FORM S-4

As filed with the Securities and Exchange Commission on July 17, 2014.

Registration No. 333-                        

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

FORM S-4

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

FIRST CITIZENS BANCSHARES, INC.

(Name of Registrant as specified in its charter)

 

 

 

Delaware   6023   56-1528994

(State or other jurisdiction of

incorporation or organization)

 

(Primary Standard Industrial

Classification Code)

 

(I.R.S. Employer

Identification Number)

4300 Six Forks Road, Raleigh, North Carolina 27609 (919) 716-7000

(Address and telephone number of principal executive offices)

Frank B. Holding, Jr.

Chairman and Chief Executive Officer

First Citizens BancShares, Inc.

4300 Six Forks Road, Raleigh, North Carolina 27609 (919) 716-7000

(Name, address and telephone number of agent for service)

 

 

With copies to:

 

Gerald F. Roach, Esq.

Jason L. Martinez, Esq.

Smith, Anderson, Blount, Dorsett, Mitchell & Jernigan, L.L.P.

Wells Fargo Capitol Center

150 Fayetteville Street, Suite 2300

Raleigh, North Carolina 27601

Phone: (919) 821-1220

Facsimile: (919) 821-6800

 

Barry P. Harris, IV, Esq.

Vice President & Chief Legal Officer

First Citizens BancShares, Inc.

4300 Six Forks Road, Raleigh,

North Carolina 27609

Phone: (919) 716-2206

Facsimile: (919) 716-7518

 

William R. Lathan, Jr., Esq.

Ward and Smith, P.A.

Wade II, Suite 400

5430 Wade Park Boulevard (27607)

Raleigh, NC 27636-3009

Phone: (919) 277-9100

Facsimile: (919) 277-9177

Henry H. Ralston, Esq.

Seth M. Huffstetler, Esq.

Robinson, Bradshaw & Hinson, P.A.

101 North Tryon Street, Suite 1900

Charlotte, NC 28246

Phone: (704) 377-2536

Facsimile: (704) 378-4000

 

Jim B. Apple

First Citizens Bancorporation, Inc.

1230 Main Street

Columbia, South Carolina 29201

Phone: (803) 733-2025

Facsimile: (803) 931-1448

 

Suzanne Hulst Clawson, Esq.

Haynsworth Sinkler Boyd, P.A.

1201 Main Street

Suite 2200

Columbia, South Carolina 29201

Phone: (803) 540-7819

Facsimile: (803) 765-1243

 

 

Approximate date of commencement of the proposed sale of the securities to the public:

As soon as practicable after this Registration Statement has become effective.


If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box.  ¨

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer   x    Accelerated filer   ¨
Non-accelerated filer   ¨  (Do not check if a smaller reporting company)    Smaller reporting company   ¨

If applicable, place an X in the box to designate the appropriate rule provision relied upon in conducting this transaction:

Exchange Act Rule 14e-4(i) (Cross-Border Issuer Tender Offer)  ¨

Exchange Act Rule 14d-1(d) (Cross-Border Third-party Tender Offer)  ¨

 

 

CALCULATION OF REGISTRATION FEE

 

 

Title of Each Class of

Securities to be Registered

 

Amount

to Be

Registered(1)

 

Proposed

Maximum

Offering Price

Per Unit

 

Proposed

Maximum

Aggregate

Offering

Price(2)

 

Amount of

Registration Fee(3)

Class A Common Stock

 

N/A

 

N/A

 

$668,407,442.13

  $86,090.88

Class B Common Stock

 

N/A

 

N/A

 

N/A(4)

  N/A(5)

 

 

(1) Represents the maximum number of full shares of First Citizens BancShares, Inc. (“North”) common stock for each applicable row estimated to be issuable upon consummation of the transaction described herein. Pursuant to Rule 416, this registration statement also covers additional shares that may be issued as a result of stock splits, stock dividends or similar transactions.
(2) Estimated solely for the purpose of determining the registration fee required by Section 6(b) of the Securities Act and calculated in accordance with Rules 457(f) and 457(c) of the Securities Act based on the value of the shares of First Citizens Bancorporation, Inc. (“South”) voting common stock and South non-voting common stock expected to be exchanged for North Class A common stock and North Class B common stock in the merger, as established by the average of the high and low sale price of shares of South voting common stock on July 11, 2014 as quoted on the OTC Bulletin Board and the book value of shares of South non-voting common stock as of June 30, 2014.
(3) Computed in accordance with Rules 457(f) and 457(c) of the Securities Act solely for the purpose of calculating the registration fee and based upon a rate of $128.80 per $1,000,000 of the proposed maximum aggregate offering price.
(4) The proposed maximum aggregate offering price is calculated based upon the value of the shares of South voting common stock and South non-voting common stock as set forth in footnote (2) above.
(5) The amount listed above represents the total aggregate registration fee payable.

 

 

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

 

 

 


Information contained herein is subject to completion or amendment. A registration statement relating to these securities has been filed with the Securities and Exchange Commission. These securities may not be sold prior to the time the registration statement becomes effective. This document shall not constitute an offer to sell nor shall there be any sale of these securities in any jurisdiction in which such offer or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction.

 

PRELIMINARY-SUBJECT TO COMPLETION DATED JULY 17, 2014

 

LOGO    LOGO

To the Shareholders of First Citizens BancShares, Inc. and First Citizens Bancorporation, Inc.:

We are pleased to report that First Citizens BancShares, Inc. (“North”) and First Citizens Bancorporation, Inc. (“South”) have entered into a definitive merger agreement that provides for the combination of our two companies. Under the merger agreement, South will merge with and into North, with North as the surviving company in the merger. We cannot complete the merger transaction without your approval. Holders of shares of North Class A common stock and North Class B common stock will vote to approve (i) the merger agreement, (ii) the issuance of North common stock in connection with the merger pursuant to the requirements of NASDAQ Listing Rules and (iii) an amendment to the North Restated Certificate of Incorporation to authorize additional shares of North Class A common stock to enable the issuance of such shares in connection with the merger, each at a special meeting of stockholders to be held on [            ], 2014. Holders of shares of South voting and non-voting common stock will vote to approve the merger agreement at a special meeting of shareholders to be held on [            ], 2014. This document, which serves as a joint proxy statement for the special meetings of North and South and as a prospectus for the shares of North common stock to be issued in the merger to South shareholders, gives you detailed information about the special meetings and the merger.

Under the terms of the merger agreement, each share of South common stock will be converted into the right to receive 4.0 shares of North Class A common stock and $50.00 in cash, unless the holder of such share elects, pursuant to a letter of transmittal that will be delivered after closing of the merger, for each share of such holder’s South common stock to be converted into the right to receive 3.58 shares of North Class A common stock and 0.42 shares of North Class B common stock. Cash will be paid in lieu of issuing fractional shares of North common stock.

The value of the shares of North common stock to be issued in the merger will fluctuate between now and the closing date of the merger. We will not know the final value of the per share merger consideration payable to holders of South common stock until after such holders make their elections after closing of the merger; however, (i) based on the closing price of North Class A common stock and the last sale price of North Class B common stock on June 9, 2014, the last trading day before the public announcement of the signing of the merger agreement, the value of the aggregate merger consideration payable to holders of South common stock was between $607,010,000 and $644,715,000, depending on whether all South shareholders receive shares of North Class A common stock and cash or elect to receive shares of North Class A common stock and shares of North Class B common stock and excluding shares of South common stock held by North, and (ii) based on the closing price of North Class A common stock and the last sale price of North Class B common stock on [            ], 2014, the last practicable date before the date of this document, the value of the aggregate merger consideration payable to holders of South common stock was between $[            ] and $[            ], depending on whether all South shareholders receive shares of North Class A common stock and cash or elect to receive shares of North Class A common stock and shares of North Class B common stock and excluding shares of South common stock held by North. South shareholders should obtain current sale prices for North common stock. North Class A common stock trades on the NASDAQ Global Select Market under the symbol “FCNCA.” North Class B common stock trades on the over-the-counter market and is quoted on the OTC Bulletin Board under the symbol “FCNCB.” South voting common stock trades on the over-the-counter market and is quoted on the OTC Bulletin Board under the symbol “FCBN.” There is no established public trading market for South non-voting common stock.

Based on the current number of shares of South common stock outstanding, (i) if all South shareholders elect to receive only North Class A common stock and cash, North currently expects to issue up to 2,605,004 shares of North Class A common stock upon completion of the merger and (ii) if all South shareholders elect to


receive North Class A common stock and North Class B common stock, North currently expects to issue up to 2,331,479 shares of Class A common stock and 273,526 shares of North Class B common stock upon completion of the merger. However, the number of shares actually issued upon completion of the merger could change depending on the actual elections of South shareholders.

The merger is intended to qualify as a “reorganization” within the meaning of Section 368(a) of the United States Internal Revenue Code of 1986, as amended, referred to as the “Internal Revenue Code” or the “Code.” Assuming the merger qualifies as a reorganization, a holder of South common stock who receives only North common stock in the merger generally will not recognize gain for tax purposes in the merger. A holder of South common stock who receives cash in the merger will recognize gain for tax purposes up to the amount of cash received. In addition, a holder of South common stock may recognize gain or loss for tax purposes from the receipt of cash in lieu of a fractional share of North common stock that such holder of South common stock would otherwise be entitled to receive.

Holders of North Class A common stock do not have a right to seek appraisal for their shares of North Class A common stock; however, holders of North Class B common stock do have the right to seek appraisal for their shares of North Class B common stock under Delaware law, provided they comply with each of the requirements under Delaware law, including not voting in favor of the merger agreement and providing notice to North. For more information regarding appraisal rights, please see “The Merger—Appraisal Rights of Holders of North Class B Common Stock” beginning on page [    ] of this joint proxy statement/prospectus.

South shareholders have dissenters’ rights under South Carolina law entitling them to obtain payment in cash for the fair value of their shares, provided they comply with each of the requirements under South Carolina law, including not voting in favor of the merger agreement and providing notice to South. For more information regarding dissenters’ rights, please see “The Merger—Dissenters’ Rights of South Shareholders” beginning on page [    ] of this joint proxy statement/prospectus.

Your vote is very important. To ensure your representation at the North or South special meeting, as applicable, please vote either electronically by telephone or through the Internet, or by completing, signing, dating and mailing the enclosed proxy card or broker’s instruction form in the enclosed envelope. Whether or not you expect to attend the North or South special meeting, as applicable, please vote promptly. If you are a record shareholder, submitting a proxy card or voting electronically now will not prevent you from being able to vote in person at the applicable special meeting. Each of the North and South boards of directors has adopted and approved the merger agreement and the transactions contemplated by it, and recommends that its respective shareholders vote “FOR” approval of each of the proposals described in this joint proxy statement/prospectus.

You should read this entire joint proxy statement/prospectus, including the appendices and the documents incorporated herein by reference, carefully because it contains important information about the special meetings and the merger. In particular, you should read carefully the information set forth under “Risk Factors” beginning on page 24 of this joint proxy statement/prospectus for a discussion of the risks you should consider in evaluating the proposed merger.

On behalf of the North and South boards of directors, thank you for your prompt attention to this important matter.

Sincerely,

 

Frank B. Holding, Jr.

Chairman and Chief Executive Officer

First Citizens BancShares, Inc.

  

Jim B. Apple

Chairman, Chief Executive Officer and President

First Citizens Bancorporation, Inc.


The shares of North common stock to be issued in the merger are not savings or deposit accounts or other obligations of any bank or nonbank subsidiary of either North or South and are not insured by the Federal Deposit Insurance Corporation or any other governmental agency.

Neither the Securities and Exchange Commission, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the North Carolina Office of the Commissioner of Banks, the South Carolina State Board of Financial Institutions nor any state securities commission or any other bank regulatory agency has approved or disapproved the securities to be issued in the merger or determined the adequacy or accuracy of this joint proxy statement/prospectus. Any representation to the contrary is a criminal offense.

This joint proxy statement/prospectus is dated [            ], 2014, and is being first mailed to North stockholders and South shareholders on or about [            ], 2014.


FIRST CITIZENS BANCSHARES, INC.

4300 Six Forks Road

Raleigh, North Carolina 27609

(919) 716-7000

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

TO BE HELD ON [                ], 2014

NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders of First Citizens BancShares, Inc. (“North”) will be held at [            ] on [            ], 2014, at [            ] local time, for the following purposes:

 

  1. Approval of Agreement and Plan of Merger. To consider and vote upon a proposal to approve the Agreement and Plan of Merger dated June 10, 2014 (the “merger agreement”) by and between First Citizens Bancorporation, Inc. (“South”) and North, pursuant to which South will merge with and into North, with North as the surviving company in the merger (the “North merger proposal”). You will find a copy of the merger agreement attached as Appendix A to this document.

 

  2. Approval of Share Issuance. To consider and vote upon the issuance of up to 2,605,004 shares of North Class A common stock and up to 273,526 shares of North Class B common stock in connection with the merger agreement (the “North share issuance proposal”).

 

  3. Approval of Amendment to Restated Certificate of Incorporation. To consider and vote upon an amendment to North’s restated certificate of incorporation, as amended, that will increase the authorized number of shares of North Class A common stock from 11,000,000 to 16,000,000 shares to enable the issuance of shares of North Class A common stock in the merger (the “North charter amendment proposal”). You will find a copy of the form of proposed amendment to the North restated certificate of incorporation attached as Appendix F to this document.

 

  4. Adjourn or Postpone the Special Meeting. To consider and vote upon a proposal of the North board of directors to adjourn or postpone the special meeting, if necessary or appropriate, to permit further solicitation of proxies if there are not sufficient votes at the time of the special meeting to approve the North merger proposal, the North share issuance proposal or the North charter amendment proposal (the “North adjournment proposal”).

 

  5. Other Business. To transact such other business as may properly come before the special meeting or any adjournments or postponements thereof.

The North board of directors has set [            ], 2014 as the record date for the North special meeting. Only stockholders of record at the close of business on [            ], 2014 are entitled to notice of, and to vote at, the special meeting.

Holders of North Class A common stock do not have a right to seek appraisal for their shares of North Class A common stock; however, holders of North Class B common stock who comply with the provisions of Delaware law relating to appraisal rights applicable to the merger are entitled to seek appraisal under the Delaware appraisal rights law, a copy of which is attached as Appendix B to this document.

The above proposals are described in more detail in the attached joint proxy statement/prospectus, which we urge you to read carefully in its entirety before you vote.

Your vote is very important. You are cordially invited to attend the North special meeting in person. However, even if you plan to attend the special meeting, to ensure your representation, please vote as promptly as possible, either electronically via telephone or the Internet, or by completing, signing, dating and mailing your proxy card or broker’s instruction form in the enclosed envelope. If you are a record stockholder and choose to attend the special meeting, then you may vote your shares in person if you wish to do so, even if you have previously signed and returned your proxy card or voted electronically via telephone or the Internet. If you hold your shares through a broker or other nominee (commonly referred to as held in “street name”) and wish to attend the special meeting and vote in person, you must present proof of ownership and appropriate voting documents from your broker or other nominee. You may


revoke your proxy or broker’s voting instructions at any time prior to the special meeting as specified in the accompanying joint proxy statement/prospectus or broker’s instructions. If you have questions about the proposals or about voting your shares, please call our Corporate Secretary, Kathy Klotzberger, at (919) 716-7000.

The North board of directors has approved and adopted the merger agreement and the transactions contemplated thereby and has determined that the merger is advisable and in the best interest of North and its stockholders. The North board of directors recommends that North stockholders vote “FOR” the North merger proposal, “FOR” the North share issuance proposal, “FOR” the North charter amendment proposal and “FOR” the North adjournment proposal.

By Order of the Board of Directors

Frank B. Holding, Jr.

Chairman and Chief Executive Officer

First Citizens BancShares, Inc.

Raleigh, North Carolina

[                ], 2014


FIRST CITIZENS BANCORPORATION, INC.

1230 Main Street

Columbia, South Carolina 29201

(803) 733-2025

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS

TO BE HELD ON [                ], 2014

NOTICE IS HEREBY GIVEN that a Special Meeting of the Shareholders of First Citizens Bancorporation, Inc. (“South”) will be held at [            ] on [            ], 2014, at [            ], local time, for the following purposes:

 

1. Approval of Agreement and Plan of Merger. To consider and vote upon a proposal to approve the Agreement and Plan of Merger dated June 10, 2014 (the “merger agreement”) by and between South and First Citizens BancShares, Inc. (“North”), pursuant to which South will merge with and into North, with North as the surviving company in the merger (the “South merger proposal”). You will find a copy of the merger agreement attached as Appendix A to this document.

 

2. Adjourn or Postpone the Special Meeting. To consider and vote upon a proposal of the South board of directors to adjourn or postpone the special meeting, if necessary or appropriate, to permit further solicitation of proxies if there are not sufficient votes at the time of the special meeting to approve the South merger proposal (the “South adjournment proposal”).

 

3. Other Business. To transact such other business as may properly come before the special meeting or any adjournments or postponements thereof.

The South board of directors has set [            ], 2014 as the record date for the South special meeting. Only shareholders of record of South common stock at the close of business on [            ], 2014 are entitled to notice of, and to vote at, the special meeting. Holders of South non-voting common stock as of the record date are entitled to vote on the South merger proposal, but are not entitled to vote on the South adjournment proposal.

Holders of South common stock who comply with the provisions of South Carolina law relating to dissenters’ rights applicable to the merger are entitled to assert dissenters’ rights under the South Carolina dissenters’ rights law, a copy of which is attached as Appendix C to this document.

The above proposals are described in more detail in the attached joint proxy statement/prospectus, which we urge you to read carefully in its entirety before you vote.

Your vote is very important. You are cordially invited to attend the South special meeting in person. However, even if you plan to attend the special meeting, to ensure your representation, please vote as promptly as possible, either electronically via telephone or the Internet, or by completing, signing, dating and mailing your proxy card or broker’s instruction form in the enclosed envelope. If you are a record shareholder and choose to attend the special meeting, then you may vote your shares in person if you wish to do so, even if you have previously signed and returned your proxy card or voted electronically via telephone or the Internet. If you hold your shares through a broker or other nominee (commonly referred to as held in “street name”) and wish to attend the special meeting and vote in person, you must present proof of ownership and appropriate voting documents from your broker or other nominee. You may revoke your proxy or broker’s voting instructions at any time prior to the special meeting as specified in the accompanying joint proxy statement/prospectus or broker’s instructions. If you have questions about the proposals or about voting your shares, please call our Corporate Secretary, Melissa A. Mendenall, at (803) 931-1320.

The South board of directors has approved and adopted the merger agreement and the transactions contemplated thereby and has determined that the merger is advisable and in the best interest of South and its shareholders. The South board of directors recommends that South shareholders vote “FOR” the South merger proposal and “FOR” the South adjournment proposal.

By Order of the Board of Directors

Jim B. Apple

Chairman, Chief Executive Officer and President

First Citizens Bancorporation, Inc.

Columbia, South Carolina

[                ], 2014


WHERE YOU CAN FIND MORE INFORMATION

First Citizens BancShares, Inc.

North files annual, quarterly and special reports, proxy statements and other business and financial information with the Securities and Exchange Commission (“SEC”). You may read and copy any materials that North files with the SEC at its Public Reference Room at 100 F Street, N.E., Room 1580, Washington, D.C. 20549, at prescribed rates. Please call the SEC at (800) SEC-0330 ((800) 732-0330) for further information on the public reference room. In addition, North files reports and other business and financial information with the SEC electronically, and the SEC maintains a website located at http://www.sec.gov containing this information. You will also be able to obtain these documents, free of charge, from North by accessing North’s website at www.firstcitizens.com. Copies can also be obtained, free of charge, by directing a written request to:

First Citizens BancShares, Inc.

4300 Six Forks Road

Raleigh, North Carolina 27609

Attn: Kathy A. Klotzberger, Corporate Secretary

Telephone: (919) 716-7000

In addition, if you are a North stockholder and you have any questions concerning the merger, the North special meeting or this joint proxy statement/prospectus, would like additional copies of this joint proxy statement/prospectus, or need help voting your shares of North common stock, please contact Kathy A. Klotzberger, Corporate Secretary, at the address above.

North has filed a Registration Statement on Form S-4 to register with the SEC up to 2,605,004 shares of North Class A common stock and up to 273,526 shares of North Class B common stock to be issued pursuant to the merger. This joint proxy statement/prospectus is a part of that Registration Statement on Form S-4. As permitted by SEC rules, this joint proxy statement/prospectus does not contain all of the information included in the Registration Statement on Form S-4 or in the exhibits or schedules to the Registration Statement on Form S-4. You may read and copy the Registration Statement on Form S-4, including any amendments, schedules and exhibits, at the SEC’s Public Reference Room at the address set forth above. The Registration Statement on Form S-4, including any amendments, schedules and exhibits, is also available, free of charge, by accessing the websites of the SEC and North or upon written or oral request to North at the address or telephone number set forth above.

Statements contained in this joint proxy statement/prospectus as to the contents of any contract or other documents referred to in this joint proxy statement/prospectus are not necessarily complete. In each case, you should refer to the copy of the applicable contract or other document filed as an exhibit to the Registration Statement on Form S-4 or in North’s other SEC fillings. This joint proxy statement/prospectus incorporates important business and financial information about North that is not included in or delivered with this document, including incorporating by reference documents that North has previously filed with the SEC. These documents contain important information about North and its financial condition. See “Documents Incorporated by Reference” beginning on page [            ] of this joint proxy statement/prospectus. These documents are available, free of charge, by accessing the websites of the SEC and North or upon written or oral request to North at the address or telephone number set forth above.

To obtain timely delivery of these documents, you must request them no later than [            ], 2014 in order to receive them before the special meeting of stockholders.

 

i


First Citizens Bancorporation, Inc.

