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Nineteen-ninety-six was a very good year for CCB Financial Corporation. We achieved record earnings and our stock price closed the year at record levels. During 1996, we exceeded a $1 billion market capitalization for the first time.
Over the past several years we have continually improved our profitability, efficiency and franchise. We have a clear vision for the future, and we are relentless in our mission to benefit customers, employees, the communities we serve and our shareholders. CCB is a work in progress. We have not fulfilled our potential. There is still more to come. Three characteristics mark our focus: availability, affordability and acceptability. AvailabilityOur franchise now connects the industrial crescent of North Carolina from the Research Triangle to the Piedmont Triad to Charlotte. We also have a very strong presence in Wilmington. The Salem Trust merger, which was completed January 31, 1997, increases our presence in Winston-Salem and Wilm-ington. It also affords us an entry into private banking.In 1996, our product array improved through the introduction of our 401(k) Spectrum product; professional, college student and group banking packages; and a well-designed relationship statement. During 1997, we intend to make PC banking available for individuals, provide bill paying by telephone, offer a home equity overdraft line and introduce a cash management account for individuals. Retail delivery improved in 1996 by offering a debit card to our customers, opening seven CCB7s in Harris Teeter stores and launching a telebanking center, open seven days a week. Plans have been approved for the expansion of our ATM network and our in-store arrangement with Harris Teeter. Implementation of these plans will take place over the next several years. We have completed our study of branch optimization, and this will provide our customers with better configurations in existing markets, while making us even more efficient. Commercial delivery improvements included significant increases in commercial and construction lending and expansion of commercial deposit services targeted to private small businesses and government (post office cash management) units during the year. All of this links together to provide ever-improving availability and accessibility to our customer base. Augmenting this, our branch administration was reorganized, effective January 1997, to better deploy our employees to foster enhanced customer service and business development efforts. AffordabilityOur commitment to human resource and capital development will compound over the next several years. Infrastructure developments are aimed at providing our employees with better tools via technology to assist them in identifying the "next" product offering, meeting requirements of existing customers and pinpointing potential customers.We are putting in place revised standards for hiring, training, and incenting our employees, as well as tracking our accomplishments. We have a good management team in place, but we must ensure that we have enough resources to achieve our goals. For capital expenditures, the commitment will be in excess of $40 million over the next three years. This not only includes facilities expansion and renovation, but also a commitment to technology. For appropriate customer access we have to link to the home, the workplace and where they shop. Balance is essential for attaining the proper return on investment. We are always cognizant of making measured bets. To increase the probability of exceeding required rates of return on our investments, we continue to be dedicated to improving our efficiency and effectiveness. During the past year, the Customer Outreach and Effectiveness Committee was active in examining our mortgage and credit card business lines. Much has been accomplished in reorganizing these areas so as to provide better service to our customers and to ensure that we have the right staff in the right places. We shall continue to evaluate other business lines of CCB over the next two years. A revenue enhancement project also was completed during 1996 with the assistance of an outside firm. The benefits of this undertaking will be realized in 1997 and beyond. AcceptabilityIn the last available measurement, from June 30, 1993 to June 30, 1995, we increased our market share in all of our major markets: the Triangle, Triad, Wilmington and Charlotte Metropolitan Statistical Areas (MSAs). Growth in the first three major markets was largely the result of our internal efforts to expand product offerings and increase sales, while the Charlotte MSA growth was primarily attributable to the merger with Security Capital. Some key facts about our acceptability:
During 1995, we conducted our first general management retreat, primarily for the benefit of former officers of Security Capital. This proved so worthwhile that we are now including management associates throughout the organization, scheduling at least two such retreats a year. In addition, we regularly have top management planning retreats and senior officer meetings. These sessions facilitate communication of corporate goals as well as provide valuable feedback from our business units. Our associates are dedicated to achieving announced goals, and all are aware that there is no substitute for hustle. Incentive pay is widely accepted and will continue to become a more important component of our reward system. Availability and Affordability are the ingredients that set the platform for success, and Acceptability is the resulting measurement. The "barbell theory" that has been proffered indicates that the big financial institutions will own the "high tech" end of the market and the small community banks will dominate the "high touch" end, while mid-sized banks will have limited opportunities. Our own metaphor, a "scale" that balances high touch and high tech, aptly demonstrates the goal that CCB is pursuing. CCB Financial Corporation, while ranking in the top 100 of over 10,000 financial institutions in this country based on size, is still clearly positioned between the very large and smaller community banks. Is this position tenable and can it flourish? We think so. Based on our availability, affordability and acceptability, we think we can offer the best of both worlds by being simultaneously dedicated to both "high touch" and "high tech." Financial ResultsFor the full year, operating earnings were $4.86 per share compared to $4.36 for 1995, an 11.5% increase. This comparison excludes the one-time charge for the FDIC assessment for funding the Savings Association Insurance Fund and the benefit from tax bad debt recapture in 1996 and merger- and transaction-related expenses for the Security Capital merger in 1995. If one were to include these non-recurring events, earnings would have been up 20.7%. This outstanding earnings performance resulted from growth in loans and fees, as well as continued improvements in the efficiency of our operations.Our Board of DirectorsJoseph G. Rutledge retired from our board. Joe provided many years of excellent leadership to Security Capital and was very active in the Salisbury community. We are grateful for his counsel and support through-out the merger between CCB and Security Capital.Bonnie McElveen-Hunter and George J. Morrow joined our board at our annual shareholders meeting. Bonnie is President of Pace Communica-tions, which produces magazines (primarily in-flight publications for major airline carriers), entertainment videos, and coffee-table books. George was recently named Managing Director of the British unit of Glaxo Wellcome, Inc., the largest pharmaceutical company in the world, having served previously as Group Vice President of commercial operations at the U.S. unit's headquarters. Both will provide invaluable insight and participation on our board. In closing, it is important to acknowledge that we have our challenges. We must sustain deposit growth to fund our loan demand, continue to increase our fee income as a viable provider of financial services through our trust and full-service brokerage units, stage capital expenditures and convert these into high-level returns, and, finally, implement a retail delivery plan that will provide sustained competitive advantage. At CCB, possibilities have not downsized. In fact, opportunity is opening wide. To fulfill our potential, we must continue to work smart and hard, and listen to our customers. As I wrote last year, Scott Edwards, Richard Furr and I, along with everyone at CCB, are committed to developing interdependent businesses at compatible paces with complementary missions. We will innovate, but always keep the commercial instincts to manage risks in the forefront. Sincerely,
Ernest C. Roessler P.S.: On February 14, 1997, CCB Financial Corporation's Board of Directors signed an agreement to combine with American Federal, FSB, based in Greenville, S.C. The $1.3 billion agreement extends our franchise down the dynamic I-85 corridor into this fast-growing region. The agreement will give CCB almost $7 billion in assets and make us the sixth-largest bank in the Carolinas. The merger should be completed in the third quarter, 1997. I will report more to you on this important development in the first-quarter shareholder letter. 
David B. Jordan Vice Chairman W. L. Burns, Jr. Chairman of the Board Ernest C. Roessler Vice Chairman, President and CEO
J. Scott Edwards |
