Real Property. Except as expressly set
forth herein, Buyer acknowledges that Seller has made no
representations or warranties and shall have no liability to
Buyer (and Buyer hereby waives any right to recourse against
Seller) with respect to the conditions of the soil, the existence
or nonexistence of hazardous substances, any past use of the Real
Property, the economic feasibility of the Real Property, or the
Real Property's compliance or noncompliance with all laws, rules
or regulations affecting the Real Property.
VIII. SELLER'S EMPLOYEES
8.1 Transferred Employees.
(a) Buyer will offer to employ all of Seller's
employees who are employed at the Branch on the Closing
<PAGE>
Date. From and after the Closing Date, Buyer shall provide
the employees of Seller who are offered employment with
Buyer, and who accept such employment with a salary or
hourly wage comparable to that earned by them at the time of
the Closing. (Such employees who become employees of Buyer
after the Closing shall be referred to as "Transferred
employees.")
(b) Seller is responsible for the filing of Forms W-2
with the Internal Revenue Service and any required filing
with state tax authorities, with respect to wages and
benefits paid to each Transferred Employee for periods
ending on or prior to the Closing Date.
8.2 Employee Benefits.
(a) (i) Following the Closing, Buyer shall not have any
liability or obligation under any Benefit Plans or any other
program or arrangement of Seller or an ERISA Affiliate
thereof under which any current or former employee of Seller
or any of its Affiliates has any right to any benefits;
(ii) Upon the Closing, the participation of
Transferred Employees in the Benefit Plans shall cease in
accordance with the terms of such plans; and
(iii) With respect to the Transferred Employees,
Seller shall be responsible for any welfare benefits or
claims which, by reason of events which take place on or
prior to the Closing Date, become payable under the terms of
any Welfare Benefit Plan. With respect to Transferred
Employees, Buyer shall be responsible for any welfare
benefits or claims which become payable by reason of events
that take place after the Closing Date.
(b) (i) From and after the Closing Date, Buyer shall
provide the Transferred Employees with the employee
benefits, if any, provided to employees of Buyer and its
Affiliates, subject to the terms of Buyer's benefit plans;
(ii) Buyer will grant for purposes of vacation
benefits, severance pay and all welfare benefit plans (as
defined in ERISA) past service credit to all Transferred
<PAGE>
Employees for periods of time credited to such Transferred
Employees under the Welfare Benefit Plans. To the extent
that any Transferred Employee has satisfied in whole or in
part any annual deductible under a Welfare Benefit Plan, or
has paid any out-of-pocket expenses pursuant to any Welfare
Benefit Plan co-insurance provision, such amount shall be
counted toward the satisfaction of any applicable deductible
or out-of-pocket expense maximum, respectively, under the
benefit plans and programs provided to Transferred Employees
by Buyer, and such plans and programs shall be applied
without regard to any limitations relating to preexisting
conditions or required physical examinations that would not
otherwise apply under the respective Welfare Benefit Plans
to the extent that such Transferred Employees are covered by
the Welfare Benefit Plans on the Closing Date;
(iii) Buyer shall take whatever action is necessary,
including amendment of its defined contribution pension
plan, to grant to each Transferred Employee past service
credit for all purposes (including any waiting period) under
Buyer's defined contribution pension plan for all periods of
service credited to each such Transferred Employee under the
Seller's defined contribution pension plan. Within 45 days
after the Closing Date, Seller shall provide to Buyer such
information as Buyer reasonably requires to establish the
service for the Transferred Employees credited under the
Seller's defined contribution pension plan; and
(iv) Buyer will grant to each Transferred Employee
past service credit for service which has been granted under
Seller's defined benefit pension plan, for all purposes,
other than benefit accrual, under Buyer's defined benefit
pension plan.
8.3 Training.
Seller shall permit Buyer to train the Transferred
Employees before Closing with regard to Buyer's operations,
policies and procedures at Buyer's sole cost and expense. This
training shall take place outside of business hours and may, at
Seller's option, take place at the Branch.