South does not have a class of securities registered under Section 12 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is not subject to the reporting requirements of Section 13(a) or 15(d) of the Exchange Act, and accordingly does not file documents and reports with the SEC.

If you are a South shareholder and have any questions concerning the merger, the South special meeting or this joint proxy statement/prospectus, would like additional copies of this joint proxy statement/prospectus, or need help voting your shares of South common stock, please contact South at:

First Citizens Bancorporation, Inc.

1230 Main Street

Columbia, South Carolina 29201

Attn: Melissa A. Mendenall, Corporate Secretary

Telephone: (803) 931-1320

Except where the context otherwise indicates, North supplied all information contained in, or incorporated by reference into, this joint proxy statement/prospectus relating to North, and South supplied all information contained in this joint proxy statement/prospectus relating to South.

You should rely only on the information contained in, or incorporated by reference into, this joint proxy statement/prospectus. No one has been authorized to give any information or make any representation about the merger or North or South that differs from, or adds to, the information in this joint proxy statement/prospectus or in documents that are publicly filed with the SEC. Therefore, if anyone does give you different or additional information, you should not rely on it. You should not assume that the information contained in this joint proxy statement/prospectus is accurate as of any date other than the date of this joint proxy statement/prospectus, and you should not assume that any information incorporated by reference into this document is accurate as of any date other than the date of such other document, and neither the mailing of this joint proxy statement/prospectus to North stockholders or South shareholders nor the issuance of North common stock or the payment of cash by North in the merger shall create any implication to the contrary.

This document does not constitute an offer to sell, or a solicitation of an offer to buy, any securities, or the solicitation of a proxy, in any jurisdiction to or from any person to whom it is unlawful to make any such offer or solicitation in such jurisdiction.

CERTAIN DEFINED TERMS

Unless the context otherwise requires throughout this document, “North” refers to First Citizens BancShares, Inc., “South” refers to First Citizens Bancorporation, Inc. and “the parties,” “we,” and “our” refer collectively to North and South. The parties refer to the proposed merger of South with and into North as the “merger”; the merger of First Citizens Bank and Trust Company, Inc. (referred to as “South Bank”), with and into First-Citizens Bank & Trust Company (referred to as “North Bank”), as the “bank merger”; and the Agreement and Plan of Merger, dated June 10, 2014, by and between North and South as the “merger agreement.”

 

ii


TABLE OF CONTENTS

 

WHERE YOU CAN FIND MORE INFORMATION

     i   

QUESTIONS AND ANSWERS ABOUT THE MERGER AND THE SPECIAL MEETINGS

     1   

SUMMARY

     12   

RISK FACTORS

     24   

SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF NORTH

     32   

SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF SOUTH

     34   

UNAUDITED PRO FORMA COMBINED CONSOLIDATED FINANCIAL INFORMATION

     36   

COMPARATIVE PER-SHARE DATA OF NORTH AND SOUTH (UNAUDITED)

     44   

MARKET PRICES AND DIVIDEND INFORMATION

     45   

FORWARD-LOOKING STATEMENTS

     47   

INFORMATION ABOUT THE NORTH SPECIAL MEETING

     49   

Time, Date, and Place

     49   

Matters to Be Considered at the Meeting

     49   

Recommendation of the North Board of Directors

     51   

Record Date and Quorum

     51   

Required Vote

     51   

How to Vote—Shares Held of Record

     52   

How to Vote—Shares Held in “Street Name”

     52   

Revocation of Proxies

     53   

Shares Held by Directors and Executive Officers

     54   

Solicitation of Proxies

     54   

Attending the Meeting

     54   

Questions and Additional Information

     54   

INFORMATION ABOUT THE SOUTH SPECIAL MEETING

     55   

Time, Date, and Place

     55   

Matters to be Considered at the Meeting

     55   

Recommendation of the South Board of Directors

     55   

Record Date and Quorum

     56   

Required Vote

     56   

How to Vote—Shares Held of Record

     56   

How to Vote—Shares Held in “Street Name”

     57   

Revocation of Proxies

     57   

Shares Held by Directors and Executive Officers

     58   

Solicitation of Proxies

     58   

 

iii


Attending the Meeting

     58   

Questions and Additional Information

     59   

THE MERGER

     60   

Structure

     60   

Merger Consideration

     60   

Background of the Merger

     60   

Recommendation of North’s Board of Directors and Reasons for the Merger

     71   

Recommendation of South’s Board of Directors and Reasons for the Merger

     73   

Opinion of North’s Financial Advisor

     75   

Certain North Unaudited Prospective Financial Information

     85   

Opinion of South’s Financial Advisor

     87   

Certain South Unaudited Prospective Financial Information

     96   

Material U.S. Federal Income Tax Consequences of the Merger

     98   

Accounting Treatment

     103   

Regulatory Approvals

     103   

Appraisal Rights of Holders of North Class B Common Stock

     103   

Dissenters’ Rights of South’s Shareholders

     107   

Board of Directors and Management of North Following the Merger

     110   

Interests of North and/or North Bank’s Directors and Executive Officers in the Merger

     110   

Interests of South and/or South Bank’s Directors and Executive Officers in the Merger

     112   

Treatment of South Preferred Stock

     117   

Share Listing

     117   

THE MERGER AGREEMENT

     118   

The Merger

     118   

Closing and Effective Time of the Merger

     118   

Merger Consideration

     118   

Exchange of Stock Certificates

     119   

Representations and Warranties

     120   

Covenants and Agreements

     122   

Solicitation of Shareholders

     126   

Third Party Proposals

     127   

Conditions to Completion of the Merger

     127   

Termination

     128   

Termination Fees

     129   

Amendments, Extensions and Waivers

     130   

Expenses

     131   

DESCRIPTION OF NORTH’S CAPITAL STOCK

     132   

COMPARISON OF SHAREHOLDERS’ RIGHTS

     135   

 

iv


INFORMATION ABOUT NORTH

     147   

INFORMATION ABOUT SOUTH

     149   

Management’s Discussion and Analysis of Financial Condition and Results of Operations for the Years Ended December 31, 2013, 2012 and 2011

     159   

Management’s Discussion and Analysis of Financial Condition and Results of Operations for the Quarter Ended March 31, 2014

     198   

Information about South and South Bank Executive Officers who will become Executive Officers of North and North Bank following the Merger

     217   

Information about South Bank’s Compensation of South and South Bank Executive Officers who will become Executive Officers of North and North Bank following the Merger

     218   

Security Ownership of South Management and Certain South Beneficial Owners

     235   

Certain Relationships and Related Party Transactions

     239   

LEGAL MATTERS

     241   

EXPERTS

     241   

STOCKHOLDER PROPOSALS

     241   

DOCUMENTS INCORPORATED BY REFERENCE

     242   

INDEX TO FINANCIAL STATEMENTS

     F-1   

APPENDIX A: AGREEMENT AND PLAN OF MERGER

     A-1   

APPENDIX B: APPRAISAL RIGHTS

     B-1   

APPENDIX C: DISSENTERS’ RIGHTS

     C-1   

APPENDIX D: OPINION OF SANDLER O’NEILL + PARTNERS, L.P.

     D-1   

APPENDIX E: OPINION OF MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED

     E-1   

APPENDIX F: CERTIFICATE OF AMENDMENT OF THE RESTATED CERTIFICATE OF INCORPORATION OF FIRST CITIZENS BANCSHARES, INC.

     F-1   

 

v


QUESTIONS AND ANSWERS ABOUT THE

MERGER AND THE SPECIAL MEETINGS

The following are answers to certain questions that you may have regarding the special meetings. North and South urge you to read carefully the remainder of this document because the information in this section may not provide all of the information that might be important to you in determining how to vote. Additional important information is also contained in the appendices to, and the documents incorporated by reference in, this document.

 

Q: Why am I receiving these materials?

 

A: North is sending these materials to its stockholders to help them decide how to vote their shares of North common stock with respect to the North merger proposal, the North share issuance proposal, the North charter amendment proposal and the other matters to be considered at the North special meeting described below.

South is sending these materials to its shareholders to help them decide how to vote their shares of South common stock with respect to the South merger proposal and the other matters to be considered at the South special meeting described below.

The merger cannot be completed unless South shareholders approve the merger agreement and North stockholders approve the merger agreement, the issuance of North common stock in the merger and the related amendment to the North restated certificate of incorporation, as amended (the “North charter”). North is holding a special meeting of stockholders to vote on the merger agreement, the issuance of North common stock in the merger and the related amendment to the North charter, each as described in “Information about the North Special Meeting” beginning on page [    ] of this joint proxy statement/prospectus. South is holding a special meeting of shareholders to vote on the merger agreement as described in “Information about the South Special Meeting” beginning on page [    ] of this joint proxy statement/prospectus.

This joint proxy statement/prospectus constitutes a proxy statement and a prospectus of North and a proxy statement of South. It is a joint proxy statement because the boards of directors of both companies are soliciting proxies from their respective shareholders. It is a prospectus because North will issue shares of its common stock in exchange for shares of South common stock in the merger.

 

Q: Who are the members of the Holding family and what interests do they have in North and South?

 

A: For purposes of this joint proxy statement/prospectus, the Holding family includes Frank B. Holding, his spouse, Ella Ann Holding, their five adult children and their children’s spouses, and their grandchildren. The five adult children of Frank B. Holding and Ella Ann Holding are Frank B. Holding, Jr., Hope H. Bryant, Olivia B. Holding, Claire H. Bristow and Carson H. Brice.

The Holding family beneficially owns shares representing a majority of the voting power of the outstanding shares of North common stock and a majority of the outstanding shares of South common stock.

Frank B. Holding previously served as Executive Vice Chairman of North, Vice Chairman of South and a director of North and South.

Frank B. Holding, Jr. is Chairman and Chief Executive Officer of North and a director of North and South.

Hope H. Bryant is Vice Chairman and a director of North.

Claire H. Bristow’s spouse, Peter M. Bristow, is Executive Vice President and Chief Operating Officer and a director of South. Mr. Bristow is proposed to become President and Corporate Sales Executive of North and North Bank following the merger.

 

Q: Have the terms of the merger been evaluated by directors who are independent from the Holding family?

 

A:

Yes. The North board of directors established an evaluation committee of the North board of directors comprised of independent directors Victor E. Bell, H. Lee Durham, Jr., and Lucius S. Jones (the “North

 

 

1


  Committee”) to consider and negotiate the terms and conditions of the merger and to make a recommendation to the North board of directors.

The South board of directors established a special committee of the South board of directors comprised of independent directors M. Craig Garner, Jr. (Chairman), Robert Hoppe, Allen McIntyre and Kevin Marsh (the “South Committee”) to consider and negotiate the terms and conditions of the merger and to make a recommendation to the South board of directors.

See “The Merger—Background of the Merger” beginning on page [    ] of this joint proxy statement/prospectus.

 

Q: What will South shareholders receive in the merger?

 

A: Under the terms of the merger agreement, each South shareholder will receive 4.0 shares of North Class A common stock and $50.00 in cash for every share of South common stock the shareholder owns, unless such holder elects, pursuant to a letter of transmittal that will be delivered after closing of the merger, to receive 3.58 shares of North Class A common stock and 0.42 shares of North Class B common stock for every share of South common stock that they own. Cash will be paid in lieu of fractional shares.

 

Q: What is the difference between the stockholder rights of the North Class A common stock and North Class B common stock?

 

A: The shares of North Class A common stock are entitled to one vote for each share outstanding on all questions presented to stockholders, and the shares of North Class B common stock are entitled to 16 votes for each share outstanding on all questions presented to stockholders.

 

Q: Will the value of the merger consideration change between the date of this joint proxy statement/prospectus and the time the merger is completed?

 

A: The value of the merger consideration described above may fluctuate between the date of this joint proxy statement/prospectus and the completion of the merger based upon the market value for North Class A common stock and North Class B common stock. Any fluctuation in the market price of North Class A common stock and North Class B common stock after the date of this joint proxy statement/prospectus will change the value of the shares of North common stock that South shareholders will receive.

 

Q: When do North and South expect to complete the merger?

 

A: North and South expect to complete the merger after all conditions to the merger in the merger agreement are satisfied or waived, including after approvals are received at the respective special meetings of North and South and all required regulatory approvals are received. North and South currently expect to complete the merger in the fourth quarter of 2014. It is possible, however, that, as a result of factors outside of either company’s control, the merger may be completed at a later time, or may not be completed at all.

 

Q: What happens if the merger is not completed?

 

A: If the merger is not completed for any reason, South shareholders will not receive any consideration for their shares of South common stock. Instead, South will remain a separate company and continue to be owned by its current shareholders.

 

Q: How will the merger consideration received by South shareholders affect North stockholders other than the Holding family?

 

A: As a result of North’s issuance of new shares to South shareholders, current North stockholders other than the Holding family (who will also receive merger consideration for their shares of South common stock) will generally experience dilution in terms of percentage ownership of North and voting rights with respect to North. North stockholders who also own shares of South, including Holding family members, will experience less significant dilution or may actually experience an increase in voting control depending on the percentage of each entity owned.

 

 

2


Q: What am I being asked to vote on?

 

A: North Class A and Class B stockholders are being asked to vote on the following proposals:

 

    a proposal to approve the merger agreement (the “North merger proposal”);

 

    a proposal to approve the issuance of up to 2,605,004 shares of North Class A common stock and up to 273,526 shares of North Class B common stock in the merger (the “North share issuance proposal”);

 

    a proposal to approve an amendment to the North charter to increase the authorized number of shares of Class A common stock from 11,000,000 to 16,000,000 shares to enable the issuance of shares of North Class A common stock in the merger (the “North charter amendment proposal”); and

 

    a proposal to approve one or more adjournments of the North special meeting, if necessary or appropriate, including adjournments to solicit additional proxies in favor of the foregoing proposals (the “North adjournment proposal”).

A more detailed description of each of these proposals can be found under “Information about the North Special Meeting” beginning on page [    ] of this joint proxy statement/prospectus.

South shareholders are being asked to vote on:

 

    a proposal to approve the merger agreement (the “South merger proposal”); and

 

    a proposal to approve one or more adjournments of the South special meeting, if necessary or appropriate, including adjournments to solicit additional proxies in favor of the foregoing proposal (the “South adjournment proposal”).

Holders of South voting common stock will vote on both proposals. Holders of South non-voting common stock will vote only on the South merger proposal.

A more detailed description of each of these proposals can be found under “Information about the South Special Meeting” beginning on page [    ] of this joint proxy statement/prospectus.

 

Q: How do the boards of directors of North and South recommend that I vote?

 

A: The North board of directors recommends that North stockholders vote “FOR” the North merger proposal, “FOR” the North share issuance proposal, “FOR” the North charter amendment proposal and “FOR” the North adjournment proposal. For a discussion of interests of North’s directors and executive officers in the merger that may be different from, or in addition to, the interests of North stockholders generally, see “The Merger—Interests of North and/or North Bank’s Directors and Executive Officers in the Merger,” beginning on page [    ] of this joint proxy statement/prospectus.

The South board of directors recommends that South shareholders vote “FOR” the South merger proposal and “FOR” the South adjournment proposal. For a discussion of interests of South’s directors and executive officers in the merger that may be different from, or in addition to, the interests of South shareholders generally, see “The Merger—Interests of South and/or South Bank’s Directors and Executive Officers in the Merger,” beginning on page [    ] of this joint proxy statement/prospectus.

 

Q: Who can vote at the special meetings?

 

A: Holders of North Class A common stock and holders of North Class B common stock as of [    ], 2014, the record date established by the North board of directors, can vote on all matters at the North special meeting. Holders of South voting and non-voting common stock as of the close of business on [    ], 2014, the record date established by the South board of directors, can vote on the South merger proposal. Only holders of South voting common stock as of the close of business on the South record date can vote on the South adjournment proposal.

 

 

3


Q: What constitutes a quorum for the North special meeting?

 

A: The presence at the North special meeting, in person or by proxy, of the holders of shares representing a majority of the total votes entitled to be cast by holders of outstanding shares of North Class A common stock and North Class B common stock at its special meeting is necessary to constitute a quorum for the transaction of business at the North special meeting, and the presence at the North special meeting, in person or by proxy, of the holders of a majority of the outstanding shares of North Class A common stock is necessary to constitute a quorum for action on the North charter amendment proposal. Shares of North common stock represented at the special meeting but not voted, including shares that a stockholder abstains from voting and shares held in “street name” with a broker or other nominee for which a stockholder provides voting instructions for one or more, but not all, proposals to be voted on, will be counted for purposes of establishing a quorum. Once a share of North common stock is represented at the special meeting on any proposal, it will be counted for the purpose of determining a quorum for all proposals voted on, not only at the special meeting but also at any adjournment or postponement of the special meeting.

 

Q: What constitutes a quorum for the South special meeting?

 

A: The presence at the South special meeting, in person or by proxy, of the holders of a majority of the aggregate outstanding shares of the total South voting and non-voting common stock entitled to vote at its special meeting, as well as a majority of the outstanding shares of South voting common stock entitled to vote as a group at the special meeting and a majority of the outstanding shares of South non-voting common stock entitled to vote as a group at the meeting, is necessary to constitute a quorum for the transaction of business at the South special meeting. Shares of South common stock represented at the special meeting but not voted, including shares that a shareholder abstains from voting and shares held in “street name” with a broker or other nominee for which a shareholder provides voting instructions for one, but not both, proposals to be voted on, will be counted for purposes of establishing a quorum. Once a share of South common stock is represented at the special meeting, it will be counted for the purpose of determining a quorum not only at the special meeting but also at any adjournment or postponement of the special meeting.

 

Q: What vote is required to approve the North proposals?

 

A: The North merger proposal will be approved if a majority of the total votes entitled to be cast by holders of the outstanding shares of North Class A common stock and North Class B common stock, voting as a group, are cast in favor of such proposal. The North share issuance proposal will be approved if a majority of the total votes actually cast at the North special meeting by holders of the outstanding shares of North Class A common stock and North Class B common stock, voting as a group, are cast in favor of such proposal. The North charter amendment proposal will be approved if a majority of the total votes entitled to be cast by holders of the outstanding shares of: (i) North Class A common stock and North Class B common stock, voting as a group, and (ii) North Class A common stock, voting as a separate group, in each case are cast in favor of such proposal. The North adjournment proposal will be approved if a majority of the total votes entitled to be cast by holders of shares of North Class A common stock and North Class B common stock represented at the North special meeting, in person or by proxy, and voting as a group, are cast in favor of such proposal.

For the North merger proposal, the North charter amendment proposal and the North adjournment proposal, if a North stockholder fails to vote, responds by proxy with an “abstain” vote or fails to instruct his, her or its broker or other nominee with respect to any of such proposals, it will have the same effect as a vote cast “AGAINST” such proposal. If a North stockholder is not present in person at the North special meeting, does not respond by proxy or fails to instruct his, her or its broker or other nominee with respect to any of such proposals, it will have the same effect as a vote “AGAINST” the North merger proposal, the North charter amendment proposal and the North adjournment proposal.

For the North share issuance proposal, if a North stockholder fails to vote, responds by proxy with an “abstain” vote or fails to instruct his, her or its broker or other nominee with respect to such proposal, it will

 

 

4


have no effect on the vote count for such proposal. If a North stockholder is not present in person at the North special meeting, does not respond by proxy or fails to instruct his, her or its broker or other nominee with respect to such proposal, it will have no effect on the vote count for such proposal.

Frank B. Holding, a former director of North and one of its stockholders, also is a shareholder and former director of South. Frank B. Holding, Jr., North’s Chairman and Chief Executive Officer, also is a shareholder and director of South. Members of the Holding family, including members who serve as directors of North and in management positions with North, and certain family entities, hold, in the aggregate, approximately 24.6% of the outstanding shares of North Class A common stock and approximately 66.5% of the outstanding shares of North Class B common stock, together representing approximately 52.2% of the total votes entitled to be cast by all outstanding shares of both classes of North common stock.

In addition to the above shares, (i) South’s investment securities available for sale include an equity investment in North (approximately 2.0% of the outstanding shares of North Class A common stock and approximately 4.4% of the outstanding shares of North Class B common stock) and (ii) other entities in which members of the Holding family are shareholders and serve as directors and/or officers hold approximately 3.2% of the outstanding shares of North Class A common stock and approximately 2.4% of the outstanding shares of North Class B common stock. Those shares held by South and the other entities amount to approximately 6.2% of the total votes entitled to be cast by all outstanding shares of both classes of North common stock.

In total, members of the Frank B. Holding family and the other entities referred to above hold an aggregate of approximately 29.7% of the outstanding shares of North Class A common stock and approximately 73.1% of the outstanding shares of North Class B common stock, together representing approximately 58.2% of the total votes entitled to be cast by all outstanding shares of both classes of North common stock.

 

Q: What vote is required to approve the South proposals?

 

A: Under the provisions of the South Carolina Business Corporation Act, to be adopted, the South merger proposal must be approved by: (i) two-thirds of the South voting and non-voting common stock entitled to be cast on the merger, voting as a group, (ii) two-thirds of the South voting common stock entitled to be cast on the merger, voting as a separate group, and (iii) two-thirds of the South non-voting common stock entitled to be cast on the merger, voting as a separate group. In addition, it is a condition to the merger that a majority of the votes entitled to be cast on the merger by persons who are “minority holders” of South common stock not be cast against the South merger proposal. The term “minority holders” was negotiated by the North Committee and the South Committee, on the basis of South’s share records and related information, to include, generally, South shareholders who were not members of the Frank B. Holding family and South shareholders who were not affiliated with Mr. Holding or his family. The South adjournment proposal will be approved if the votes cast by South voting common stock in favor of the South adjournment proposal exceed the votes cast against the South adjournment proposal. The South non-voting common stock is not entitled to vote on the South adjournment proposal.

