Broadening its reach in the Southeast, CCB Financial Corp. has agreed to acquire American Federal Bank, a Greenville, S.C.-based thrift, for $325 million in stock.
The deal, announced Tuesday, marks CCB's first foray outside its home state of North Carolina. It would make the company the sixth-largest bank in the Carolinas, with $6.9 billion of assets.
Analysts said the price-amounting to 2.74 times American Federal's book value-is full but fair. They said CCB, based in Durham, would benefit from a presence in the thriving Greenville market.
CCB has been actively acquiring banks and thrifts in North Carolina since 1993, deepening its ties to the state's rapidly growing metropolitan markets. The South Carolina deal would be CCB's biggest move yet.
Ernest Roessler, CCB's chief executive officer, called American Federal a "very banklike" thrift, adding that the combination of the two companies should be a good business and cultural fit.
"Both institutions have solid capital positions, excellent credit quality, strong branch office networks as well as very compatible corporate cultures," he said.
According to the agreement, American Federal would retain its name and its thrift charter, and would operate as a wholly owned subsidiary of CCB.
"This deal makes a lot of sense," said John W. Coffey, first vice president of Robinson-Humphrey Co. "What is happening here is a microcosm of the industry. Anytime a company has an opportunity to enhance its franchise and enhance the earnings opportunity, they should do that."
CCB, with $5.5 billion of assets, currently operates 161 offices in 28 counties throughout North Carolina. American Federal operates 40 banking offices in 12 counties in northwest South Carolina.
The deal would CCB the fourth-largest bank in deposits in the Greenville-Spartanburg market.
CCB officials expect the deal to dilute 1997 earnings, although they said the transaction should add to profits in 1998.
Expense savings are projected to reach $9.4 million a year on a pretax basis-about 26% of American's 1997 expense base. The biggest savings-$5.6 million-would come from personnel reductions.
CCB officials predicted that 120 jobs at most would be affected, and that about half of those jobs could be eliminated through attrition.
Revenue enhancements are expected to amount to $1.9 million a year by 1999.
Company officials said they have set goals for return on assets of 1.65%, return on equity of 17.15%, and an efficiency ratio of 48% by 1998.
"I think CCB is realistic," said Christopher W. Marinac, an analyst with Interstate/Johnson Lane. "They have a history of being conservative and not promising more than they can deliver. I don't suspect there is any fluff in these numbers."
The merger, which was unanimously approved by the boards of directors of both companies, would be accounted for as a pooling of interest. Each share of American Federal would be exchanged for 0.445 share of CCB. The deal would be a tax-free exchange valued at about $28.86 per share, based on CCB's five-day average closing price last Friday.
CCB's stock price fell $2 on Tuesday, closing at $66. American Federal's share price rose $6, to $27.50.
As part of the deal, American Federal granted CCB an option to purchase up to 19.9% of its outstanding shares.
Mr. Roessler said he expects the transaction to close by Sept. 30.