IX. CLOSING AND CONDITIONS TO CLOSING
<PAGE>
9.1 Time and Place of Closing.
The Closing shall be on a date mutually agreed upon by
the parties (the "Closing Date") which shall be on a Friday and
shall be no more than 60 days after the last regulatory approval
necessary for the Closing has been obtained (without regard to
any statutory waiting periods following such approval). The
Closing shall take place at Seller's offices located at One First
Union Center, Charlotte, North Carolina, at 10:00 a.m. on the
Closing Date, or at a time and place otherwise determined by
mutual agreement of the parties.
9.2 Exchange of Closing Documents.
The parties shall exchange drafts of all documents to
be delivered at the Closing (other than the Closing Statement) at
least ten Business Days prior to the Closing Date.
9.3 Buyer's Conditions to Closing.
Buyer's obligations to purchase the Assets and assume
the Liabilities is contingent upon and subject to the fulfillment
of the following conditions in all material respects:
(a) the parties obtaining all regulatory approvals
which are required in order for them to proceed with the
transactions contemplated by this Agreement and the
expiration of any required waiting period without the
commencement of adverse proceedings by any governmental
authority with jurisdiction over the transactions
contemplated by this Agreement;
(b) each representation and warranty of Seller in this
Agreement being true and correct in all material respects as
of the Closing Date and all covenants and conditions of
Seller to be performed or met by Seller on or before the
Closing Date having been performed or met in all material
respects;
(c) Seller's delivery to Buyer of the following
documents in form and substance reasonably satisfactory to
Buyer:
<PAGE>
(i) special warranty deeds conveying the Real
Property;
(ii) bills of sale, assignments and other
instruments of transfer sufficient to convey to Buyer
all of Seller's right, title, and interest in and to
the remaining Assets;
(iii) a certificate executed by an appropriate
officer of Seller attesting, to the officer's best
knowledge, to Seller's compliance with the conditions
set forth in Section 9.3(b); and
(iv) estoppel certificates executed by the lessors
of the Leased Branch; and
(d) Buyer's agreement to receive the Closing Statement
and the Settlement Payment as provided in Section 3.2.
9.4 Seller's Conditions to Closing.
Seller's obligation to sell the Assets and transfer the
Liabilities to Buyer is contingent upon and subject to the
fulfillment of the following conditions in all material respects:
(a) the parties obtaining all regulatory approvals
which are required in order for them to proceed with the
transactions contemplated by this Agreement and the
expiration of any required waiting period without the
commencement of adverse proceedings by any governmental
authority with jurisdiction over the transactions
contemplated by this Agreement;
(b) each representation and warranty of Buyer in this
Agreement being true and correct in all material respects as
of the Closing Date and all covenants and conditions of
Buyer to be performed or met by Buyer on or before the
Closing Date having been performed or met in all material
respects;
(c) Buyer's delivery to Seller of the following
documents in form and substance reasonably satisfactory to
Seller:
<PAGE>
(i) one or more executed assumptions of the Real
Property Leases;
(ii) one or more executed instruments assuming the
remaining Liabilities; and
(iii) a certificate executed by an appropriate
officer of Buyer attesting, to the officer's best
knowledge, to Buyer's compliance with the conditions
set forth in Section 9.4(b); and
(d) Buyer's payment of the Conversion Expenses as
provided in Section 3.3.
9.5 Survival of Representations and Warranties.
Unless provided otherwise in this Agreement, Buyer's
and Seller's representations and warranties under this Agreement
or contained in any certificate or instrument delivered by either
party at the Closing shall survive for a period of one year
following the Closing Date.
X. TERMINATION
10.1 Termination by Either Party.
Either party may terminate this Agreement upon written
notice to the other if:
(a) as a result of any breach of any representation,
warranty or covenant, the party terminating this Agreement
has given the other party written notice of such breach and
such breach is not cured within 30 days thereafter;
(b) the Closing does not occur within two hundred
seventy (270) days after the date of this Agreement; or
(c) the other party so agrees in writing.
The termination of this Agreement under subsection (a)
shall not absolve the breaching party from any liability to the
other party arising out of its breach of this Agreement.
<PAGE>
XI.MISCELLANEOUS
11.1 Continuing Cooperation.
(a) On and after the Closing Date, Seller agrees to
execute, acknowledge and deliver such documents and
instruments as Buyer may reasonably request to vest in Buyer
the full legal and equitable title to the Assets and
Liabilities.