For the South merger proposal, if a South shareholder fails to vote, responds by proxy with an “abstain” vote or fails to instruct his, her or its broker or other nominee with respect to such proposal, it will have the same effect as a vote cast “AGAINST” such proposal. If a South shareholder is not present in person at the South special meeting, does not respond by proxy or fails to instruct his, her or its broker or other nominee with respect to such proposal, it will have the same effect as a vote “AGAINST” the South merger proposal.

For the South adjournment proposal, if a South shareholder fails to vote, responds by proxy with an “abstain” vote or fails to instruct his, her or its broker or other nominee with respect to such proposal, it will have no effect on the vote count for such proposal. If a South shareholder is not present in person at the South special meeting, does not respond by proxy or fails to instruct his, her or its broker or other nominee with respect to such proposal, it will have no effect on the vote count for such proposal.

 

 

5


Members of the Holding family, including those members who serve as directors of North and in management positions with North, and certain family entities, hold, in the aggregate, approximately 48.4% of the outstanding shares of South’s voting common stock and approximately 16.8% of the outstanding shares of South’s non-voting common stock, together representing approximately 47.2% of the total votes entitled to be cast on the South merger proposal by all outstanding shares of both classes of South’s common stock.

In addition to the above shares, (i) North’s investment securities available for sale include an equity investment in South (approximately 4.9% of the outstanding shares of South voting common stock) and (ii) other entities in which members of the Holding family are shareholders and serve as directors and/or officers hold approximately 8.8% of the outstanding shares of South voting common stock and approximately 14.1% of South non-voting common stock. Those shares held by North and the other entities amount to approximately 13.7% of the total votes entitled to be cast on the South merger proposal by all outstanding shares of both classes of South common stock.

In total, members of the Frank B. Holding family and the other entities referred to above hold an aggregate of approximately 62.1% of the outstanding shares of South voting common stock and approximately 30.9% of the outstanding shares of South non-voting common stock, together representing approximately 60.8% of the total votes entitled to be cast on the South merger proposal by all outstanding shares of both classes of South common stock.

 

Q: Is completion of the merger subject to any conditions?

 

A: Yes. North and South are not required to complete the merger unless a number of conditions are satisfied or, where permissible, waived by the board of directors of the party or parties for whom the condition exists. These conditions include, among others, (i) the adoption of the merger agreement by North stockholders and South shareholders, (ii) the approval of the North charter amendment proposal by North stockholders, (iii) receipt of approval of various governmental authorities without the imposition of a burdensome condition, (iv) the authorization for listing on the NASDAQ Global Select Market of the shares of North Class A common stock to be issued in the merger, (v) the effectiveness of the registration statement of which this joint proxy statement/prospectus is a part and the absence of any stop order suspending the effectiveness of this registration statement (or proceedings for that purpose initiated or threatened by the SEC and not withdrawn), (vi) the absence of any order, injunction or decree by any court or agency of competent jurisdiction or other legal restraint or prohibition preventing the consummation of the merger, the bank merger or any of the other material transactions contemplated by the merger agreement, (vii) the absence of any statute, rule, regulation, order, injunction or decree enacted, entered, promulgated or enforced by any governmental entity that prohibits or makes illegal consummation of the merger, the bank merger or any of the other material transactions contemplated by the merger agreement, (viii) the accuracy of the representations and warranties of each other party in the merger agreement as of the day on which the merger is completed, subject to the materiality standards provided in the merger agreement and the performance of the other party in all material respects of all obligations required to be performed by it at or prior to the effective time of the merger under the merger agreement (and the receipt by each party of certificates from the other party to such effect), (ix) receipt by each party of an opinion of legal counsel as to certain tax matters, (x) the absence of any events or occurrences that, individually or in the aggregate, have had or would reasonably be expected to have a material adverse effect on the other party, and (xi) a majority of the shares held by the minority holders of South common stock must not have voted against the merger. See “Information about South—Security Ownership of South Management and Certain South Beneficial Owners” beginning on page [    ] of this joint proxy statement/prospectus. For a more complete summary of the conditions that must be satisfied (or, where permissible, waived) prior to completion of the merger, see “The Merger Agreement—Conditions to Completion of the Merger” beginning on page [    ] of this joint proxy statement/prospectus.

 

 

6


Q: If my North or South shares are held in “street name” by a broker or other nominee, will my broker or nominee vote my shares for me?

 

A: Your broker or other nominee will not vote your shares unless you give voting instructions to your broker or other nominee. If your shares are held in “street name” through a broker or other nominee, that institution will send you separate instructions describing the procedure for voting your shares. Please follow the voting instructions provided by your broker or other nominee. Please note that you may not vote shares held in street name by returning a proxy card directly to North or South or by voting in person at your special meeting unless you provide a “legal proxy,” which you must obtain from your broker or other nominee.

Brokers or other nominees who hold shares in street name for a beneficial owner typically have the authority to vote in their discretion on “routine” proposals when they have not received instructions from beneficial owners. However, brokers or other nominees are not allowed to exercise their voting discretion on matters that are determined to be “non-routine” without specific instructions from the beneficial owner. Broker non-votes are shares held by a broker or other nominee that are represented at the applicable special meeting but with respect to which the broker or other nominee is not instructed by the beneficial owner of such shares to vote on the particular proposal and the broker or other nominee does not have discretionary voting power on such proposal.

If you are a North stockholder and you do not instruct your broker or other nominee on how to vote your shares, your broker or other nominee may not vote your shares on the North merger proposal, the North share issuance proposal, the North charter amendment proposal or the North adjournment proposal, which broker non-votes, if any, will have the same effect as a vote “AGAINST” the North merger proposal, the North charter amendment proposal and the North adjournment proposal and no effect on the North share issuance proposal.

If you are a South shareholder and you do not instruct your broker or other nominee on how to vote your shares, your broker or other nominee may not vote your shares on the South merger proposal or the South adjournment proposal, which broker non-votes, if any, will have the same effect as a vote “AGAINST” the South merger proposal and no effect on the South adjournment proposal.

 

Q: What will happen if I return my proxy card without indicating how to vote?

 

A: If you submit your proxy via the Internet, by telephone or by mail, the persons named on your proxy card will vote your shares in the manner you requested if you correctly submitted your proxy. If you sign your proxy card and return it without indicating how to vote on any particular proposal, the shares of common stock represented by your proxy will be voted in favor of that proposal. Notwithstanding the foregoing, North and South urge their respective shareholders to properly complete, date, and sign the enclosed proxy card and return it in the enclosed envelope to ensure that your shares will be represented at the special meetings.

 

Q: What do I need to do now?

 

A: After carefully reading and considering the information contained in this joint proxy statement/prospectus, North stockholders should vote by telephone or on the Internet, or complete, sign and date the enclosed proxy card or broker’s voting instruction form and return it in the enclosed envelope as soon as possible so that their shares will be represented at North’s special meeting.

After carefully reading and considering the information contained in this joint proxy statement/prospectus, South shareholders should vote by telephone or the Internet, or complete, sign and date the enclosed proxy card or broker’s voting instruction form and return it in the enclosed envelope as soon as possible so that their shares will be represented at South’s special meeting.

Please follow the instructions set forth on the proxy card or on the voting instruction form provided by the record holder if your shares are held in the name of your broker or other nominee.

 

 

7


Q: How do I cast my vote?

 

A: If you are a stockholder of record of North as of the record date for the North special meeting, which is [            ], 2014 (the “North record date”), you may cast your vote by:

 

    accessing the Internet website specified on your proxy card;

 

    calling the toll-free number specified on your proxy card; or

 

    signing and dating the enclosed proxy card and returning it in the postage-paid envelope provided.

You may also cast your vote in person at North’s special meeting.

If you are a shareholder of record of South as of the record date for the South special meeting, which is [            ], 2014 (the “South record date”), you may vote by:

 

    accessing the Internet website specified on your proxy card;

 

    calling the toll-free number specified on your proxy card; or

 

    signing and dating the enclosed proxy card and returning it in the postage-paid envelope provided.

You may also cast your vote in person at South’s special meeting.

If your North or South shares are held in “street name” through a broker or other nominee, that institution will send you separate instructions describing the procedure for voting your shares. Please follow the voting instructions provided by your broker or nominee. Please note that you may not vote shares held in street name by returning a proxy card directly to North or South or by voting in person at your special meeting unless you provide a “legal proxy,” which you must obtain from your broker or nominee.

 

Q: What if I hold shares in both North and South?

 

A: If you are both a North stockholder and a South shareholder, you will receive separate packages of proxy materials from each company. A vote as a North stockholder for any of the North proposals will not constitute a vote as a South shareholder for any South proposal, or vice versa. Therefore, please mark, sign, date and return all proxy cards and/or voting instructions that you receive from North or South, or vote over the Internet or by telephone.

 

Q: When are the North special meeting and the South special meeting, and where will each be held?

 

A: The special meeting of North stockholders will be held at [            ], at [            ] time, on [            ], 2014. All stockholders of North as of the North record date, or their duly appointed proxies, may attend the North special meeting.

The special meeting of South shareholders will be held at [            ], at [            ] time, on [            ], 2014. All shareholders of South as of the South record date, or their duly appointed proxies, may attend the South special meeting.

 

Q: What happens if I sell my North shares after the record date but before the North special meeting?

 

A: The North record date is earlier than the date of the North special meeting and earlier than the date that the merger is expected to be completed. If you sell or otherwise transfer your shares of North Class A common stock or North Class B common stock after the record date but before the date of the North special meeting, you will retain your right to vote at the North special meeting.

 

 

8


Q: What happens if I sell my South shares after the South record date but before the South special meeting?

 

A: The South record date is earlier than the date of the South special meeting and earlier than the date that the merger is expected to be completed. If you sell or otherwise transfer your shares of South common stock after the record date but before the date of the South special meeting, you will retain your right to vote at the South special meeting; however, you will not have the right to receive the merger consideration to be received by South shareholders in the merger. In order to receive the merger consideration, you must hold your shares through completion of the merger.

 

Q: Can North stockholders exercise appraisal rights in connection with the merger?

 

A: Under the Delaware General Corporation Law (“DGCL”), holders of North Class A common stock are not entitled to appraisal rights in connection with the merger.

Under the DGCL, holders of North Class B common stock who want to seek appraisal of the fair value of their shares must provide North with a written demand for appraisal prior to the vote on the North merger proposal at the North special meeting, stating, among other things, that you will exercise your right to seek appraisal if the merger is completed. Also, you may not vote in favor of the North merger proposal and must follow other procedures, both before and after the North special meeting, as described in Appendix B to this joint proxy statement/prospectus. Note that, if you return a signed proxy card without voting instructions or with instructions to vote “FOR” the North merger proposal, then your shares will automatically be voted in favor of the North merger proposal and you will lose all appraisal rights available under the DGCL. A summary of these provisions can be found under “The Merger—Appraisal Rights of Holders of North Class B Common Stock” beginning on page [ ] of this joint proxy statement/prospectus. Due to the complexity of the procedures for exercising appraisal rights, holders of North Class B common stock who are considering exercising such rights are encouraged to seek the advice of legal counsel. Failure to strictly comply with the applicable DGCL provisions will result in the loss of appraisal rights.

 

Q: Can South shareholders exercise dissenters’ rights in connection with the merger?

 

A: Yes. If you are a South shareholder and you want to exercise dissenters’ rights and obtain payment of the fair value of shares of South common stock in cash instead of the merger consideration, then you must provide South with written notice prior to the South special meeting stating, among other things, that you will exercise your right to dissent if the merger is completed. Also, you may not vote in favor of the South merger proposal and must follow other procedures, both before and after the South special meeting, as described in Appendix C to this joint proxy statement/prospectus. Note that, if you return a signed proxy card without voting instructions or with instructions to vote “FOR” the South merger proposal, then your shares will automatically be voted in favor of the South merger proposal and you will lose all dissenters’ rights available under South Carolina law. A summary of these provisions can be found under “The Merger—Dissenters’ Rights of South Shareholders” beginning on page [    ] of this joint proxy statement/prospectus. Due to the complexity of the procedures for exercising dissenters’ rights, South shareholders who are considering exercising such rights are encouraged to seek the advice of legal counsel. Failure to strictly comply with the applicable South Carolina law provisions will result in the loss of the right to dissent.

 

Q: Can I attend the North or South special meeting and vote my shares in person, and, if so, do I need to bring identification or anything else with me?

 

A:

Yes. All shareholders of North and South, including shareholders of record and shareholders who hold their shares through brokers or other nominees or any other holder of record, are invited to attend their respective special meetings. Holders of record of North and South common stock can vote in person at the North special meeting and South special meeting, respectively. If you are not a shareholder of record, you must obtain a “legal proxy,” executed in your favor, from the record holder of your shares, such as a broker or

 

 

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  other nominee, to be able to vote in person at the special meetings. If you plan to attend your special meeting, you must hold your shares in your own name or have a letter from the record holder of your shares confirming your ownership. In addition, you must bring a form of personal photo identification with you in order to be admitted. North and South reserve the right to refuse admittance to anyone without proper proof of share ownership or without proper photo identification. The use of cameras, sound recording equipment, communications devices or any similar equipment during the North or South special meeting is prohibited without North’s or South’s express written consent, respectively.

 

Q: Can I change my vote?

 

A: North stockholders: Yes. If you are a holder of record of North common stock, you may revoke any proxy at any time before it is voted by (i) signing and returning a proxy card with a later date, (ii) delivering a written revocation letter to North’s corporate secretary, (iii) submitting a valid, later-dated proxy via the Internet or by telephone before [            ] (Eastern Time) on [            ], 2014, or by mail that is received prior to the applicable special meeting or (iv) attending the special meeting in person, notifying the corporate secretary and voting by ballot at the special meeting. Attendance at the special meeting will not automatically revoke your proxy. A revocation or later-dated proxy received by North after the vote will not affect the vote. North’s corporate secretary’s mailing address is: Corporate Secretary, First Citizens BancShares, Inc., 4300 Six Forks Road, Raleigh, North Carolina 27609. If you hold your shares in “street name,” you should contact your broker or other nominee to revoke your proxy.

South shareholders: Yes. If you are a holder of record of South common stock, you may revoke any proxy at any time before it is voted by (i) signing and returning a proxy card with a later date, (ii) delivering a written revocation letter to South’s corporate secretary, (iii) submitting a valid, later-dated proxy via the Internet or by telephone before [            ] (Eastern Time) on [            ], 2014, or by mail that is received prior to the applicable special meeting or (iv) attending the special meeting in person, notifying the corporate secretary and voting by ballot at the special meeting. Attendance at the special meeting by itself will not automatically revoke your proxy. A revocation or later-dated proxy received by South after the vote will not affect the vote. South’s corporate secretary’s mailing address is: Corporate Secretary, First Citizens Bancorporation, Inc., 1230 Main Street, Columbia, South Carolina 29201. If you hold your shares in “street name,” you should contact your broker or other nominee to revoke your proxy.

 

Q: Should South shareholders send in their South share certificates now?

 

A: No. South shareholders SHOULD NOT send in any share certificates now. After the merger is completed, North will send you written instructions explaining how to exchange your South share certificates.

 

Q: What should I do if I receive more than one joint proxy statement/prospectus or set of voting instructions?

 

A: South shareholders and North stockholders may receive more than one set of voting materials, including multiple copies of this document and multiple proxy cards or voting instruction cards. For example, if you hold shares of South and/or North common stock in more than one brokerage account, you will receive a separate voting instruction card for each brokerage account in which you hold such shares. If you are a holder of record of shares of South common stock or North common stock and your shares are registered in more than one name, you will receive one or more separate proxy cards or voting instruction cards for each company. In addition, if you are a holder of record of shares of North Class A common stock and North Class B common stock, you will receive a separate proxy card or voting instruction card for each class of shares held. Please complete, sign, date and return each proxy card and voting instruction card that you receive or otherwise follow the voting instructions set forth in this document to ensure that you vote every share of South common stock and/or North common stock that you own.

 

 

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Q: Whom should I call with questions?

 

A: North stockholders: If you have any questions concerning the merger or this joint proxy statement/prospectus, would like additional copies of this joint proxy statement/prospectus or need help voting your shares of North common stock, please contact: Kathy A. Klotzberger, Corporate Secretary, First Citizens BancShares, Inc., 4300 Six Forks Road, Raleigh, North Carolina 27609 at (919) 716-8449.

South shareholders: If you have any questions concerning the merger or this joint proxy statement/prospectus, would like additional copies of this joint proxy statement/prospectus or need help voting your shares of South common stock, please contact: Melissa A. Mendenall, Corporate Secretary, First Citizens Bancorporation, Inc., 1230 Main Street, Columbia, South Carolina 29201, at (803) 931-1320.

 

 

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SUMMARY

The following summary highlights selected information from this joint proxy statement/prospectus. It does not contain all of the information that is important to you. Each item in this summary refers to the page where that subject is discussed in more detail. You should carefully read the entire joint proxy statement/prospectus and the other documents to which we refer to understand fully the merger. See “Where You Can Find More Information” beginning on page [    ] of this joint proxy statement/prospectus on how to obtain copies of those documents. In addition, the merger agreement is attached as Appendix A to this joint proxy statement/prospectus. First Citizens BancShares, Inc. and First Citizens Bancorporation, Inc. encourage you to read the merger agreement because it is the legal document that governs the merger.

Information about North and South

First Citizens BancShares, Inc.

4300 Six Forks Road

Raleigh, North Carolina 27609

(919) 716-7000

North was incorporated under the laws of Delaware on August 7, 1986, to become the holding company of North Bank, its banking subsidiary. North Bank opened in 1898 as the Bank of Smithfield in Smithfield, North Carolina, and later became North Bank. On April 28, 1997, North launched IronStone Bank, or “ISB,” a federally-chartered thrift institution that originally operated under the name Atlantic States Bank. Initially, ISB operated in the counties surrounding Atlanta, Georgia, but gradually expanded into other high-growth markets throughout the southeastern and western United States. On January 7, 2011, ISB was merged into North Bank resulting in a single banking subsidiary of North.

Prior to 2009, North Bank focused on organic growth, delivering its products and services to customers through de novo branch expansion. Beginning in 2009, leveraging on its strong capital and liquidity positions, North Bank participated in six FDIC-assisted transactions involving distressed financial institutions. These transactions allowed North Bank to enter new markets and expand its presence in other markets.

As of March 31, 2014, North Bank operated 409 branches in North Carolina, Virginia, West Virginia, Maryland, Tennessee, Washington, California, Florida, Georgia, Texas, Arizona, New Mexico, Oregon, Colorado, Oklahoma, Kansas, Missouri and Washington, DC.

North Class A common stock is traded on the NASDAQ Global Select Market under the symbol “FCNCA.”

North Class B common stock is traded in the over-the-counter market and is quoted on the OTC Bulletin Board under the symbol “FCNCB.”

For more information about North, see “Information about North” beginning on page [    ] of this joint proxy statement/prospectus.

First Citizens Bancorporation, Inc.

1230 Main Street

Columbia, South Carolina 29201

(803) 931-1320

South is a one-bank holding company incorporated in 1982 under the laws of the State of South Carolina whose principal subsidiary is South Bank. South Bank offers a complete array of commercial and retail banking services through its 157 offices in 102 communities in South Carolina and 20 offices in 17 communities in Georgia. South Bank also offers trust services. South Bank’s wholly-owned subsidiary, First Citizens Securities Corporation, offers brokerage, financial advisory and wealth management services, and South Bank’s wholly-owned subsidiary, First Citizens Asset Management, Inc. offers investment advisory services.

 

 

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South voting common stock is traded in the over-the-counter market and is quoted on the OTC Bulletin Board under the symbol “FCBN.” There is no established public trading market for the South non-voting common stock, it is only traded infrequently and it is not quoted on the OTC Bulletin Board or listed on any exchange.

For more information about South, see “Information about South” beginning on page [    ] of this joint proxy statement/prospectus.

The Merger (see page [    ])

The terms and conditions of the merger are contained in the merger agreement, a copy of which is included as Appendix A to this joint proxy statement/prospectus and is incorporated by reference herein. You should read the merger agreement carefully and in its entirety, as it is the legal document governing the merger. This summary is intended to assist you in reviewing the proposed merger, but shall not under any circumstances be deemed a substitute for carefully reviewing the merger agreement in its entirety. In the event of any conflict between this summary and the merger agreement, the terms of the merger agreement will control.

In the merger, South will merge with and into North, with North as the surviving company. It is expected that, following the merger, South Bank will merge with and into North Bank, with North Bank as the surviving bank.

Closing and Effective Time of the Merger (see page [    ])

The closing date is currently expected to occur in the fourth quarter of 2014. The merger will become effective as set forth in the certificate of merger to be filed with the Secretary of State of the State of Delaware and the articles of merger to be filed with the Secretary of State of the State of South Carolina. Neither North nor South can predict, however, the actual date on which the merger will be completed because it is subject to factors beyond each company’s control, including whether or when the required regulatory approvals and the parties’ respective shareholder approvals will be received.

Merger Consideration (see page [    ])

Under the terms of the merger agreement, each share of South common stock will be converted into the right to receive 4.0 shares of North Class A common stock and $50.00 in cash, unless the holder of such share elects, pursuant to a letter of transmittal that will be delivered after closing of the merger, for each share of such holder’s South common stock to be converted into the right to receive 3.58 shares of North Class A common stock and 0.42 shares of North Class B common stock. Cash will be paid in lieu of issuing fractional shares of North common stock.

Exchange of Stock Certificates (see page [    ])

Promptly after the effective time of the merger, North’s exchange agent will mail to each holder of record of South common stock that is converted into the right to receive the merger consideration a letter of transmittal and instructions for the surrender of the holder’s South share certificate(s) for the merger consideration (including cash in lieu of any fractional North shares) and any dividends or distributions to which such holder is entitled pursuant to the merger agreement.

Please do not send in your share certificate until you receive instructions.

Material U.S. Federal Income Tax Consequences of the Merger (see page [    ])

The merger is intended to qualify as a “reorganization” within the meaning of section 368(a) of the Code, and it is a condition to the respective obligations of North and South to complete the merger that each of North and

 

 

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South receives a legal opinion to that effect. Assuming such treatment applies, a holder of South common stock who receives only North common stock in the merger generally will not recognize gain in the merger. A holder of South common stock who receives cash in the merger will recognize gain up to the amount of cash received. In addition, a holder of South common stock may recognize gain or loss from the receipt of cash in lieu of a fractional share of North common stock that such holder of South common stock would otherwise be entitled to receive.

The United States federal income tax consequences described in this joint proxy statement/prospectus may not apply to all holders of shares of South common stock. Your tax consequences will depend on your individual situation. Accordingly, we strongly urge you to consult your tax advisor for a full understanding of the particular tax consequences of the merger to you.

Appraisal Rights of Holders of North Class B Common Stock (see page [    ] and Appendix B)

If a holder of North Class B common stock wants to seek appraisal of the fair value of their shares, such holder must provide North with a written demand for appraisal prior to the vote on the North merger proposal at the North special meeting stating, among other things, that you will exercise your right to seek appraisal if the merger is completed. Also, you may not vote in favor of the North merger proposal and must follow other procedures, both before and after the special meeting, as described in Appendix B to this joint proxy statement/prospectus. Note that, if you return a signed proxy card without voting instructions or with instructions to vote “FOR” the North merger proposal, then your shares will automatically be voted in favor of the North merger proposal and you will lose all appraisal rights available under the DGCL. A summary of these provisions can be found under “The Merger—Appraisal Rights of Holders of North Class B Common Stock” beginning on page [    ] of this joint proxy statement/prospectus. Due to the complexity of the procedures for exercising appraisal rights, holders of North Class B common stock who are considering exercising such rights are encouraged to seek the advice of legal counsel. Failure to strictly comply with the applicable DGCL provisions will result in the loss of appraisal rights.

Dissenters’ Rights of South’s Shareholders (see page [    ] and Appendix C)

If a South shareholder wants to exercise dissenters’ rights and obtain payment of the fair value of shares of South common stock in cash instead of the merger consideration, then such holder must provide South with written notice prior to the special meeting stating, among other things, that you will exercise your right to dissent if the merger is completed. Also, you may not vote in favor of the South merger proposal and must follow other procedures, both before and after the special meeting, as described in Appendix C to this joint proxy statement/prospectus. Note that, if you return a signed proxy card without voting instructions or with instructions to vote “FOR” the South merger proposal, then your shares will automatically be voted in favor of the South merger proposal and you will lose all dissenters’ rights available under South Carolina law. A summary of these provisions can be found under “The Merger—Dissenters’ Rights of South Shareholders” beginning on page [    ] of this joint proxy statement/prospectus. Due to the complexity of the procedures for exercising dissenters’ rights, South shareholders who are considering exercising such rights are encouraged to seek the advice of legal counsel. Failure to strictly comply with the applicable South Carolina law provisions will result in the loss of the right to dissent.

Opinion of North’s Financial Advisor (see page [    ] and Appendix D)

On June 10, 2014, at a meeting of the North Committee, Sandler O’Neill + Partners, L.P. (“Sandler O’Neill”) delivered to the North Committee its oral opinion, which was subsequently confirmed in writing on June 10, 2014, that, as of June 10, 2014, subject to procedures followed, assumptions made, matters considered and qualifications and limitations described in Sandler O’Neill’s opinion, the merger consideration was fair to North and its stockholders from a financial point of view.

 

 

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The full text of Sandler O’Neill’s opinion is attached as Appendix D to this joint proxy statement/prospectus. The opinion outlines, among other things, the procedures followed, assumptions made, matters considered and qualifications and limitations on the review undertaken by Sandler O’Neill in rendering its opinion. Holders of North Class A common stock and North Class B common stock are urged to read the entire opinion carefully in connection with their consideration of the proposed merger.

Sandler O’Neill’s opinion speaks only as of the date of the opinion. The opinion was addressed to the North Committee and is directed only to the fairness of the merger consideration to North and its stockholders from a financial point of view. It does not address the underlying business decision of North to engage in the merger or any other aspect of the merger and is not a recommendation to any shareholder of North or South as to how such shareholder should vote at their special meeting with respect to the merger or any other matter. Sandler O’Neill did not express any opinion as to the fairness of the amount or nature of the compensation to be received in connection with the merger by South’s officers, directors, or employees, or any class of such persons, relative to the merger consideration to be received in the merger by any other shareholders of South.

For further information, please see the section entitled “The Merger—Opinion of North’s Financial Advisor” beginning on page [    ].

Opinion of South’s Financial Advisor (see page [    ] and Appendix E)

In connection with the merger, Merrill Lynch, Pierce, Fenner & Smith Incorporated (“BofA Merrill Lynch”), South’s financial advisor, delivered to the South Committee a written opinion, dated June 10, 2014, as to the fairness, from a financial point of view and as of the date of the opinion, of the merger consideration to be received by the minority holders of South common stock who do not elect to receive North Class B common stock as part of the merger consideration. The full text of the written opinion, dated June 10, 2014, of BofA Merrill Lynch, which describes, among other things, the assumptions made, procedures followed, factors considered and limitations on the review undertaken, is attached as Appendix E to this document and is incorporated by reference herein in its entirety. BofA Merrill Lynch provided its opinion to the South Committee (in its capacity as such) for the benefit and use of the South Committee in connection with and for purposes of its evaluation of the merger consideration from a financial point of view. BofA Merrill Lynch’s opinion does not address any other aspect of the merger and no opinion or view was expressed as to the relative merits of the merger in comparison to other strategies or transactions that might be available to South or in which South might engage or as to the underlying business decision of South to proceed with or effect the merger. BofA Merrill Lynch’s opinion does not address any other aspect of the merger and does not constitute a recommendation to any shareholder as to how to vote or act in connection with the proposed merger or any related matter.

Recommendation of the North Board of Directors (see page [    ])

After careful consideration, the North board of directors recommends that North stockholders vote “FOR” the North merger proposal, “FOR” the North share issuance proposal, “FOR” the North charter amendment proposal and “FOR” the North adjournment proposal.

For a more complete description of North’s reasons for the merger and the recommendations of the North board of directors, please see the section entitled “The Merger—Recommendation of North’s Board of Directors and Reasons for the Merger” beginning on page [    ] of this joint proxy statement/prospectus.

 

 

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Recommendation of the South Board of Directors (see page [    ])

After careful consideration, the South board of directors recommends that South shareholders vote “FOR” the South merger proposal and “FOR” the South adjournment proposal.

For a more complete description of South’s reasons for the merger and the recommendation of the South board of directors, please see the section entitled “The Merger—Recommendation of South’s Board of Directors and Reasons for the Merger” beginning on page [    ] of this joint proxy statement/prospectus.

Interests of North and/or North Bank’s Directors and Executive Officers and South and/or South Bank’s Directors and Executive Officers (see page [    ])

In considering the recommendations of the North and South boards of directors with respect to the respective merger and other proposals, you should be aware that some of North’s and/or North Bank’s directors and executive officers have interests in the merger that are different from, or in addition to, the interests of North’s stockholders generally, and some of South’s and/or South Bank’s directors and executive officers have interests in the merger that are different from, or in addition to, the interests of South’s shareholders generally. Specifically, Frank B. Holding, a former director of North and one of its stockholders, also is a shareholder and former director of South. Frank B. Holding, Jr., North’s Chairman and Chief Executive Officer, also is a shareholder and director of South. Members of the Holding family, including members who serve as directors of North and are in management positions with North, and certain family entities hold, in the aggregate, (i) approximately 24.6% of the outstanding shares of North Class A common stock and approximately 66.5% of the outstanding shares of North Class B common stock, together representing approximately 52.2% of the total votes entitled to be cast by all outstanding shares of both classes of North common stock and (ii) approximately 48.4% of the outstanding shares of South voting common stock and approximately 66.5% of the outstanding shares of South non-voting common stock, together representing approximately 47.2% of the total votes entitled to be cast on the South merger proposal by all outstanding shares of both classes of South common stock. In addition to the above shares (i) North’s investment securities available for sale include an equity investment in South (approximately 4.9% of the outstanding shares of South voting common stock), and South’s investment securities available for sale include an equity investment in North (approximately 2.0% of the outstanding shares of North Class A common stock and approximately 4.4% of the outstanding shares of North Class B common stock), and (ii) other entities in which members of the Holding family are shareholders and serve as directors and/or officers hold approximately 3.2% of the outstanding shares of the North Class A common stock, approximately 2.4% of the outstanding shares of the North Class B common stock, approximately 8.8% of the outstanding shares of South voting common stock, and approximately 14.1% of South non-voting common stock. Those shares held by North, South and the other entities amount to approximately 6.2% of the total votes entitled to be cast by all outstanding shares of both classes of North common stock and approximately 13.7% of the total votes entitled to be cast by all outstanding shares of both classes of South common stock.

In total, members of the Frank B. Holding family and the other entities referred to above hold an aggregate of (i) approximately 29.7% of the outstanding shares of North Class A common stock and approximately 73.1% of the outstanding shares of North Class B common stock, together representing approximately 58.2% of the total votes entitled to be cast by all outstanding shares of both classes of North common stock and (ii) approximately 62.1% of the outstanding shares of South voting common stock and approximately 30.9% of the outstanding shares of South non-voting common stock, together representing approximately 60.8% of the total votes entitled to be cast on the South merger proposal by all outstanding shares of both classes of South common stock.

Additionally, Victor E. Bell III, a director of North and member of the North Committee, holds 107 shares of South voting common stock in trust for his nieces and nephews, and 53 shares of South voting common stock are held by a family member as trustee for Mr. Bell’s children, which collectively amount to approximately 0.02% of the outstanding shares of South voting common stock.

 

 

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The North and South boards of directors were aware of, and considered, these interests, among other matters, when making their respective decisions to approve the merger agreement, and in recommending that North’s and South’s respective shareholders vote in favor of the merger agreement.

Finally, subsequent to execution of the merger agreement, North announced that (i) Peter M. Bristow, currently Executive Vice President and Chief Operating Officer of South, President and Chief Operating Officer of South Bank and brother-in-law to Mr. Holding, Jr. and Ms. Hope H. Bryant, Vice Chairman of North and North Bank, is proposed to become President and Corporate Sales Executive of North and North Bank at the effective time of the merger and (ii) Craig L. Nix, currently Executive Vice President and Chief Financial Officer of South and South Bank, is proposed to replace North’s and North Bank’s current Chief Financial Officer, Glenn D. McCoy, who will retire on a date to be determined following the merger.

These interests are discussed in more detail in the sections entitled “The Merger—Interests of North and/or North Bank’s Directors and Executive Officers in the Merger” beginning on page [    ] of this joint proxy statement/prospectus, “The Merger—Interests of South and/or South Bank’s Directors and Executive Officers in the Merger” beginning on page [    ] of this joint proxy statement/prospectus and “The Merger—Board of Directors and Management of North Following the Merger” beginning on page [    ] of this joint proxy statement/prospectus.

Regulatory Approvals (see page [    ])

Completion of the merger requires the prior approval of the Board of Governors of the Federal Reserve System, the South Carolina State Board of Financial Institutions, and the North Carolina Commissioner of Banks. Completion of the bank merger requires the prior approval of the Federal Deposit Insurance Corporation, the North Carolina Commissioner of Banks and the North Carolina State Banking Commission. Additionally, certain notices to or approvals of various non-bank regulatory agencies will be required related to South Bank’s insurance, broker-dealer and investment advisory subsidiaries.

The regulatory approvals to which the completion of the merger and bank merger are subject are described in more detail under the section entitled “The Merger—Regulatory Approvals” beginning on page [    ] of this joint proxy statement/prospectus.

Conditions to Completion of the Merger (see page [    ])

The completion of the merger depends on a number of conditions being satisfied or, where permissible, waived, including:

 

    receipt of North stockholder approval of the North merger proposal, the North share issuance proposal and the North charter amendment proposal;

 

    receipt of South shareholder approval of the South merger proposal;

 

    authorization for listing of North Class A common stock issuable as merger consideration on the NASDAQ Global Select Market;

 

    receipt of regulatory approvals;

 

    effectiveness of the registration statement, of which this joint proxy statement/prospectus is a part;

 

    absence of an injunction preventing the merger or law prohibiting the merger;

 

    accuracy of each party’s representations and warranties as of the signing and closing (or such other date specified in the merger agreement), subject to certain exceptions;

 

    performance of all requisite obligations by North and South under the merger agreement in all material respects;

 

 

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    delivery of customary closing certificates and other deliverables by each party;

 

    absence of a material adverse effect on either party between the date of the merger agreement and closing of the merger;

 

    receipt by each party of an opinion that the merger qualifies as a tax-free reorganization; and

 

    a majority of the votes entitled to be cast on the South merger proposal by minority holders of South (which minority holds approximately 37.0% of the aggregate outstanding voting common stock of South) must not have cast their votes against the South merger proposal. The term “minority holders” was negotiated by the North Committee and the South Committee, on the basis of South’s share records and related information, to include, generally, South shareholders who were not members of the Frank B. Holding family and South shareholders who were not affiliated with Mr. Holding or his family.

Third Party Proposals (see page [    ])

South has agreed to a number of limitations with respect to soliciting, negotiating and discussing acquisition proposals involving persons other than North and to certain related matters. The merger agreement does not, however, prohibit South from considering an unsolicited bona fide acquisition proposal from a third party if certain specified conditions are met.

Termination of the Merger Agreement (see page [    ])

The merger agreement may be terminated at any time prior to the effective time of the merger and, except as specified below, whether before or after adoption of the merger agreement by the respective shareholders of North or South:

 

    by mutual written consent of North and South;

 

    by either North or South if any governmental entity that must grant a requisite regulatory approval has (i) denied approval of the consummation of any of the material transactions contemplated by the merger agreement, including the merger or the bank merger and such denial has become final and nonappealable or any governmental entity of competent jurisdiction has issued a final nonappealable order permanently enjoining or otherwise prohibiting the consummation of any of the material transactions contemplated by the merger agreement, including the merger or the bank merger or (ii) granted the requisite regulatory approval, but such approval contains or results in the imposition of a materially burdensome regulatory condition and there is no meaningful possibility that such approval could be revised prior to the termination date of the merger agreement so as not to result in a materially burdensome regulatory condition, unless, in either case, the failure to obtain a requisite regulatory approval or to obtain a requisite regulatory approval without it containing or resulting in the imposition of a materially burdensome regulatory condition shall be due to the failure of the party seeking to terminate the merger agreement to perform or observe the covenants and agreements of such party set forth in the merger agreement;

 

    by either North or South if the merger is not consummated on or before one year from the date of the merger agreement, unless the failure of the closing to occur by such date is due to the failure of the party seeking to terminate the merger agreement to perform or observe the covenants and agreements of such party set forth in the merger agreement;

 

   

by either North or South if there is a breach of any of the covenants or agreements or any of the representations or warranties in the merger agreement by the other party, either individually or in the aggregate with all other breaches by such party, such that any of the conditions to North’s obligations or conditions to South’s obligations, respectively, set forth in the merger agreement would not be

 

 

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satisfied, and (i) such breach is not reasonably capable of being cured or (ii) if such breach is reasonably capable of being cured, such breach is not cured by the earlier of (a) the termination date of the merger agreement or (b) the date that is 30 days following written notice thereof to the party committing such breach; provided in each case that the terminating party is not then in breach of any representation, warranty, covenant or other agreement of such party contained in the merger agreement such that any of the conditions to North’s or South’s obligations would not be satisfied;

 

    by either North or South if (i) in the North special meeting (including any postponements or adjournments thereof) the proposals are correctly voted on and the requisite North vote is not obtained or (ii) in the South special meeting (including any postponements or adjournments thereof) the proposals are correctly voted on and the requisite South vote is not obtained; provided that the party seeking to terminate the merger agreement under this provision has complied in all material respects with its obligations under the shareholders’ approval section of the merger agreement (including by complying with an adjournment or postponement request as specified in the merger agreement);

 

    by North, prior to South obtaining the requisite South vote, if (i) the board of directors of South has failed to recommend approval of the merger agreement by South shareholders, failed to include such recommendation in this joint proxy statement/prospectus or has withdrawn such recommendation (or modified it in a manner adverse to North), each a “change in board recommendation,” or (ii) South failed to comply in all material respects with its obligations to solicit its shareholders under the merger agreement (see “The Merger Agreement—Solicitation of Shareholders”) or the restrictions on acquisition proposals under the merger agreement (see “The Merger Agreement—Third Party Proposals”);

 

    by South, prior to North obtaining the requisite North vote, if North failed to comply in all material respects with its obligations to solicit its stockholders under the merger agreement (see “The Merger Agreement—Solicitation of Shareholders”);

 

    by South, prior to obtaining the requisite South vote, if the board of directors of South has effected a change in board recommendation; provided that South has complied with the requirements of the board of directors recommendation provision in the shareholders’ approval section of the merger agreement (see “The Merger Agreement—Solicitation of Shareholders”) and the restrictions on acquisition proposals under the merger agreement (see “The Merger Agreement—Third Party Proposals”);

 

    by North if there are certain material defects with South’s real property and such defects individually or in the aggregate have a material adverse effect on South; or

 

    by North if holders of 10% of the outstanding shares of South common stock are deemed “dissenting shares” pursuant to the terms of the merger agreement.

Termination Fees (see page [    ])

If the merger agreement is terminated under specified circumstances, South has agreed to pay North a termination fee of $6,450,000, $10,000,000 or $22,574,000 (and in certain instances, North’s documented expenses), depending on the timing and circumstances of the termination.

Share Listing (see page [    ])

North will cause the shares of North Class A common stock that are to be issued to the holders of South common stock in the merger to be authorized for listing on the NASDAQ Global Select Market, subject to official notice of issuance, prior to the effective time of the merger. North Class B common stock trades in the over-the-counter market and is quoted on the OTC Bulletin Board.

 

 

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Accounting Treatment (see page [    ])

North will account for the merger under the acquisition method of accounting for business combinations under accounting principles generally accepted in the United States of America (“GAAP”).

North Special Meeting (see page [    ])

The special meeting of North stockholders will be held on [            ], 2014, at [            ], local time, at [            ]. At the special meeting, North Class A and Class B stockholders will be asked to vote on:

 

    the North merger proposal;

 

    the North share issuance proposal;

 

    the North charter amendment proposal;

 

    the North adjournment proposal; and

 

    any other matters as may properly be brought before the special meeting or any adjournment or postponement of the special meeting.

See “Information about the North Special Meeting” beginning on page [    ] of this joint proxy statement/prospectus for more information about the proposals to be considered at the North special meeting.

Holders of North Class A common stock and North Class B common stock as of [            ], 2014, the North record date, can vote at the North special meeting. As of the North record date, there were an aggregate of [            ] shares of North Class A and Class B common stock outstanding and entitled to notice and to vote, held by approximately [            ] holders of record. Of that total, there were an aggregate of [            ] shares of North Class A common stock outstanding and entitled to notice and to vote held by approximately [            ] holders of record, and an aggregate of [            ] shares of North Class B common stock outstanding and entitled to notice and to vote held by approximately [            ] holders of record. Each holder of North Class A common stock can cast one vote for each share of North Class A common stock owned on the North record date. Each holder of North Class B common stock can cast 16 votes for each share of North Class B common stock owned on the North record date.

As of the North record date, directors and executive officers of North and their affiliates owned and were entitled to vote [            ] shares of North Class A common stock and [            ] shares of North Class B common stock, representing approximately [            ]% of the shares of North Class A common stock and approximately [            ]% of the shares of North Class B common stock outstanding and entitled to vote on that date, respectively, and [            ] total votes. As of the North record date, South and directors and executive officers of South and their affiliates owned and were entitled to vote [            ] shares of North Class A common stock and [            ] shares of North Class B common stock, representing approximately [    ]% of the shares of North Class A common stock and [    ]% of the shares of North Class B common stock outstanding and entitled to vote on that date, respectively, and [            ] total votes.

South Special Meeting (see page [    ])

The special meeting of South shareholders will be held on [            ], 2014, at [            ], local time, at [            ]. At the special meeting, South shareholders will be asked to vote on:

 

    the South merger proposal;

 

    the South adjournment proposal; and

 

    any other matters as may properly be brought before the special meeting or any adjournment or postponement of the special meeting.

 

 

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See “Information about the South Special Meeting” beginning on page [    ] of this joint proxy statement/prospectus for more information about the proposals to be considered at the South special meeting.

Holders of South voting and non-voting common stock as of the close of business on [            ], 2014, the South record date, can vote on the South merger proposal at the South special meeting. Only holders of South voting common stock can vote on the South adjournment proposal at the South special meeting. As of the South record date, there were an aggregate of [            ] shares of South voting and non-voting common stock outstanding and entitled to notice and to vote held by approximately [            ] holders of record. As of the South record date, there were an aggregate of [            ] shares of South voting common stock outstanding and entitled to notice and to vote held by approximately [            ] holders of record. As of the South record date, there were an aggregate of [            ] shares of South non-voting common stock outstanding and entitled to notice and to vote held by approximately [            ] holders of record. Each holder of South voting and non-voting common stock can cast one vote for each share of South voting or non-voting common stock owned on the South record date.