(b) On and after the Closing Date, Buyer shall
execute, acknowledge and deliver such documents and
instruments as Seller may reasonably request to relieve and
discharge Seller from its obligations with respect to the
Liabilities.
(c) Seller and Buyer shall cooperate with each other
in connection with any examination conducted by any tax
authority subsequent to the Closing Date by promptly
providing upon request information relating to the tax
liability of any business operated by Seller or Buyer with
respect to the Branch and promptly informing the other of
the institution of, any material developments concerning,
and the outcome of, the same.
(d) Except as provided in Section 7.2, no interest in
or right to use First Union National Bank of North
Carolina's logo or the name "First Union" or any other
similar word, name, symbol or device in which Seller has any
interest by itself or in combination with any other word,
name, symbol or device, or any similar variation of any of
the foregoing (collectively, the "Retained Names and Marks")
is being transferred to Buyer pursuant to the transactions
contemplated hereby. Unless permitted pursuant to Section
7.2, Buyer shall not after the Closing Date in any way
knowingly use any materials or property, whether or not in
existence on the Closing Date, that bear any Retained Name
or Mark. Buyer agrees that Seller shall have no
responsibility for claims by third parties arising out of,
or relating to, the use by the Buyer of any Retained Name or
Mark after the Closing Date, and Buyer agrees to indemnify
and hold harmless Seller from any and all claims (and all
expenses, including reasonable attorneys' fees and
<PAGE>
disbursements incurred in connection with any such claim)
that may arise out of the use thereof by Buyer.
11.2 Merger and Amendment.
This Agreement sets out the complete agreement of the
parties with respect to the matters discussed in this Agreement,
and it supersedes all prior agreements between the parties,
whether written or oral, which apply to these matters. No
provision of this Agreement may be changed or waived except as
expressly stated in a document executed by both parties.
11.3 Dispute Resolution.
(a) Neither Seller nor Buyer shall assert any claim
arising out of or relating to this Agreement (except with
respect to claims to be handled under the Working Agreement
or submitted to the Mediator under Section 3.2(c)), unless:
(i) except for claims arising under or in respect
of Sections 2.4, 2.5 or 11.1(d), the amount in dispute
with respect to any claim exceeds $5,000.00;
(ii) except for claims arising in respect of
Sections 2.4, 2.5 or 11.1(d), the aggregate amount of
all claims by Buyer or Seller (as the case may be)
which satisfy the preceding clause exceeds $25,000.00,
in which case a claim may be asserted only to the
extent that such threshold has been exceeded;
(iii) except for claims arising under Sections
2.4, 2.5, or 11.1(d), the aggregate amount of all
claims by Buyer or Seller (as the case may be) shall
not exceed the Amount of Premium; and
(iv) except for claims arising under Sections 2.4,
2.5 or 11.1(d), the notification required by Section
11.3(b) (if any) is given on or before the first
anniversary of the Closing Date.
(b) The parties shall attempt in good faith to resolve
any dispute arising out of or relating to this Agreement
promptly by negotiations, as provided in this subsection
<PAGE>
(b). Either party may give the other party written notice
of any dispute not resolved in the normal course of
business. Executives of both parties at comparable levels
at least one step above the personnel who have previously
been involved in the dispute shall meet at a mutually
acceptable time and place within ten days after delivery of
such notice, and thereafter as often as they reasonably deem
necessary, to exchange relevant information and to attempt
to resolve the dispute. If the matter has not been resolved
by these persons within 30 days of the disputing party's
notice, or if the parties fail to meet within ten days, the
dispute shall be referred to more senior executives of both
parties who have authority to settle the dispute and who
shall likewise meet to attempt to resolve the dispute. All
negotiations under this subsection (b) are confidential and
shall be treated as compromise and settlement negotiations
for purposes of the Federal Rules of Evidence, applicable
state rules of evidence, and common law. The procedures set
forth above will be followed in advance of litigation of any
dispute between the parties; nevertheless, either party may
seek a preliminary injunction or other provisional judicial
relief if in its judgment such an action is necessary to
avoid irreparable damage or to preserve the status quo.
Despite any such action, the parties will continue to
participate in good faith in the procedures set forth in
this subsection (b).