As of the South record date, directors and executive officers of South and their affiliates owned and were entitled to vote an aggregate of [            ] shares of South voting and non-voting common stock, representing approximately [            ]% of the aggregate shares of South voting and non-voting common stock outstanding and entitled to vote on that date. As of the South record date, directors and executive officers of South and their affiliates owned and were entitled to vote [            ] shares of South voting common stock and [            ] shares of the South non-voting common stock, representing approximately [            ]% of the shares of South voting common stock and [            ]% of the shares of South non-voting common stock outstanding and entitled to vote on that date, respectively. As of the South record date, North and directors and executive officers of North and their affiliates owned and were entitled to vote an aggregate of [            ] shares of South voting and non-voting common stock, representing approximately [    ]% of the aggregate shares of South voting and non-voting common stock outstanding and entitled to vote on that date. As of the South record date, North and directors and executive officers of North and their affiliates owned and were entitled to vote [            ] shares of South voting common stock and [            ] shares of the South non-voting common stock, representing approximately [            ]% of the shares of South voting common stock and [            ]% of the shares of South non-voting common stock outstanding and entitled to vote on that date, respectively.

Required Shareholder Votes (see page [    ])

The North merger proposal will be approved if a majority of the total votes entitled to be cast by holders of the outstanding shares of North Class A common stock and North Class B common stock, voting as a group, are cast in favor of such proposal. The North share issuance proposal will be approved if a majority of the total votes actually cast at the North special meeting by holders of the outstanding shares of North Class A common stock and North Class B common stock, voting as a group, are cast in favor of such proposal. The North charter amendment proposal will be approved if a majority of the total votes entitled to be cast by holders of the outstanding shares of: (i) North Class A common stock and North Class B common stock, voting as a group, and (ii) North Class A common stock, voting as a separate group, in each case are cast in favor of such proposal. The North adjournment proposal will be approved if a majority of the total votes entitled to be cast by holders of shares of North Class A common stock and North Class B common stock represented at the North special meeting, in person or by proxy, and voting as a group, are cast in favor of such proposal.

Under the provisions of the South Carolina Business Corporation Act, to be adopted, the South merger proposal must be approved by: (i) two-thirds of the South voting and non-voting common stock entitled to be cast on the merger, voting as a group, (ii) two-thirds of the South voting common stock entitled to be cast on the merger, voting as a separate group, and (iii) two-thirds of the South non-voting common stock entitled to be cast on the merger, voting as a separate group. In addition, it is a condition to the merger that a majority of the votes entitled to be cast on the merger by persons who are “minority holders” of South common stock not be cast

 

 

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against the merger. The term “minority holders” was negotiated by the North Committee and the South Committee, on the basis of South’s share records and related information, to include, generally, South shareholders who were not members of the Frank B. Holding family and South shareholders who were not affiliated with Mr. Holding or his family.

The South adjournment proposal will be approved if the votes cast by the South voting common stock in favor of the South adjournment proposal exceed the votes cast against the South adjournment proposal. The South non-voting common stock is not entitled to vote on the South adjournment proposal.

Members of the Holding family, including those members who serve as directors of North and are in management positions with North, and certain family entities, hold, in the aggregate, (i) approximately 24.6% of the outstanding shares of North’s Class A common stock and approximately 66.5% of the outstanding shares of North’s Class B common stock, together representing approximately 52.2% of the total votes entitled to be cast by all outstanding shares of both classes of North’s common stock and (ii) approximately 48.4% of the outstanding shares of South’s voting common stock and approximately 16.8% of the outstanding shares of South’s non-voting common stock, together representing approximately 47.2% of the total votes entitled to be cast on the South merger proposal by all outstanding shares of both classes of South’s common stock.

In addition to the above shares, (i) North’s investment securities available for sale include an equity investment in South (approximately 4.9% of the outstanding shares of South voting common stock), and South’s investment securities available for sale include an equity investment in North (approximately 2.0% of the outstanding shares of North’s Class A common stock and approximately 4.4% of the outstanding shares of North’s Class B common stock) and (ii) other entities in which members of the Holding family are shareholders and serve as directors and/or officers hold approximately 3.2% of the outstanding shares of North’s Class A common stock, approximately 2.4% of the outstanding shares of North’s Class B common stock, approximately 8.8% of the outstanding shares of South voting common stock, and approximately 14.1% of South’s non-voting common stock. Those shares held by North, South and the other entities amount to approximately 6.2% of the total votes entitled to be cast by all outstanding shares of both classes of North’s common stock and approximately 13.7% of the total votes entitled to be cast on the South merger proposal by all outstanding shares of both classes of South’s common stock.

In total, members of the Frank B. Holding family and the other entities referred to above hold an aggregate of (i) approximately 29.7% of the outstanding shares of North Class A common stock and approximately 73.1% of the outstanding shares of North Class B common stock, together representing approximately 58.2% of the total votes entitled to be cast by all outstanding shares of both classes of North common stock and (ii) approximately 62.1% of the outstanding shares of South voting common stock and approximately 30.9% of the outstanding shares of South non-voting common stock, together representing approximately 60.8% of the total votes entitled to be cast on the South merger proposal by all outstanding shares of both classes of South common stock.

No Restrictions on Resales (see page [    ])

All shares of North common stock received by South shareholders in the merger will be freely tradable, except that shares of North received by persons who are or become affiliates of North for purposes of Rule 144 under the Securities Act may be resold by them only in transactions permitted by Rule 144, or as otherwise permitted under the Securities Act.

Changes in South Shareholders’ Rights as a Result of the Merger (see page [    ])

The rights of South shareholders will change as a result of the merger due to differences in North’s and South’s governing documents and states of incorporation. The rights of South shareholders are governed by

 

 

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South Carolina law and by South’s articles of incorporation and bylaws, each as amended to date. The rights of North stockholders are governed by Delaware law and by the North charter and bylaws, each as amended to date. Upon the completion of the merger, South shareholders will become stockholders of North, as the continuing legal entity in the merger, and the rights of South shareholders will, therefore, be governed by Delaware law and the North charter and bylaws. For more information, please see the section entitled “Comparison of Shareholders’ Rights” beginning on page [    ] of this joint proxy statement/prospectus.

Risk Factors (see page [    ])

Before voting at the North or South special meeting, you should carefully consider all of the information contained or incorporated by reference into this joint proxy statement/prospectus, including the risk factors set forth in the section entitled “Risk Factors” beginning on page [    ] of this joint proxy statement/prospectus or described in North’s reports filed with the SEC, which are incorporated by reference into this joint proxy statement/prospectus. Please see “Where You Can Find More Information” and “Documents Incorporated by Reference” beginning on page [    ] and [    ], respectively, of this joint proxy statement/prospectus.

 

 

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RISK FACTORS

In addition to the other information contained in, or incorporated by reference into, this joint proxy statement/prospectus, including North’s Annual Report on Form 10-K for the fiscal year ended December 31, 2013 and Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2014, and the matters addressed under “Forward-Looking Statements,” North and South shareholders should consider the matters described below carefully in determining how to vote on the matters presented at their respective special meetings. Additional Risk Factors included in Part I, Item 1A in North’s Annual Report on Form 10-K for the fiscal year ended December 31, 2013 and Part II, Item 1A in North’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2014 are incorporated by reference. North and South shareholders should read and consider those Risk Factors in addition to the Risk Factors listed below.

Risk Factors Relating to the Merger

Because the market price of North common stock may fluctuate, South shareholders cannot be sure of the value of the merger consideration that they will receive in the merger.

Under the terms of the merger agreement, each share of South common stock outstanding immediately prior to the effective time of the merger (with certain exceptions) will be converted into the right to receive 4.0 shares of North Class A common stock and $50.00 in cash, unless the holder of such share elects, pursuant to a letter of transmittal that will be delivered after closing of the merger, for each share of such holder’s South common stock to be converted into the right to receive 3.58 shares of North Class A common stock and 0.42 shares of North Class B common stock. Cash will be paid in lieu of issuing fractional shares of North common stock. The value of the shares of North Class A common stock and North Class B common stock to be issued to South shareholders in the merger may fluctuate between now and the closing date of the merger due to a variety of factors, including general market and economic conditions, changes in the parties’ respective businesses, operations and prospects, and regulatory considerations, among other things. Many of these factors are beyond the control of North and South. We make no assurances as to whether or when the merger will be completed. South shareholders should obtain current sale prices for shares of North common stock before voting their shares of South common stock at the special meeting.

The fairness opinions obtained by North and South from their respective financial advisors will not reflect changes in circumstances between the date of the signing of the merger agreement and the completion of the merger.

The North Committee has obtained a fairness opinion dated June 10, 2014 from Sandler O’Neill, and the South Committee has obtained a fairness opinion dated June 10, 2014 from BofA Merrill Lynch, and such opinions have not been updated as of the date of this document and will not be updated at the time of the completion of the merger. Changes in the operations and prospects of North or South, general market and economic conditions and other factors that may be beyond the control of North and South, and on which the fairness opinions were based, may alter the value of North or South or the prices of shares of North common stock or South common stock by the time the merger is completed. The fairness opinions do not address the fairness of the merger consideration, from a financial point of view, at the time the merger is completed or as of any other date than the date of the opinions. The fairness opinions that the North Committee and the South Committee received from their respective financial advisors are attached as Appendix D and Appendix E to this joint proxy statement/prospectus. For a description of the opinions, see “The Merger—Opinion of South’s Financial Advisor” and “The Merger—Opinion of North’s Financial Advisor” beginning on page [    ] of this joint proxy statement/prospectus. For a description of the other factors considered by North’s board of directors in determining to approve the merger, see “The Merger—Recommendation of North’s Board of Directors and Reasons for the Merger” beginning on page [    ] of this joint proxy statement/prospectus. For a description of the other factors considered by South’s board of directors in determining to approve the merger, see “The Merger—Recommendation of South’s Board of Directors and Reasons for the Merger” beginning on page [    ] of this joint proxy statement/prospectus.

 

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South’s financial advisor did not give an opinion with respect to the alternative merger consideration.

Each South shareholder will receive 4.0 shares of North Class A common stock and $50.00 in cash for each share of South common stock the shareholder owns, unless such holder elects to receive 3.58 shares of North Class A common stock and 0.42 shares of North Class B common stock for each share of South common stock owned. The opinion of South’s financial advisor was limited to the fairness, from a financial point of view, of the merger consideration to be received in the merger by the minority holders of South common stock who do not elect to receive North Class B common stock as part of the merger consideration. South’s financial advisor did not give an opinion with respect to the fairness, from a financial point of view, of the alternative consideration of 3.58 shares of North Class A common stock and 0.42 shares of North Class B common stock for each share of South common stock owned. Accordingly, there has been no determination that such consideration is fair from a financial point of view, and South has not provided its shareholders with an opinion on which to base a decision whether to choose this alternative payment.

North may fail to realize all of the anticipated benefits and cost savings of the merger.

The success of the merger will depend on, among other things, North’s ability to realize anticipated cost savings and to combine the businesses of North and South in a manner that does not materially disrupt the existing customer relationships of either North or South or result in decreased revenues from customers of either of them. If North is not able to successfully achieve these objectives, then the anticipated benefits and cost savings of the merger may not be realized fully, if at all, or may take longer to realize than expected.

North and South have operated and, until the completion of the merger, will continue to operate, independently. It is possible that the integration process could result in the loss of key employees, the disruption of either North’s or South’s ongoing businesses or inconsistencies in standards, controls, procedures and policies that adversely affect the ability of North or South to maintain relationships with their respective clients, customers, depositors and employees or to achieve the anticipated benefits and cost savings of the merger. The loss of key employees could adversely affect North’s ability to successfully conduct its business in the markets in which South now operates, which could have an adverse effect on North’s financial results and the value of its stock. Integration efforts by North and South will also divert management attention and resources. These integration matters could have an adverse effect on each of North and South during the transition period and on the combined company for an undetermined period following completion of the merger. Additionally, the actual benefits and cost savings of the merger could be less than anticipated.

Completion of the merger is subject to many conditions and if these conditions are not satisfied or, where permissible, waived, the merger will not be completed.

The obligations of North and South to complete the merger are subject to satisfaction or, where permissible, waiver of a number of conditions, including, among others: (i) the adoption of the merger agreement by North stockholders and South shareholders, (ii) the approval of the North charter amendment proposal by North stockholders, (iii) receipt of approval of various governmental authorities without the imposition of a burdensome condition, (iv) the authorization for listing on the NASDAQ Global Select Market of the shares of North Class A common stock to be issued in the merger, (v) the effectiveness of the registration statement of which this joint proxy statement/prospectus is a part and the absence of any stop order suspending the effectiveness of this registration statement (or proceedings for that purpose initiated or threatened by the SEC and not withdrawn), (vi) the absence of any order, injunction or decree by any court or agency of competent jurisdiction or other legal restraint or prohibition preventing the consummation of the merger, the bank merger or any of the other material transactions contemplated by the merger agreement, (vii) the absence of any statute, rule, regulation, order, injunction or decree enacted, entered, promulgated or enforced by any governmental entity that prohibits or makes illegal consummation of the merger, the bank merger or any of the other material transactions contemplated by the merger agreement, (viii) the accuracy of the representations and warranties of each other party in the merger agreement as of the day on which the merger is completed, subject to the materiality standards provided in the merger agreement and the performance of the other party in all material respects of all obligations required to be performed by it at or prior to the effective time of the merger under the merger agreement (and the receipt by each party of certificates from the other party to such effect), (ix) receipt by

 

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each party of an opinion of legal counsel as to certain tax matters, (x) the absence of any events or occurrences that, individually or in the aggregate, have had or would reasonably be expected to have a material adverse effect on the other party (see “The Merger Agreement—Representations and Warranties” beginning on page [    ] of this joint proxy statement/prospectus for the definition of material adverse effect), and (xi) a majority of the shares held by the minority holders of South common stock must not have voted against the merger. For a more complete summary of the conditions that must be satisfied (or, where permissible, waived) prior to completion of the merger, see “The Merger Agreement—Conditions to Completion of the Merger” beginning on page [    ] of this joint proxy statement/prospectus. There can be no assurance that the conditions to closing of the merger will be satisfied or, where permissible, waived, or that the merger will be completed. Further, it is possible that one or more of the conditions to closing the merger will not be met and that the board of directors of the party for whom the condition exists will waive the condition and the merger will be completed anyway.

The merger agreement limits South’s ability to pursue alternatives to the merger and may discourage other companies from trying to acquire South for greater consideration than what North has agreed to pay.

The merger agreement contains provisions that make it more difficult for South to sell its business to a party other than North. These provisions include a general prohibition on South soliciting any acquisition proposal or offer for a competing transaction. Further, there are only limited exceptions to South’s agreement that the South board of directors will not withdraw or modify in a manner adverse to North the recommendation of the South board of directors in favor of the adoption of the merger agreement. Notwithstanding the foregoing, at any time prior to the approval of the merger agreement by South shareholders, the South board of directors is permitted to withdraw or modify in a manner adverse to North the recommendation of the South board of directors in favor of the adoption of the merger agreement if it determines in good faith that the failure to take such action would be inconsistent with its fiduciary duties to South shareholders under applicable law. See “The Merger Agreement—Third Party Proposals” beginning on page [    ] of this joint proxy statement/prospectus.

While South believes these provisions and agreements are reasonable and customary and are not preclusive of other offers, the provisions might discourage a third party that has an interest in acquiring all or a significant part of South from considering or proposing that acquisition, even if that party were prepared to pay consideration with a higher per-share value than the currently proposed merger consideration.

Termination of the merger agreement or failure to complete the merger after approval by South shareholders could negatively impact North or South.

If the merger agreement is terminated, there may be various consequences. For example, North’s or South’s businesses may have been affected adversely by the failure to pursue other beneficial opportunities due to the focus of management on the merger, without realizing any of the anticipated benefits of completing the merger. Additionally, if the merger agreement is terminated, the market price of North’s or South’s common stock could decline to the extent that the current market prices reflect a market assumption that the merger will be completed. If the merger agreement is terminated under specified circumstances, South has agreed to pay North a termination fee of $6,450,000, $10,000,000 or $22,574,000 (and in certain instances, North’s documented expenses), depending on the timing and circumstances of the termination.

Furthermore, if the merger is approved by South shareholders, the approval will constitute a triggering event under GAAP that will require South to review the goodwill recorded in its financial statements for impairment. As a result, South could write down a portion of goodwill, which would result in a charge to earnings and corresponding reduction of South shareholders’ equity, and termination of the agreement or failure to consummate the merger will not reverse the charge to earnings.

South will be subject to business uncertainties and contractual restrictions while the merger is pending.

Uncertainty about the effect of the merger on employees and customers may have an adverse effect on South. These uncertainties may impair South’s ability to attract, retain and motivate key personnel until the merger is completed, and could cause customers and others that deal with South to seek to change existing business relationships with South. Retention of certain employees by South may be challenging while the merger is pending, as certain employees may experience uncertainty about their future roles with South or North. If key

 

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employees depart because of issues relating to the uncertainty and difficulty of integration or a desire not to remain with South or North, South’s business or South’s business assumed by North following the merger could be harmed. In addition, subject to certain exceptions, South has agreed to operate its business in the ordinary course prior to closing. See “The Merger Agreement—Covenants and Agreements—Forbearances of South” beginning on page [    ] of this joint proxy statement/prospectus for a description of the restrictive covenants applicable to South.

North and South will incur significant transaction and merger-related costs in connection with the merger.

North and South expect to incur a number of costs associated with the merger and combining the operations of the two companies. The substantial majority of expenses will be comprised of transaction costs related to the merger. The significant costs associated with the merger include, among others, fees and expenses of financial advisors (which are described under “Opinion of North’s Financial Advisor” and “Opinion of South’s Financial Advisor” beginning on pages [    ] and [    ] of this joint proxy statement/prospectus, respectively) and other advisors and representatives, certain employment-related costs relating to employees of South (which are described under “The Merger—Interests of South and/or South Bank’s Directors and Executive Officers in the Merger” beginning on page [    ] of this joint proxy statement/prospectus), filing fees due in connection with filings required under applicable law and filing fees and printing and mailing costs for this joint proxy statement/prospectus. Some of these costs have already been incurred or may be incurred regardless of whether the merger is consummated, including a portion of the fees and expenses of financial advisors and other advisors and representatives and filing fees for this joint proxy statement/prospectus. North also will incur transaction fees and costs related to formulating and implementing integration plans with respect to the two companies, including facilities and systems consolidation costs. North continues to assess the magnitude of these costs, and additional unanticipated costs may be incurred in the merger and the integration of the two companies’ businesses. Although North expects that the elimination of duplicative costs, as well as the realization of other efficiencies related to the integration of the businesses, should allow North to offset integration-related costs over time, this net benefit may not be achieved in the near term or at all.

We do not expect a trading market for the North Class B common stock to develop beyond the OTC Bulletin Board, and therefore any investment in North Class B common stock may be effectively illiquid.

There is currently a very limited public market for North Class B common stock. North Class B common stock trades on the over-the-counter market and is quoted on the OTC Bulletin Board. As a result, there can be no assurance that a secondary market will develop, and we do not expect any market makers to participate in a secondary market outside of the OTC Bulletin Board. Trading activity, if any, in the North Class B common stock will be very limited. Because the North Class B common stock will not be listed on a securities exchange or automated quotation system besides the OTC Bulletin Board, it may be difficult to obtain pricing information with respect to the shares. Accordingly, if you elect to receive North Class B common stock as merger consideration, there may be a limited number of buyers if you decide to sell your North Class B common stock. This may affect the price you receive upon such sale.

Members of the Holding family own shares of outstanding North and South common stock and will be in position to influence the outcome of matters submitted for North stockholder votes following the merger, and their interests may differ from North’s other stockholders.

Frank B. Holding, a former director of North and one of its stockholders, also is a shareholder and former director of South. Frank B. Holding, Jr., North’s Chairman and Chief Executive Officer, also is a shareholder and director of South. Members of the Holding family, including members who serve as directors of North and are in management positions with North, and certain family entities, hold, in the aggregate, (i) approximately 24.6% of the outstanding shares of North Class A common stock and approximately 66.5% of the outstanding shares of North Class B common stock, together representing approximately 52.2% of the total votes entitled to be cast by all outstanding shares of both classes of North common stock and (ii) approximately 48.4% of the outstanding

 

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shares of South voting common stock and approximately 16.8% of the outstanding shares of South non-voting common stock, together representing approximately 47.2% of the total votes entitled to be cast on the South merger proposal by all outstanding shares of both classes of South’s common stock. In addition to the above shares (i) North’s investment securities available for sale include an equity investment in South (approximately 4.9% of the outstanding shares of South voting stock), and South’s investment securities available for sale include an equity investment in North (approximately 2.0% of the outstanding shares of North Class A common stock and approximately 4.4% of the outstanding shares of North Class B common stock), and (ii) other entities in which members of the Holding family are shareholders and serve as directors and/or officers hold approximately 3.2% of the outstanding shares of the North Class A common stock, approximately 2.4% of the outstanding shares of the North Class B common stock, approximately 8.8% of the outstanding shares of South voting common stock, and approximately 14.1% of South non-voting common stock. Those shares held by North, South and the other entities amount to approximately 6.2% of the total votes entitled to be cast by all outstanding shares of both classes of North common stock and approximately 13.7% of the total votes entitled to be cast on the South merger proposal by all outstanding shares of both classes of South common stock. Therefore, after the merger certain members of the Holding family will continue to hold a significant amount of North Class A common stock and/or North Class B common stock and thus be able to more directly control or influence the outcome of matters submitted to North’s stockholders for approval, including the election of directors, approval of mergers or other business combinations, and acquisitions or dispositions of assets. Also, the interests of members of the Holding family may differ from or be opposed to the interests of North’s other stockholders and their level of ownership and voting power in North following the merger may have the effect of delaying or preventing a subsequent change in control that may be favored by other North stockholders.

In total, members of the Frank B. Holding family and the other entities referred to above hold an aggregate of (i) approximately 29.7% of the outstanding shares of North Class A common stock and approximately 73.1% of the outstanding shares of North Class B common stock, together representing approximately 58.2% of the total votes entitled to be cast by all outstanding shares of both classes of North common stock and (ii) approximately 62.1% of the outstanding shares of South voting common stock and approximately 30.9% of the outstanding shares of South non-voting common stock, together representing approximately 60.8% of the total votes entitled to be cast on the South merger proposal by all outstanding shares of both classes of South common stock.

The merger will result in an increase in the number of shares of North Class A common stock and North Class B common stock available for trading, which could depress the price of such shares and increase the volatility of the price of such shares, both before and after completion of the merger.

The merger will increase the number of shares of North Class A common stock and North Class B common stock available for sale in the public markets. As of [            ], 2014, approximately [            ] shares of North Class A common stock and [            ] shares of North Class B common stock were outstanding.

Because South shareholders are entitled to elect whether to exchange their shares of South common stock for North Class A common stock and cash or a combination of North Class A common stock and North Class B common stock, the number of new shares of North Class A common stock and new shares of North Class B common stock that will be issued to holders of South common stock and become immediately available for sale following the merger is unknown.

Sales of large amounts of shares of North Class A common stock or North Class B common stock could depress the market price of North Class A common stock or North Class B common stock, respectively. In addition, the potential that such sales may occur could depress prices, even in advance of such sales. Neither North nor South can predict the effects that any such sales, or the perception that such sales could occur, will have on the price of North common stock, either before or after completion of the merger.

 

28


Regulatory approvals may not be received, may take longer than expected or may impose conditions that are not presently anticipated or cannot be met.

Before the transactions contemplated by the merger agreement, including the merger and the bank merger, may be completed, various approvals must be obtained from bank regulatory authorities. These governmental entities may impose conditions on the granting of such approvals. Such conditions and the process of obtaining regulatory approvals could have the effect of delaying consummation of the merger or of imposing additional costs or limitations on North following the merger. The regulatory approvals may not be received at all, may not be received in a timely fashion, and may contain conditions on the completion of the merger that are not anticipated or cannot be met. If the consummation of the merger is delayed, including by a delay in receipt of necessary governmental approvals, the business, financial condition and results of operations of each company may also be materially adversely affected.

Shares of either class of North common stock to be received by South shareholders as a result of the merger will have rights different from shares of South common stock.

Upon completion of the merger, the rights of former South shareholders will be governed by the North charter and the North bylaws. The rights associated with South common stock are different from the rights associated with either class of North common stock, especially because South is a South Carolina corporation and North is a Delaware corporation. Please see the section entitled “Comparison of Shareholders’ Rights” beginning on page [    ] of this joint proxy statement/prospectus for a discussion of the different rights associated with both classes of North common stock.

Shares of North Class A common stock have one vote per share, while shares of North Class B common stock have 16 votes per share. North’s Class A common stock is listed on the NASDAQ Global Select Market under the symbol “FCNCA.” The North Class B common stock is traded on the over-the-counter market and quoted on the OTC Bulletin Board under the symbol “FCNCB.” The market for North Class B common stock is extremely limited. On many days, there is no trading and, to the extent there is trading, it is generally low in volume. The average monthly trading volume for North Class A common stock was 259,767 shares for the first quarter of 2014 and 279,383 shares for the year ended December 31, 2013. The average monthly trading volume for North Class B common stock was 2,500 shares in the first quarter of 2014 and 2,225 shares for the year ended December 31, 2013.

Some executive officers and directors of North and/or North Bank and South and/or South Bank have financial interests in the merger that are different from, or in addition to, the interests of shareholders.

Certain independent directors of North and South negotiated the terms of the merger agreement, and each board of directors approved and recommended that their respective shareholders vote to approve the merger agreement. In considering these facts and the other information contained in this joint proxy statement/prospectus, you should be aware that certain executive officers and other directors of North, South, North Bank and South Bank have financial interests in the merger that are different from, or in addition to, the interests of shareholders generally. Specifically, Frank B. Holding, a former director of North and one of its stockholders, also is a shareholder and former director of South. Frank B. Holding, Jr., North’s Chairman and Chief Executive Officer, also is a shareholder and director of South. Members of the Holding family, including members who serve as directors of North and are in management positions with North, and certain family entities, hold, in the aggregate, (i) approximately 24.6% of the outstanding shares of North Class A common stock and approximately 66.5% of the outstanding shares of North Class B common stock, together representing approximately 52.2% of the total votes entitled to be cast by all outstanding shares of both classes of North common stock and (ii) approximately 48.4% of the outstanding shares of South voting common stock and approximately 16.8% of the outstanding shares of South non-voting common stock, together representing approximately 47.2% of the total votes entitled to be cast on the South merger proposal by all outstanding shares of both classes of South common stock. In addition to the above shares, (i) North’s investment securities available for sale include an

 

29


equity investment in South (approximately 4.9% of the outstanding shares of South voting common stock), and South’s investment securities available for sale include an equity investment in North (approximately 2.0% of the outstanding shares of North Class A common stock and approximately 4.4% of the outstanding shares of North Class B common stock) and (ii) other entities in which members of the Holding family are shareholders and serve as directors and/or officers hold approximately 3.2% of the outstanding shares of the North Class A common stock, approximately 2.4% of the outstanding shares of the North Class B common stock, approximately 8.8% of the outstanding shares of South voting common stock and approximately 14.1% of South non-voting common stock. Those shares held by North, South and the other entities amount to approximately 6.2% of the total votes entitled to be cast on the South merger proposal by all outstanding shares of both classes of North common stock and approximately 13.7% of the total votes entitled to be cast by all outstanding shares of both classes of South common stock. In total, members of the Frank B. Holding family and the other entities referred to above hold an aggregate of approximately 29.7% of the outstanding shares of North Class A common stock and approximately 73.1% of the outstanding shares of North Class B common stock, together representing approximately 58.2% of the total votes entitled to be cast by all outstanding shares of both classes of North common stock. In total, members of the Frank B. Holding family and the other entities referred to above hold an aggregate of approximately 62.1% of the outstanding shares of South voting common stock and approximately 30.9% of the outstanding shares of South non-voting common stock, together representing approximately 60.8% of the total votes entitled to be cast on the South merger proposal by all outstanding shares of both classes of South common stock. Finally, subsequent to entering into the merger agreement, North announced that (i) Peter M. Bristow, currently Executive Vice President and Chief Operating Officer of South, President and Chief Operating Officer of South Bank and brother-in-law to Mr. Holding, Jr. and Ms. Hope H. Bryant, Vice Chairman of North and North Bank, is proposed to become President and Corporate Sales Executive of North and North Bank at closing of the merger and (ii) Craig L. Nix, currently Executive Vice President and Chief Financial Officer of South and South Bank, is proposed to replace North and North Bank’s current Chief Financial Officer, Glenn D. McCoy, who will retire on a date to be determined following the merger. See “The Merger—Interests of North and/or North Bank’s Directors and Executive Officers in the Merger” and “The Merger—Interests of South and/or South Bank’s Directors and Executive Officers in the Merger” beginning on pages [    ] and [    ], respectively, of this joint proxy statement/prospectus for information about these financial interests.

North and South may be subject to litigation in connection with the merger. An adverse ruling in any such lawsuit may prevent the merger from being completed.

North, South, and their respective directors and officers may be subject to lawsuits challenging the merger. Following announcement of the merger, North received a shareholder demand from the City of Providence pursuant to Section 220 of the DGCL for access to certain books and records of North. The purported basis for the demand was to investigate potential breaches of fiduciary duty and other wrongdoing by North’s officers and directors in connection with the merger. The City of Providence concurrently filed a putative class action lawsuit in the Delaware Court of Chancery against North and its directors challenging Article X, Section 8 of North’s bylaws, which requires certain litigation to be brought only in North Carolina courts to the fullest extent permitted by law. The Delaware complaint, captioned City of Providence v. First Citizens BancShares, Inc., et al., No. CA9795, alleges that the bylaw violates the DGCL and that adoption of the bylaw constituted a breach of fiduciary duty by North’s directors. While not directly challenging the merger, the complaint contains allegations referencing the merger and seeks a declaration that any stockholder action regarding the merger may be brought in the Delaware Court of Chancery.

If litigation is brought challenging the merger, the plaintiff(s) may seek an order enjoining completion of the merger. If successful, such an order may prevent the merger from being completed, or from being completed within the expected time frame. Regardless of whether plaintiffs’ claims were to succeed, this type of litigation is often expensive and diverts management’s attention and resources, which could adversely affect the operation of North and South’s business.

 

30


The unaudited pro forma combined financial statements included in this joint proxy statement/prospectus are preliminary and the actual financial condition and results of operations of the combined company after the merger may differ materially.

The unaudited pro forma combined financial statements in this joint proxy statement/prospectus are presented for illustrative purposes only and are not necessarily indicative of what North’s actual financial condition or results or operations would have been had the merger been completed on the dates indicated. The unaudited pro forma combined financial statements reflect adjustments, which are based upon preliminary estimates, to record the South identifiable assets acquired and liabilities assumed at fair value and the resulting goodwill recognized. The purchase price allocation reflected in this document is preliminary, and final allocation of the purchase price will be based upon the actual purchase price and the fair value of the assets and liabilities of South as of the date of the completion of the merger. Accordingly, the final acquisition accounting adjustments may differ materially from the pro forma adjustments reflected in this document. For more information, see “Unaudited Pro Forma Combined Financial Statements” beginning on page [    ] of this joint proxy statement/prospectus.

Risk Factors Relating to North

North is, and following completion of the merger North will continue to be, subject to the risks described in Part I, Item 1A in the North Annual Report on Form 10-K for the year ended December 31, 2013 and in Part II, Item 1A in the North Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2014. See “Where You Can Find More Information” beginning on page [    ] of this joint proxy statement/prospectus. Accordingly, shareholders of each of North and South should be aware of these notes in addition to the “Risks Related to the Merger.”

 

31


SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF NORTH

The following selected historical consolidated financial data as of and for the years ended December 31, 2013, 2012, 2011, 2010 and 2009 is derived from the audited consolidated financial statements of North, and the interim selected historical consolidated financial data is derived from the unaudited consolidated financial statements of North. In North’s opinion, such unaudited consolidated financial statements include all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of its financial position and results of operations for such periods. Interim results for the three months ended March 31, 2014 are not necessarily indicative of, and are not projections for, the results to be expected for the full year ending December 31, 2014.

 

    Three months ended
March 31,
    Year ended December 31,  
(dollars in thousands, except share data)   2014     2013     2013     2012     2011     2010     2009  

SUMMARY OF OPERATIONS

             

Interest income

  $ 173,394      $ 220,604      $ 796,804      $ 1,004,836      $ 1,015,159      $ 969,368      $ 738,159   

Interest expense

    12,463        15,722        56,618        90,148        144,192        195,125        227,644   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net interest income

    160,931        204,882        740,186        914,688        870,967        774,243        510,515   

Provision for loan and lease losses

    (1,903     (18,606     (32,255     142,885        232,277        143,519        79,364   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net interest income after provision for loan and lease losses

    162,834        223,488        772,441        771,803        638,690        630,724        431,151   

Gains on acquisitions

    —          —          —          —          150,417        136,000        104,434   

Noninterest income

    61,181        57,513        263,603        189,300        313,949        270,214        299,017   

Noninterest expense

    191,030        194,355        771,380        766,933        792,925        733,376        651,503   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

    32,985        86,646        264,664        194,170        310,131        303,562        183,099   

Income taxes

    10,619        31,061        96,965        59,822        115,103        110,518        66,768   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income

  $ 22,366      $ 55,585      $ 167,699      $ 134,348      $ 195,028      $ 193,044      $ 116,331   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net interest income, taxable equivalent

  $ 161,694      $ 205,553      $ 742,846      $ 917,664      $ 874,727      $ 778,382      $ 515,446   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

PER SHARE DATA

             

Net income

  $ 2.33      $ 5.78      $ 17.43      $ 13.11      $ 18.80      $ 18.50      $ 11.15   

Cash dividends

    0.30        0.30        1.20        1.20        1.20        1.20        1.20   

Market price at period end (Class A)

    240.75        182.70        222.63        163.50        174.99        189.05        164.01   

Book value at period end

    218.82        199.46        215.89        193.75        180.97        166.08        149.42   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

SELECTED PERIOD AVERAGE BALANCES

             

Total assets

  $ 21,872,343      $ 21,150,143      $ 21,300,800      $ 21,077,444      $ 21,135,572      $ 20,841,180      $ 17,557,484   

Investment securities

    5,606,723        5,196,930        5,206,000        4,698,559        4,215,761        3,641,093        3,412,620   

Loans and leases (acquired and originated)

    13,459,945        13,289,828        13,163,743        13,560,773        14,050,453        13,865,815        12,062,954   

Interest-earning assets

    20,139,131        19,180,308        19,433,947        18,974,915        18,824,668        18,458,160        15,846,514   

Deposits

    18,492,310        17,922,665        17,947,996        17,727,117        17,776,419        17,542,318        14,578,868   

Interest-bearing liabilities

   
14,189,227
  
   
14,140,511
  
    13,910,299        14,298,026        15,044,889        15,235,253        13,013,237   

Long-term obligations

    500,805        444,539        462,203        574,721        766,509        885,145        753,242   

Shareholders’ equity

  $ 2,094,557      $ 1,877,445      $ 1,942,108      $ 1,915,269      $ 1,811,520      $ 1,672,238      $ 1,465,953   

Shares outstanding

    9,618,941        9,618,985        9,618,952        10,244,472        10,376,445        10,434,453        10,434,453   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

SELECTED PERIOD-END BALANCES

             

Total assets

  $ 22,154,997      $ 21,351,012      $ 21,199,091      $ 21,283,652      $ 20,997,298      $ 20,806,659      $ 18,466,063   

Investment securities

    5,677,019        5,280,907        5,388,610        5,227,570        4,058,245        4,512,608        2,932,765   

Loans and leases:

             

Acquired

    1,270,818        1,621,327        1,029,426        1,809,235        2,362,152        2,007,452        1,173,020   

Originated

    12,200,226        11,509,080        12,104,298        11,576,115        11,581,637        11,480,577        11,644,999   

Deposits

    18,763,545        18,064,921        17,874,066        18,086,025        17,577,274        17,635,266        15,337,567   

Long-term obligations

    440,300        444,252        510,769        444,921        687,599        809,949        797,366   

Shareholders’ equity

  $ 2,104,830      $ 1,918,581      $ 2,076,675      $ 1,864,007      $ 1,861,128      $ 1,732,962      $ 1,559,115   

Shares outstanding

    9,618,941        9,618,941        9,618,941        9,620,914        10,284,119        10,434,453        10,434,453   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

32


    Three months ended
March 31,
    Year ended December 31,  
(dollars in thousands, except share data)   2014     2013     2013     2012     2011     2010     2009  

SELECTED RATIOS AND OTHER DATA

             

Rate of return on average assets (annualized)

    0.41     1.07     0.79     0.64     0.92     0.93     0.66

Rate of return on average shareholders’ equity (annualized)

    4.33        12.01        8.63        7.01        10.77        11.54        7.94   

Net yield on interest-earning assets (taxable equivalent)

    3.26        4.35        3.82        4.84        4.65        4.22        3.25   

Allowance for loan and lease losses to total loans and leases:

             

Acquired

    3.54        5.95        5.20        7.74        3.78        2.55        0.30   

Originated

    1.46        1.53        1.49        1.55        1.56        1.54        1.45   

Nonperforming assets to total loans and leases and other real estate at period end:

             

Acquired covered

    9.34        8.46        7.02        9.26        17.95        12.87        16.59   

Acquired not covered

    3.36        —          —          —          —          —          —     

Originated

    0.66        1.10        0.74        1.15        0.89        1.14        0.85   

Tier 1 risk-based capital ratio

    14.56        14.72        14.92        14.27        15.41        14.86        13.34   

Total risk-based capital ratio

    16.05        16.41        16.42        15.95        17.27        16.95        15.59   

Leverage capital ratio

    9.66        9.53        9.82        9.23        9.90        9.18        9.54   

Dividend payout ratio

    12.88        5.19        6.88        9.15        6.38        6.49        10.76   

Average loans and leases to average deposits

    72.79        74.15        73.34        76.50        79.04        79.04        82.74   

 

33


SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF SOUTH

The following selected historical consolidated financial data as of and for the years ended December 31, 2013, 2012, 2011, 2010 and 2009 is derived from the audited consolidated financial statements of South, and the interim selected historical consolidated financial data is derived from the unaudited consolidated financial statements of South. In South’s opinion, such unaudited consolidated financial statements include all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of its financial position and results of operations for such periods. Interim results for the three months ended March 31, 2014 are not necessarily indicative of, and are not projections for, the results to be expected for the full year ending December 31, 2014.

 

    Three months ended
March 31,
    Year ended December 31,  
(dollars in thousands, except share data)   2014     2013     2013     2012     2011     2010     2009  

SUMMARY OF OPERATIONS

             

Interest income

  $ 54,490      $ 55,998      $ 225,329      $ 252,606      $ 287,862      $ 334,261      $ 332,746   

Interest expense

    4,848        5,944        21,814        29,935        47,600        81,861        98,902   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net interest income

    49,642        50,054        203,515        222,671        240,262        252,400        233,844   

Provision for loan losses

    144        505        8,054        20,066        23,558        56,856        74,556   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net interest income after provision for loan losses

    49,498        49,549        195,461        202,605        216,704        195,544        159,288   

Gain on acquisition

    —          —          —          —          —          —          107,903   

Noninterest income

    34,968        34,241        130,991        135,364        111,991        157,684        117,462   

Noninterest expense

    61,031        65,185        258,024        254,433        250,502        246,272        225,119   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

    23,435        18,605        68,428        83,536        78,193        106,956        159,534   

Income taxes

    8,436        6,364        23,425        29,701        27,416        38,350        58,514   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income

  $ 14,999      $ 12,241      $ 45,003      $ 53,835      $ 50,777      $ 68,606      $ 101,020   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net interest income, taxable equivalent

  $ 49,880      $ 50,303      $ 204,479      $ 223,842      $ 241,659      $ 254,070      $ 235,319   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

PER SHARE DATA

             

Net income

  $ 21.89      $ 17.86      $ 65.62      $ 63.97      $ 59.91      $ 80.87      $ 118.91   

Cash dividends

    0.35        0.35        1.40        3.40        1.40        1.40        1.40   

Market price at period end

    689.66        623.37        674.32        499.91        407.79        505.96        401.96   

Book value at period end

    1,119.54        1,040.69        1,097.19        1,023.71        876.46        815.63        729.26   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

SELECTED PERIOD AVERAGE BALANCES

             

Total assets

  $ 8,474,969      $ 8,325,997      $ 8,275,077      $ 8,229,993      $ 8,370,956      $ 8,606,520      $ 7,454,477   

Investment securities

    2,017,444        1,678,582        1,729,596        1,529,157        1,522,273        1,336,111        1,251,332   

Loans and leases:

             

Acquired

    160,648        261,434        222,676        354,222        450,377        667,216        244,589   

Originated

    4,340,277        4,050,567        4,154,179        4,099,309        4,229,383        4,533,226        4,853,234   

Interest-earning assets

    7,733,616        7,569,127        7,556,257        7,420,460        7,446,029        7,494,705        6,725,126   

Deposits

    7,263,425        7,137,900        7,076,807        6,950,571        7,105,433        7,353,469        6,263,728   

Interest-bearing liabilities

    5,637,525        5,804,876        5,633,836        5,738,951        6,172,119        6,604,183        5,803,181   

Long-term debt

    203,287        203,185        202,268        204,392        208,695        267,692        286,215   

Shareholders’ equity

  $ 764,022      $ 706,857      $ 722,837      $ 766,601      $ 721,670      $ 661,560      $ 551,848   

Shares outstanding

    683,293        683,293        683,293        838,625        844,884        846,292        848,125   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

SELECTED PERIOD-END BALANCES

             

Total assets

  $ 8,532,136      $ 8,378,384      $ 8,374,101      $ 8,236,484      $ 8,153,895      $ 8,425,723      $ 8,436,868   

Investment securities

    2,031,947        1,725,179        2,000,022        1,606,149        1,575,540        1,452,878        1,298,353   

Loans and leases:

             

Acquired

    151,951        246,258        174,203        282,335        438,907        523,305        872,753   

Originated

    4,348,660        4,045,220        4,343,506        4,079,574        4,134,347        4,386,379        4,705,296   

Interest-earning assets

    7,785,442        7,655,433        7,594,532        7,447,106        7,300,760        7,357,259        7,413,823   

Deposits

    7,325,972        7,192,973        7,191,569        7,042,865        6,875,909        7,184,208        7,204,717   

Interest-bearing liabilities

    5,609,462        5,802,272        5,554,043        5,687,937        5,851,180        6,372,070        6,590,502   

Long-term debt

    203,303        203,202        203,278        203,176        208,694        208,593        308,492   

Shareholders’ equity

  $ 764,972      $ 711,094      $ 749,701      $ 699,494      $ 740,498      $ 689,921      $ 618,177   

Shares outstanding (voting and non-voting)

    683,293        683,293        683,293        683,293        844,871        845,871        847,680   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

34


    Three months ended
March 31,
    Year ended December 31,  
(dollars in thousands, except share data)   2014     2013     2013     2012     2011     2010     2009  

SELECTED RATIOS AND OTHER DATA

             

Rate of return on average assets (annualized)

    0.72     0.60     0.54     0.65     0.61     0.80     1.36

Rate of return on average shareholders’ equity (annualized)

    7.96        7.02        6.23        7.02        7.04        10.37        18.31   

Net yield on interest-earning assets (taxable equivalent)

    2.60        2.68        2.69        3.00        3.23        3.37        3.48   

Allowance for loan losses to total loans and leases

    1.17        1.41        1.21        1.44        1.55        1.67        1.61   

Allowance for loan losses to total loans and leases (excluding loss share)

    1.21        1.49        1.26        1.54        1.72        1.88        1.90   

Nonperforming assets to total assets at period end (excluding acquired loans and covered real estate owned)

    1.44        1.73        1.49        1.83        2.20        2.05        1.58   

Tier 1 risk-based capital ratio

    16.15        15.80        15.53        15.33        15.50        13.33        10.94   

Total risk-based capital ratio

    18.03        18.17        17.41        17.69        18.21        16.29        14.09   

Leverage capital ratio

    8.31        7.85        8.32        7.78        8.12        7.28        6.50   

Dividend payout ratio

    1.60        1.96        2.13        5.31        2.34        1.73        1.18   

Average loans and leases to average deposits

    61.97        60.41        61.85        64.07        65.86        70.72        81.39   

 

35


UNAUDITED PRO FORMA COMBINED CONSOLIDATED FINANCIAL INFORMATION

The following unaudited pro forma combined consolidated financial information and explanatory notes present how the combined financial statements of North and South may have appeared had the businesses actually been combined. The merger agreement provides two exchange options for South shareholders; however it is assumed for purposes of the pro forma financial information that at the effective date of the merger, each share of South common stock will be converted into the right to receive 4.0 shares of North Class A common stock and $50.00 in cash. The unaudited pro forma combined consolidated financial information shows the impact of the merger of North and South on the companies’ respective historical financial positions and results of operations under the acquisition method of accounting with North treated as the acquirer. Under this method of accounting, the assets and liabilities of South will be recorded by North at their estimated fair values as of the date the merger is completed. The unaudited pro forma combined consolidated balance sheet gives effect to the merger as if the transaction had occurred on March 31, 2014. The unaudited pro forma combined consolidated statements of income for the three months ended March 31, 2014 and for the year ended December 31, 2013, give effect to the merger as if these transactions had been completed on January 1, 2013. The unaudited pro forma combined selected financial data is derived from such balance sheets and statements of income.