(c) Neither party shall have any liability for lost
profits or punitive damages with respect to any claim
arising out of or relating to this Agreement. The sole
recourse and remedy of a party hereto for breach of this
Agreement by the other party hereto shall be against such
other party and its assets, and no officer, director,
employee, stockholder or affiliate of any party shall be
liable at law or in equity for the breach by such party of
any of its obligations under this Agreement.
11.4 Counterparts.
This Agreement may be executed in any number of
counterparts, each of which will constitute an original, but all
of which taken together shall constitute one and the same
instrument.
<PAGE>
11.5 Exhibits and Schedules.
All exhibits and schedules referred to in this
Agreement shall constitute a part of this Agreement.
11.6 Assignment.
This Agreement is not assignable by either party
without the written consent of the other party, which shall not
be unreasonably withheld.
11.7 Headings.
The headings contained in this Agreement are inserted
for convenience only and shall not affect the meaning of this
Agreement or any of its provisions.
11.8 Notices.
Any notice under this Agreement shall be made in
writing and shall be deemed given when delivered in person, when
delivered by first class mail postage prepaid (in which case the
notice shall be deemed given on the third Business Day following
the date on which the notice is postmarked), or when delivered by
facsimile transmission, which transmission also shall be sent by
first class mail, postage prepaid before the second Business Day
following the transmission (in which case the notice shall be
deemed given on the day transmitted if transmitted before or
during normal business hours or, otherwise, on the next
succeeding Business Day) to the parties at the respective
addresses set forth below or at such other addresses as each
party shall inform the other in writing.
If to Seller to: Leigh M. Bullen
Chief Financial Officer
First Union National Bank of
North Carolina
One First Union Center, NC-0159
Charlotte, North Carolina 28288
with a copy to: Keith D. Lembo, Esq.
Senior Vice President
and Deputy General Counsel
<PAGE>
First Union Corporation
One First Union Center, Leg-0630,
31st Floor
Charlotte, North Carolina 28288-0603
If to Buyer to: James H. Garner
President
First Bank
341 N. Main Street
Troy, North Carolina 37371
with a copy to: Hank Ralston, Esq.
Robinson, Bradshaw & Hinson
101 N. Tryon Street
Suite 1900
Charlotte, North Carolina 28246
11.9 Expenses.
Unless specifically stated to the contrary in this
Agreement, each party will assume and pay for the expenses it
incurs with respect to the purchase and sale of the Assets and
assumption of the Liabilities under this Agreement; provided,
however, that Buyer shall pay all fees and expenses associated
with the regulatory application process. Each party shall be
responsible for any fee payable to any agent, broker or finder
acting on its behalf in this transaction.
11.10 Public Announcements.
Each party shall consult with the other before making
any announcement or other public communication with respect to
the transactions contemplated by this Agreement and shall furnish
a copy of the text to the other party of the announcement or
other communication.
11.11 Governing Law; Jurisdiction.
This Agreement and the legal relations between the
parties shall be governed by and construed in accordance with the
laws of the State of North Carolina applicable to contracts made
and to be performed entirely within the State of North Carolina.
<PAGE>
11.12 No Third Party Beneficiaries.
The parties intend that this Agreement shall not
benefit or create any right or cause of action in or on behalf of
any Person other than Seller and Buyer.
<PAGE>
IN WITNESS WHEREOF, each of the parties to this Agreement
has caused this Agreement to be executed by a duly authorized
officer as of the date written on page one of this Agreement.
FIRST BANK
By: /s/ James H. Garner
Its: President & CEO
FIRST UNION NATIONAL BANK
OF NORTH CAROLINA
By: /s/ Paul A. Stevens
Its: Vice President
<TABLE> <S> <C>
<PAGE>
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<YIELD-ACTUAL> 5.76
<LOANS-NON> 678
<LOANS-PAST> 0
<LOANS-TROUBLED> 712
<LOANS-PROBLEM> 1,250
<ALLOWANCE-OPEN> 4,726
<CHARGE-OFFS> 367
<RECOVERIES> 196
<ALLOWANCE-CLOSE> 4,755
<ALLOWANCE-DOMESTIC> 4,755
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