The unaudited pro forma combined consolidated financial information has been derived from and should be read in conjunction with the historical consolidated financial statements and the related notes of both North and South which are included or incorporated by reference in this joint proxy statement/prospectus as of and for the periods indicated. See “Where You Can Find More Information” on page [    ] and the historical financial information that South has provided in this joint proxy statement/prospectus beginning on page F-1.

The unaudited pro forma condensed consolidated financial information is presented for illustrative purposes only and does not indicate the financial results of the combined company had the companies actually been combined at the beginning of the period presented and had the impact of possible revenue enhancements and expense efficiencies, among other factors, been considered and, accordingly, does not attempt to predict or suggest future results. It also does not necessarily reflect what the historical results of the combined company would have been had the companies been combined during this period. In addition, as explained in more detail in the accompanying notes to the unaudited pro forma combined consolidated financial information, the preliminary determination of fair values of South’s assets acquired and liabilities assumed reflected in the unaudited pro forma combined consolidated financial information are subject to adjustment and may vary from the actual fair values assigned that will be recorded upon completion of the merger. Subsequent to the completion of the merger, North will finalize its determination of the fair values of the acquired assets and assumed liabilities which could significantly change both the amount and the composition of these estimated accounting adjustments.

 

36


Unaudited Pro Forma Combined Consolidated Balance Sheet

As of March 31, 2014

(in thousands)

 

     North
(as Reported)
    South
(as Reported)
    Pro Forma
adjustments
   

Notes

   Pro Forma
Combined
 

Assets

           

Cash and due from banks

   $ 543,471      $ 1,455,258      $ (36,047   A, E    $ 1,962,682   

Overnight investments

     1,161,469        —               1,161,469   

Investment securities available for sale

     5,676,237        2,031,947        (74,764   B, D, F      7,633,420   

Investment securities held to maturity

     782        —               782   

Loans held for sale

     53,361        20,209             73,570   

Loans and leases

           

Acquired

     1,270,818        4,480,402        (115,100   G      5,636,120   

Originated

     12,200,226               12,200,226   

Allowance for loan and lease losses

     (222,942     (52,573     52,573      H      (222,942
  

 

 

   

 

 

   

 

 

      

 

 

 

Net loans and leases

     13,248,102        4,427,829        (62,527        17,613,404   

Premises and equipment

     878,850        229,264        (8,743   I      1,099,371   

Other real estate owned

           

Covered under loss share agreements

     41,855        23,596        (1,700   J      63,751   

Not covered under loss share agreements

     44,504        28,398        (3,400   J      69,502   

Income earned not collected

     49,668        16,699        —             66,367   

FDIC loss share receivable

     74,784        7,312        (300   K      81,796   

Goodwill

     127,140        188,107        (116,147   L      199,100   

Other intangible assets

     4,390        17,556        100,131      M      122,077   

Other assets

     250,384        85,961        (2,460   B, N      333,885   
  

 

 

   

 

 

   

 

 

      

 

 

 

Total assets

   $ 22,154,997      $ 8,532,136      $ (205,957      $ 30,481,176   
  

 

 

   

 

 

   

 

 

      

 

 

 

Liabilities

           

Deposits

           

Noninterest-bearing

   $ 5,627,868      $ 2,108,182      $ —           $ 7,736,050   

Interest-bearing

     13,135,677        5,217,790        1,647      O      18,355,114   
  

 

 

   

 

 

   

 

 

      

 

 

 

Total deposits

     18,763,545        7,325,972        1,647           26,091,164   
  

 

 

   

 

 

   

 

 

      

 

 

 

Short-term borrowings

     617,794        188,369        —             806,163   

Long-term borrowings

     440,300        203,303        (14,600   P      629,003   

FDIC loss share payable

     111,339        —          —             111,339   

Other liabilities

     117,189        49,520        20,071      D, Q, S      186,780   
  

 

 

   

 

 

   

 

 

      

 

 

 

Total liabilities

     20,050,167        7,767,164        7,118           27,824,449   
  

 

 

   

 

 

   

 

 

      

 

 

 

Shareholders’ Equity

           

Preferred stock

     —          3,050        (3,050   R      —     

Common stock

       3,416        (3,416   R      —     

Class A

     8,586        —          2,391      C, D      10,977   

Class B

     1,033        —          —             1,033   

Surplus

     143,766        65,081        506,071      C, D, R      714,918   

Retained earnings

     1,968,039        685,533        (693,876   B, R, S      1,959,696   

Accumulated other comprehensive loss

     (16,594     7,892        (21,195   B, R      (29,897
  

 

 

   

 

 

   

 

 

      

 

 

 

Total shareholders’ equity

     2,104,830        764,972        (213,075        2,656,727   
  

 

 

   

 

 

   

 

 

      

 

 

 

Total liabilities and shareholders’ equity

   $ 22,154,997      $ 8,532,136      $ (205,957      $ 30,481,176   
  

 

 

   

 

 

   

 

 

      

 

 

 

 

37


Notes

A Adjustment reflects $50 per share of South common stock paid by North totaling $32.6 million.
B Adjustment reflects the impact of North selling South common stock which includes removal of the investment at fair value totaling $22.1 million; $8.4 million reversal of the deferred tax associated with the unrealized gain (rate = 39%); $13.3 million reversal of the other comprehensive income component; and $21.7 million realized gain.
C Adjustment reflects North issuance of common stock of $2.6 million at par value and $621.3 million of surplus.
D Adjustment reflects retirement of North common stock owned by South which includes removal of the investment at fair value totaling $50.4 million; $16.4 reversal of the deferred tax associated with the unrealized gain (rate = 35%); and retirement of the shares consisting of $0.2 million par value and $50.1 million of surplus.
E Adjustment reflects cash paid by South to repurchase and retire all South’s outstanding preferred stock of $3.5 million.
F Adjustment reflects the fair value adjustment (discount) of South’s investment portfolio of $2.3 million.
G Adjustment reflects the fair value adjustment (discount) based upon North’s evaluation of the acquired loan portfolio of $115.1 million.
H Adjustment reflects the reversal of South’s allowance for loan and lease losses (ALLL) of $52.6 million.
I Adjustment reflects the fair value adjustment of South’s acquired premises and equipment of $8.7 million.
J Adjustment reflects the fair value adjustment of South’s other real estate owned (OREO) of $5.1 million.
K Adjustment reflects the fair value adjustment of South’s Federal Deposit Insurance Corporation (FDIC) receivable of $0.3 million.
L Adjustment reflects $72.0 million goodwill generated as a result of the consideration paid being greater than the net assets acquired (see page [    ] for detail) and the elimination of South’s legacy goodwill totaling $188.1 million.
M Adjustment reflects$96.9 million of core deposit intangible recorded by North for South deposits; fair value adjustment of South’s mortgage servicing rights totaling $5.0 million; and elimination of South’s legacy core deposit intangible of $1.8 million.
N Adjustment reflects the recording of a $10.8 million deferred tax asset generated by the net pro forma adjustments (rate = 39%).
O Adjustment reflects the fair value adjustment (premium) to South’s deposits of $1.6 million.
P Adjustment reflects the fair value adjustment (discount) to South’s long-term borrowings of $14.6 million.
Q Adjustment reflects the fair value adjustment to South’s pension plan assets of $2.5 million and fair value adjustments for South’s accrued liabilities of $4.0 million.
R Adjustment reflects the reversal of South’s March 31, 2013 preferred stock at par totaling $3.1 million, common stock at par of $3.4 million, surplus of $65.1 million, retained earnings of $715.5 million and other comprehensive income of $7.9 million.
S Adjustment reflects estimated merger-related expenses of $30.0 million.

 

38


The following table summarizes the calculation of the preliminary purchase price and the allocation of the purchase price to the estimated fair value of assets and liabilities (in thousands, except per share data):

 

South common shares outstanding at March 31, 2014

  

     683,293   

Less: Retire North common stock ownership in South

  

     (32,042
     

 

 

 

Net South common shares outstanding at March 31, 2014

  

     651,251   

Price per share, based upon North Class A common stock price of $239.50 as of July 8, 2014

  

   $ 958.00   
     

 

 

 

Value of shares of North Class A common stock issued to South shareholders

      $ 623,898   

Cash paid to South shareholders

        32,563   

Fair value of South common shares owned by North (as recorded by North at March 31, 2014)

        22,109   
     

 

 

 

Total pro forma purchase price

      $ 678,570   

Fair value of assets acquired:

     

Cash and due from banks

   $ 1,451,774      

Investment securities available for sale

     1,979,292      

Loans held for sale

     20,209      

Loans and leases

     4,365,302      

Premises and equipment

     220,521      

Other real estate owned

     46,894      

Income earned not collected

     16,699      

FDIC loss share receivable

     7,012      

Other intangible assets

     117,687      

Other assets

     75,147      
  

 

 

    

Total assets

     8,300,537      
  

 

 

    

Fair value of liabilities assumed:

     

Total deposits

     7,327,619      

Short-term borrowings

     188,369      

Long-term borrowings

     188,703      

Other liabilities

     39,591      
  

 

 

    

Total liabilities

     7,744,282      
  

 

 

    

Retirement of North common stock acquired from South

     50,355      
  

 

 

    

Net assets acquired

  

     606,610   
     

 

 

 

Preliminary pro forma goodwill

  

   $ 71,960   
     

 

 

 

Purchase Price Sensitivity

Preliminary pro forma goodwill represents the excess of the purchase price over the fair value of the net assets acquired. The purchase price will not be finalized until the merger is consummated and will be based on the share price of North’s Class A common stock on that date. The above estimate is based on the closing price of North’s Class A common stock on July 8, 2014 of $239.50 per share. Based on preliminary fair values used herein, for every dollar increase or decrease in North’s Class A common stock price, the resulting goodwill will increase or decrease by approximately $2.6 million.

 

39


Unaudited Pro Forma Combined Consolidated Income Statement

For the Three Months Ended March 31, 2014

(in thousands)

 

     North
(as Reported)
    South
(as Reported)
     Pro Forma
Adjustments
    Notes    Pro Forma
Combined
 

Interest income

            

Loans and leases

   $ 161,034      $ 46,960       $ 4,313      A    $ 212,307   

Investment securities interest and dividend income

     11,748        6,752         192      B      18,692   

Overnight investments

     612        778              1,390   
  

 

 

   

 

 

    

 

 

      

 

 

 

Total interest income

     173,394        54,490         4,505           232,389   

Interest expense

            

Deposits

     6,825        1,721         (137   C      8,409   

Short-term borrowings

     585        63              648   

Long-term obligations

     5,053        3,064         138      D      8,255   
  

 

 

   

 

 

    

 

 

      

 

 

 

Total interest expense

     12,463        4,848         1           17,312   
  

 

 

   

 

 

    

 

 

      

 

 

 

Net interest income

     160,931        49,642         4,504           215,077   

Provision (credit) for loan and lease losses

     (1,903     144              (1,759
  

 

 

   

 

 

    

 

 

      

 

 

 

Net interest income after provision for loan and lease losses

     162,834        49,498         4,504           216,836   

Noninterest income

            

Cardholder services

     11,832        6,717              18,549   

Merchant services

     13,521        4,032              17,553   

Service charges on deposit accounts

     14,440        8,991              23,431   

Wealth management services

     14,880        4,827              19,707   

Fees from processing services

     4,861        —           (4,861   E      —     

Securities gains (losses)

     —          5,753              5,753   

Other service charges and fees

     3,944        1,078              5,022   

Mortgage income

     955        1,583              2,538   

Insurance commissions

     3,287        507              3,794   

ATM income

     1,202        973              2,175   

Adjustments to FDIC loss share receivable

     (12,349     176              (12,173

Other

     4,608        331         367      F, L      5,306   
  

 

 

   

 

 

    

 

 

      

 

 

 

Total noninterest income

     61,181        34,968         (4,494        91,655   

Noninterest expense

            

Salaries and wages

     79,874        23,140              103,014   

Employee benefits

     20,100        7,903              28,003   

Occupancy expense

     20,425        4,311         87      H      24,823   

Equipment expense

     18,791        2,391              21,182   

FDIC insurance expense

     2,636        1,260              3,896   

Foreclosure-related expenses

     5,410        1,026         442      L      6,878   

Other

     43,794        21,000         (3,360   G, I, N      61,434   
  

 

 

   

 

 

    

 

 

      

 

 

 

Total noninterest expense

     191,030        61,031         (2,831        249,230   

Income before income taxes

     32,985        23,435         2,841           59,261   
  

 

 

   

 

 

    

 

 

      

 

 

 

Provision for income taxes

     10,619        8,436         1,108      J      20,163   
  

 

 

   

 

 

    

 

 

      

 

 

 

Net income

     22,366        14,999         1,733           39,098   

Preferred dividends

     —          39         (39   K      —     
  

 

 

   

 

 

    

 

 

      

 

 

 

Net income available to common shareholders

   $ 22,366      $ 14,960       $ 1,772         $ 39,098   
  

 

 

   

 

 

    

 

 

      

 

 

 

Net income per share

            

Net income per share—basic and diluted

   $ 2.33      $ 21.89       $ 1.04         $ 3.26   

Average shares outstanding

     9,618,941        683,293         1,708,211      M      12,010,445   

 

40


Notes

A Adjusted loan interest income for purchased loans using the level yield method over the estimated lives of the acquired loan portfolio.
B Adjustment reflects amortization of the investment portfolio discount over the estimated portfolio duration.
C Adjustment reflects amortization of the deposit premium over the estimated average deposit lives.
D Adjustment reflects amortization of the debt discount over the estimated duration of the debt obligations.
E Adjustment reflects the elimination of processing fees received by North paid from South.
F Adjustment reflects the elimination of North dividend income from South of $0.01 million and the elimination of South dividend income from North of $0.06 million.
G Adjustment reflects the amortization of the core deposit intangible of $3.5 million and amortization of the mortgage servicing rights intangible of $0.2 million over their estimated lives.
H Adjustment reflects the incremental depreciation expense of facilities acquired.
I Adjustment reflects the elimination of South processing service fees paid to North of $7.6 million and the elimination of North expenses that were being offset by fees charged to South for other processing services of $0.6 million.
J Adjustment reflects the income tax expense (rate = 39%) associated with the net pro forma adjustments.
K Adjustment reflects the elimination of South preferred stock dividends.
L Reclassification of South’s OREO related expenses from non-interest income to foreclosure related expenses to conform to North’s presentation.
M Adjustment reflects net impact of common shares issued and retired totaling 1,708,211. The net impact consists of the following adjustments: North Class A shares issued, which is the weighted average of South’s outstanding common shares totaling 683,293 less common shares owned and retired by North of 32,042 multiplied by the exchange ratio of 4.0, resulting in 2,605,004 gross North Class A common shares. This amount is then reduced by the total South shares outstanding of 683,293 and the retirement of 213,500 North Class A common shares that are owned by South.
N North expects to incur merger charges related to integration efforts, contract cancellations, severance, and other merger related charges; however, these charges are not reflected in these pro forma income statements.

 

41


Unaudited Pro Forma Consolidated Income Statement

For the Year Ended December 31, 2013

(in thousands)

 

     North
(as Reported)
    South
(as Reported)
    Pro Forma
Adjustments
    Notes    Pro Forma
Combined
 

Interest income

           

Loans and leases

   $ 757,197      $ 202,040      $ 17,258      A    $ 976,495   

Investment securities interest and dividend income

     36,884        19,546        767      B      57,197   

Overnight investments

     2,723        3,743             6,466   
  

 

 

   

 

 

   

 

 

      

 

 

 

Total interest income

     796,804        225,329        18,025           1,040,158   

Interest expense

           

Deposits

     34,495        8,985        (549   C      42,931   

Short-term borrowings

     2,724        510             3,234   

Long-term obligations

     19,399        12,319        554      D      32,272   
  

 

 

   

 

 

   

 

 

      

 

 

 

Total interest expense

     56,618        21,814        5           78,437   
  

 

 

   

 

 

   

 

 

      

 

 

 

Net interest income

     740,186        203,515        18,020           961,721   

Provision (credit) for loan and lease losses

     (32,255     8,054        —             (24,201
  

 

 

   

 

 

   

 

 

      

 

 

 

Net interest income after provision for loan and lease losses

     772,441        195,461        18,020           985,922   

Noninterest income

           

Cardholder services

     48,360        25,445             73,805   

Merchant services

     56,024        15,460             71,484   

Service charges on deposit accounts

     60,661        38,660             99,321   

Wealth management services

     59,628        17,739             77,367   

Fees from processing services

     22,821        —          (20,400   E      2,421   

Securities gains (losses)

     —          8,290             8,290   

Other service charges and fees

     15,696        4,009             19,705   

Mortgage income

     11,065        11,675             22,740   

Insurance commissions

     10,694        1,884             12,578   

ATM income

     5,026        3,915             8,941   

Adjustments to FDIC loss share receivable

     (72,342     4,384             (67,958

Other

     45,970        (470     2,726      F, L      48,226   
  

 

 

   

 

 

   

 

 

      

 

 

 

Total noninterest income

     263,603        130,991        (17,674        376,920   

Noninterest expense

           

Salaries and wages

     308,941        96,431             405,372   

Employee benefits

     90,479        35,705             126,184   

Occupancy expense

     75,718        16,621        350      H      92,689   

Equipment expense

     75,545        9,403             84,948   

FDIC insurance expense

     10,175        5,494             15,669   

Foreclosure-related expenses

     17,134        8,955        3,027      L      29,116   

Other

     193,388        85,415        (5,724   G, I, N      273,079   
  

 

 

   

 

 

   

 

 

      

 

 

 

Total noninterest expense

     771,380        258,024        (2,347        1,027,057   
  

 

 

   

 

 

   

 

 

      

 

 

 

Income before income taxes

     264,664        68,428        2,693           335,785   

Provision for income taxes

     96,965        23,425        1,050      J      121,440   
  

 

 

   

 

 

   

 

 

      

 

 

 

Net income

     167,699        45,003        1,643           214,345   

Preferred Dividends

     —          162        (162   K      —     
  

 

 

   

 

 

   

 

 

      

 

 

 

Net income available to common shareholders

   $ 167,699      $ 44,841      $ 1,805         $ 214,345   
  

 

 

   

 

 

   

 

 

      

 

 

 

Net income per share

           

Net income per share—basic and diluted

   $ 17.43      $ 65.62      $ 1.06         $ 17.85   

Average shares outstanding

     9,618,952        683,293        1,708,211      M      12,010,456   

 

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Notes

A Adjusted loan interest income for purchased loans using the level yield method over the estimated lives of the acquired loan portfolio.
B Adjustment reflects amortization of the investment portfolio discount over the estimated portfolio duration.
C Adjustment reflects amortization of the deposit premium over the estimated average deposit lives.
D Adjustment reflects amortization of the debt discount over the estimated duration of the debt obligations.
E Adjustment reflects the elimination of processing fees received by North paid from South.
F Adjustment reflects the elimination of North dividend income from South of $0.05 million and the elimination of South dividend income from North of $0.3 million.
G Adjustment reflects the amortization of the core deposit intangible of $13.8 million and amortization of the mortgage servicing rights intangible of $0.8 million over their estimated lives.
H Adjustment reflects the incremental depreciation expense of facilities acquired.
I Adjustment reflects the elimination of South processing service fees paid to North of $25.7 million and the elimination of North expenses that were being offset by fees charged to South for other processing services of $5.3 million.
J Adjustment reflects the income tax expense (rate = 39%) associated with the net pro forma adjustments.
K Adjustment reflects the elimination of South preferred stock dividends.
L Reclassification of South’s OREO related expenses from non-interest income to foreclosure related expenses to conform to North’s presentation.
M Adjustment reflects net impact of common shares issued and retired totaling 1,708,211. The net impact consists of the following adjustments: North Class A common shares issued, which is the weighted average of South’s outstanding common shares totaling 683,293 less common shares owned and retired by North of 32,042 multiplied by the exchange ratio of 4.0, resulting in 2,605,004 gross North Class A common shares. This amount is then reduced by the total South shares outstanding of 683,293 and the retirement of 213,500 North Class A common shares that are owned by South.
N North expects to incur merger charges related to integration efforts, contract cancellations, severance, and other merger related charges; however, these charges are not reflected in these pro forma income statements.

 

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COMPARATIVE PER-SHARE DATA OF NORTH AND SOUTH (UNAUDITED)

The following table sets forth for North Class A common stock and South common stock certain historical, pro forma and pro forma equivalent per-share financial information. The pro forma and pro forma equivalent per-share information gives effect to the merger as if the transaction had been effective on the dates presented, in the case of book value data, and as if the transaction had been effective on January 1, 2013 in the case of the earnings and dividend data. The pro forma information in the table assumes that the merger is accounted for under the acquisition method of accounting. The information in the following table is based on the historical financial statements of each of North and South and should be read together with the historical financial information that North has presented in prior filings with the SEC and the historical financial information that South has provided in this joint proxy statement/prospectus beginning on page F-1. With respect to North, see “Where You Can Find More Information” beginning on page [    ] of this joint proxy statement/prospectus.

The pro forma financial information is not necessarily indicative of results that would have occurred had the merger been completed on the dates indicated or that may be obtained in the future.

The unaudited pro forma adjustments are based upon available information and certain assumptions that North management believes are reasonable. The unaudited pro forma data, while helpful in illustrating the financial characteristics of the combined company under one set of assumptions, do not reflect the impact of factors that may result as a consequence of the mergers or consider any potential impacts of current market conditions of the mergers on revenues, expense efficiencies, or asset dispositions, among other factors. As a result, unaudited pro forma data are presented for illustrative purposes only and do not represent an attempt to predict or suggest future results. Upon completion of the merger, the operating results of South will be reflected in the consolidated financial statements of North on a prospective basis.

Unaudited Pro Forma Comparative Per-Share Data As of And For The Three Months Ended March 31, 2014

 

     North      South      Pro Forma
Combined
     Per Equivalent
South Share (1)
 

Basic Income from Continuing Operations

   $ 2.33       $ 21.89       $ 3.26       $ 13.04   

Diluted Income from Continuing Operations

   $ 2.33       $ 21.89       $ 3.26       $ 13.04   

Cash Dividends

   $ 0.30       $ 0.35       $ 0.30       $ 1.20   

Book Value Per Common Share

   $ 218.82       $ 1,119.54       $ 221.20       $ 884.81   
  

 

 

    

 

 

    

 

 

    

 

 

 

Unaudited Pro Forma Comparative Per-Share Data As of And For The Year Ended December 31, 2013

 

     North      South      Pro Forma
Combined
     Per Equivalent
South Share (1)
 

Basic Income from Continuing Operations

   $ 17.43       $ 65.62       $ 17.85       $ 71.40   

Diluted Income from Continuing Operations

   $ 17.43       $ 65.62       $ 17.85       $ 71.40   

Cash Dividends

   $ 1.20       $ 1.40       $ 1.20       $ 4.80   

Book Value Per Common Share

   $ 215.89       $ 1,097.19       $ 221.66       $ 886.63   

 

(1) Reflects conversion of each South share into four shares of North Class A common stock.

 

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MARKET PRICES AND DIVIDEND INFORMATION

North Class A common stock is listed and trades on The NASDAQ Global Select Market under the symbol “FCNCA.” The trading market for North Class B common stock is limited. It trades in the over-the-counter market and is quoted on the OTC Bulletin Board under the symbol “FCNCB.” As of the North record date, there were [            ] shares of North Class A common stock outstanding and [            ] shares of North Class B common stock outstanding. As of the North record date, North had approximately [            ] holders of record of its Class A common stock and [            ] holders of record of its Class B common stock, as reported by its stock transfer agent, Broadridge Corporate Issuer Solutions, Inc. Holders of record are defined as those stockholders whose shares are registered in their names in North’s stock records. The term excludes “beneficial holders” whose shares are held for them in “street name” by a broker or other nominee.

South voting common stock trades in the over-the-counter market and is quoted on the OTC Bulletin Board under the symbol “FCBN.” There is no established public trading market for South’s non-voting common stock, it trades infrequently, and it is not quoted on the OTC Bulletin Board or listed on any exchange. As of the South record date, there were [            ] shares of South voting common stock and [            ] shares of South non-voting common stock outstanding, held of record by [            ] holders and [            ] holders, respectively.

The following tables show, for the indicated periods, the high and low sales prices per share for North Class A common stock, as reported on NASDAQ, and the high and low bid prices for North Class B common stock and South voting common stock, as reported in the OTC Bulletin Board. Shares of South voting common stock and North Class B common stock are not traded frequently. Over-the-counter bid prices for North Class B common stock and South voting common stock represent inter-dealer prices without retail markup, markdown or commissions, and may not represent actual transactions. South is aware of a few transactions over the past two years in which the South non-voting common stock traded at prices ranging from $[            ] to $[            ] per share. However, South has not ascertained whether these were arm’s length transactions, and because of the limited number of transactions involved, the prices may not be indicative of the value of South non-voting common stock.

Cash dividends declared per share on North and South common stock are also shown for the periods indicated below.

 

    North Class A Common Stock     North Class B Common Stock     South Voting Common Stock  
    High     Low     Dividends     High     Low     Dividends     High     Low     Dividends  

2014

                 

First Quarter

  $ 240.46      $ 215.22      $ 0.30      $ 219.01      $ 198.01      $ 0.30      $ 690.00      $ 658.00      $ 0.35   

Second Quarter

  $ 260.10      $ 214.93      $ 0.30      $ 244.50      $ 199.93      $ 0.30      $ 1,053.00      $ 689.00      $ 0.35   

Third Quarter (through [                ], 2014)

  $ [               $ [               $ [               $ [               $ [               $ [               $ [               $ [               $ [            

2013

                 

First Quarter

  $ 182.21      $ 166.49      $ 0.30      $ 173.57      $ 162.75      $ 0.30      $ 635.00      $ 510.00      $ 0.35   

Second Quarter

  $ 204.76      $ 179.22      $ 0.30      $ 193.00      $ 171.00      $ 0.30      $ 640.00      $ 585.00      $ 0.35   

Third Quarter

  $ 212.30      $ 194.39      $ 0.30      $ 197.50      $ 184.00      $ 0.30      $ 675.00      $ 635.00      $ 0.35   

Fourth Quarter

  $ 226.07      $ 201.64      $ 0.30      $ 210.95      $ 185.50      $ 0.30      $ 670.00      $ 644.00      $ 0.35   

2012

                 

First Quarter

  $ 185.42      $ 164.70      $ 0.30      $ 183.00      $ 165.75      $ 0.30      $ 495.00      $ 400.00      $ 2.35   

Second Quarter

  $ 181.62      $ 161.22      $ 0.30      $ 182.26      $ 162.00      $ 0.30      $ 491.00      $ 462.00      $ 0.35   

Third Quarter

  $ 169.70      $ 160.89      $ 0.30      $ 166.05      $ 158.00      $ 0.30      $ 525.00      $ 466.00      $ 0.35   

Fourth Quarter

  $ 174.03      $ 156.48      $ 0.30      $ 168.00      $ 157.00      $ 0.30      $ 526.00      $ 484.00      $ 0.35   

On June 9, 2014, the last full trading day before the announcement of the merger, (i) the high and low sales prices of shares of North Class A common stock as reported on the NASDAQ Global Select Market were $234.99 and $231.11, respectively, (ii) the high and low bid prices of shares of North Class B common stock as

 

45


quoted on the OTC Bulletin Board were $216.20 and $214.20, respectively, and (iii) the high and low bid prices of shares of South voting common stock as quoted on the OTC Bulletin Board were $706.00 and $701.00, respectively. On [            ], 2014, the last practicable trading day prior to the printing of this joint proxy statement/prospectus, (a) the high and low sales prices of shares of North Class A common stock as reported on The NASDAQ Global Select Market were $[            ] and $[            ], respectively, (b) the high and low bid prices of shares of North Class B common stock as quoted on the OTC Bulletin Board were $[            ] and $[            ], respectively, and (c) the high and low bid prices of shares of South voting common stock as quoted in the OTC Bulletin Board were $[            ] and $[            ], respectively.

 

46


FORWARD-LOOKING STATEMENTS

This joint proxy statement/prospectus, including information included in, or incorporated by reference into, this joint proxy statement/prospectus, may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, but are not limited to: (i) statements about the benefits and costs of the merger, including future financial and operating results and cost savings that may be realized from the merger; (ii) statements about our respective plans, objectives, expectations and intentions and other statements that are not historical facts; and (iii) other statements identified by words such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” “estimate,” “feel,” “indicate,” “strive,” “forecast,” “project,” “target,” “contemplate,” “assume,” “achievable,” “potential,” “strategy,” “goal,” “outcome,” “continue,” “remain,” “maintain,” “trend,” “objective” and variations of such words and similar expressions, or future or conditional verbs such as “will,” “would,” “should,” “could,” “might,” “can,” “may” or words of similar meaning. These forward-looking statements relating to North or the combined company are based on current beliefs and expectations of North’s management and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond North’s control. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change. Accordingly, actual results may differ materially from those expressed in, or implied by, the forward-looking statements.

Some of the factors that may cause actual results or earnings to differ materially from those contemplated by the forward-looking statements include, but are not limited to, those discussed under “Risk Factors” and those discussed in the filings of North with the SEC that are incorporated by reference into this joint proxy statement/prospectus, as well as the following:

 

    the merger may not be completed when expected or at all because the requisite regulatory approvals for the merger, and/or the approval of the South merger proposal, the South adjournment proposal, the North merger proposal, the North share issuance proposal, the North charter amendment proposal, and the North adjournment proposal might not be obtained or other conditions to the completion of the merger set forth in the merger agreement might not be satisfied or waived, or because of litigation that might be instituted against North or South;

 

    the sale price for the North common stock (Class A, Class B or both) could decline before the completion of the merger, including as a result of the financial performance of North or South, or more generally due to broader stock market movements and the performance of financial companies and peer group companies;

 

    the expected cost savings, synergies and other financial benefits from the merger might not be realized within the expected time frames or at all as a result of, among other things, changes in general economic and market conditions, interest and exchange rates, monetary policy, laws and regulations and their enforcement, and the degree of competition in the markets in which North and South operate;

 

    South’s business may not be integrated into North’s business successfully, or such integration may take longer to accomplish than expected;

 

    operating costs, customer losses and business disruption following the merger, including adverse developments in relationships with employees, may be greater than expected; and

 

    management time and effort may be diverted to the resolution of merger-related issues.

Because these forward-looking statements are subject to assumptions and uncertainties, North’s and the combined company’s actual results may differ materially from those expressed or implied by these forward-looking statements. You are cautioned not to place undue reliance on these statements, which speak only as of the date of this joint proxy statement/prospectus or the date of any document incorporated by reference into this joint proxy statement/prospectus, as applicable.

 

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All subsequent written and oral forward-looking statements regarding the merger or other matters addressed in this joint proxy statement/prospectus, and attributable to North or any person acting on its behalf, are expressly qualified in their entirety by the cautionary statements contained or referred to in this section entitled “Forward-Looking Statements.” We undertake no obligation to update these forward-looking statements to reflect events or circumstances after the date of this joint proxy statement/prospectus or to reflect the occurrence of unanticipated events, unless obligated to do so under the federal securities laws.

 

48


INFORMATION ABOUT THE NORTH SPECIAL MEETING

This section contains information about the special meeting that North has called to allow North stockholders to vote on certain proposals related to the merger agreement and the merger, as more fully described below. The North board of directors is mailing this joint proxy statement/prospectus to you, as a North stockholder, on or about [            ], 2014. Together with this joint proxy statement/prospectus, the North board of directors is also sending to you a notice of the special meeting of North stockholders and a form of proxy that the North board of directors is soliciting for use at the special meeting and at any adjournments or postponements of the special meeting.

Time, Date, and Place

The special meeting is scheduled to be held on [            ], 2014 at [            ], local time, at [            ].

Matters to Be Considered at the Meeting

At the special meeting, North stockholders will be asked to consider and vote on:

 

    a proposal to approve the merger agreement;

 

    a proposal to approve the issuance of up to 2,605,004 shares of North Class A common stock and up to 273,526 shares of North Class B common stock in the merger in accordance with NASDAQ Listing Rules;

 

    a proposal to approve an amendment to the North charter to increase the authorized number of shares of North Class A common stock from 11,000,000 to 16,000,000 shares to enable the issuance of shares in the merger;

 

    a proposal of the North board of directors to adjourn or postpone the special meeting, if necessary or appropriate, to permit further solicitation of proxies if there are not sufficient votes at the time of the special meeting to approve the North merger proposal, the North share issuance proposal or the North charter amendment proposal; and

 

    any other matters as may properly be brought before the special meeting or any adjournment or postponement of the special meeting.

At this time, the North board of directors is unaware of any other matters that may be presented for action at the special meeting. If any other matters are properly presented, however, and you have completed, signed and submitted your proxy, the person(s) named as proxy will have the authority to vote your shares in accordance with his or her judgment with respect to such matters. A copy of the merger agreement is attached to this joint proxy statement/prospectus as Appendix A, and we encourage you to read it carefully in its entirety.

North merger proposal. In the merger, South will merge with and into North, with North as the surviving company. It is expected that, following the merger, South Bank will merge with and into North Bank, with North Bank as the surviving bank. For a detailed description of the merger and the merger agreement, see the sections entitled “The Merger” and “The Merger Agreement” beginning on pages [    ] and [    ], respectively, of this joint proxy statement/prospectus.

North share issuance proposal. Under the NASDAQ Listing Rules, a company listed on NASDAQ is required to obtain stockholder approval prior to the issuance of common stock or securities convertible into or exercisable for common stock in connection with the acquisition of the stock or assets of another company if such common stock has or will have upon issuance voting power equal to or in excess of 20% of the voting power outstanding before the issuance of stock or securities convertible into or exercisable for common stock, or the number of shares of common stock to be issued is or will be equal to or in excess of 20% of the number of

 

49


shares of common stock outstanding before the issuance of the stock or securities. As of [            ], 2014, there were an aggregate of [            ] shares of North Class A common stock and North Class B common stock outstanding, for a total number of [            ] votes. Based on the current number of shares of South common stock outstanding, (i) if all South shareholders elect to receive only North Class A common stock and cash, North currently expects to issue up to 2,605,004 shares of North Class A common stock upon completion of the merger and (ii) if all South shareholders elect to receive North Class A common stock and North Class B common stock, North currently expects to issue up to 2,331,479 shares of Class A common stock and 273,526 shares of North Class B common stock upon completion of the merger. However, the number of shares (and corresponding number of votes) actually issued upon completion of the merger could change depending on the actual elections of South shareholders.

NASDAQ Listing Rules also require stockholder approval prior to the issuance of common stock or securities convertible into or exercisable for common stock in connection with the acquisition of the stock or assets of another company if any director, officer or “substantial shareholder” (as defined by NASDAQ Listing Rules) has a 5% or greater interest (or such persons collectively have a 10% or greater interest), directly or indirectly, in the company or assets to be acquired or in the consideration to be paid in the transaction or series of related transactions and the present or potential issuance of common stock, or securities convertible into or exercisable for common stock, could result in an increase in outstanding common shares or voting power of 5% or more. See “Information about South—Security Ownership of South Management and Certain South Beneficial Owners” beginning on page [    ] of this joint proxy statement prospectus. For a description of North’s “substantial shareholders” and their interests in the merger, see the section entitled “The Merger—Interests of North and/or North Bank’s Directors and Executive Officers in the Merger” beginning on page [    ] of this joint proxy statement prospectus.

North charter amendment proposal. North’s authorized capital stock currently consists of 23,000,000 shares divided into three classes: (i) 11,000,000 shares of North Class A common stock, (ii) 2,000,000 shares of North Class B common stock, and (iii) 10,000,000 shares of preferred stock. As of [            ], 2014, there were [            ] shares of North Class A common stock, [            ] shares of North Class B common stock, and 0 shares of preferred stock issued and outstanding. In connection with the merger, up to 2,605,004 shares of North Class A common stock may be issued to holders of South common stock (if all South shareholders choose North Class A common stock and cash as merger consideration). Accordingly, absent the adoption of the North charter amendment, North does not have a sufficient number of authorized shares of North Class A common stock to consummate the merger (if all South shareholders choose North Class A common stock and cash as merger consideration). For that reason, the obligations of both North and South to consummate the merger agreement are conditioned upon North’s stockholders approving North’s charter amendment. If North’s stockholders do not approve the charter amendment, North will be unable to consummate the merger.

If North’s stockholders approve the charter amendment, North could have approximately 4.8 million shares of North Class A common stock available for future issuance after giving effect to the issuance of North Class A common stock in connection with the merger. These additional authorized shares of North Class A common stock will be available for issuance at the discretion of North’s board of directors, and for such consideration as determined by the North board of directors, for any corporate purpose, including, among other things, stock splits, stock dividends, redemption and exchanges, public or private stock offerings or future acquisitions, without further action by North’s stockholders, except as may be required by applicable laws or regulations or the NASDAQ Listing Rules. Although North does not have any specific commitments for the issuance of the additional shares of North Class A common stock for which authorization is solicited beyond those shares required to consummate the merger, North’s board of directors believes that it is desirable for the stockholders to authorize such additional shares at this time so that North is prepared to meet possible future needs.

The additional shares of North Class A common stock to be authorized by adoption of the North charter amendment would have rights identical to the shares of North Class A common stock currently outstanding.

 

50


Adoption of the North charter amendment and issuance of the North Class A common stock authorized thereby would not affect the rights of the holders of currently outstanding North Class A common stock or North Class B common stock, except for effects incidental to increasing the number of shares of North Class A common stock outstanding, such as potential dilution of the earnings per share and voting power of current holders of North Class A common stock and North Class B common stock.

North adjournment proposal. If the number of shares of North Class A common stock and/or North Class B common stock present or represented by proxy and voting in favor of the North merger proposal, the North share issuance proposal or the North charter amendment proposal, as applicable, is insufficient to approve any such proposal(s), North may move to adjourn the North special meeting in order to solicit additional proxies for such proposal(s). North does not intend to call a vote on the North adjournment proposal if each of the North merger proposal, the North share issuance proposal and the North charter amendment proposal has been approved at the North special meeting.

Recommendation of the North Board of Directors

The North board of directors recommends that North stockholders vote “FOR” the North merger proposal, “FOR” the North share issuance proposal, “FOR” the North charter amendment proposal and “FOR” the North adjournment proposal. See “The Merger—Recommendation of North’s Board of Directors and Reasons for the Merger” beginning on page [    ] of this joint proxy statement prospectus.

Record Date and Quorum

[            ], 2014 has been fixed as the record date for the determination of North stockholders entitled to notice of, and to vote at, the special meeting and any adjournment or postponement thereof. At the close of business on the record date, there were (i) [            ] shares of North Class A common stock outstanding and entitled to vote at the special meeting, held by [            ] holders of record and (ii) [            ] shares of North Class B common stock outstanding and entitled to vote at the special meeting, held by [            ] holders of record.

A quorum is necessary to transact business at the special meeting. The presence, in person or by proxy, of shares representing a majority of the total votes entitled to be cast by holders of outstanding shares of North Class A common stock and North Class B common stock at the special meeting is necessary to constitute a quorum, and the presence, in person or by proxy, of the holders of a majority of the outstanding shares of North Class A common stock is necessary to constitute a quorum for action on the North charter amendment proposal. Shares of North Class A common stock and North Class B common stock represented at the special meeting but not voted, including shares that a stockholder abstains from voting and shares held in “street name” with a broker or other nominee for which a stockholder provides voting instructions for one or more, but not all, proposals to be voted on, will be counted for purposes of establishing a quorum. Once a share of North Class A common stock or North Class B common stock is represented at the special meeting on any proposal, it will be counted for the purpose of determining a quorum for all proposals voted on, not only at the special meeting but also at any adjournment or postponement of the special meeting. In the event that a quorum is not present at the special meeting, it is expected that the special meeting will be adjourned or postponed.

Required Vote

Pursuant to Delaware law, the North merger proposal will be approved if a majority of the total votes entitled to be cast by holders of the outstanding shares of North Class A common stock and North Class B common stock, voting as a group, are cast in favor of such proposal. The North charter amendment proposal will be approved if a majority of the total votes entitled to be cast by holders of the outstanding shares of: (i) North Class A common stock and North Class B common stock, voting as a group, and (ii) North Class A common stock, voting as a separate group, in each case are cast in favor of such proposal. Pursuant to NASDAQ Listing

 

51


Rules, the North share issuance proposal will be approved if a majority of the total votes actually cast at the North special meeting by holders of the outstanding shares of North Class A common stock and North Class B common stock, voting as a group, are cast in favor of such proposal. The North adjournment proposal will be approved if a majority of total votes entitled to be cast by holders of shares of North Class A common stock and North Class B common stock represented at the North special meeting, in person or by proxy, and voting as a group, are cast in favor of such proposal. For each proposal, you may vote “FOR,” “AGAINST” or “ABSTAIN.”

If you vote to “ABSTAIN” with respect to the North merger proposal, the North charter amendment proposal or the North adjournment proposal or if you fail to vote on any such proposal, or fail to instruct your broker or other nominee how to vote with respect to any such proposal, this will have the same effect as voting “AGAINST” such proposal. If you vote to “ABSTAIN” with respect to the North share issuance proposal, if you fail to vote on such proposal or if you fail to instruct your broker or other nominee how to vote with respect to such proposal, this will have no effect on the vote count for such proposal.

Each share of North Class A common stock you own as of the record date for the special meeting entitles you to one vote at the special meeting on all matters properly presented at the meeting. Each share of North Class B common stock you own as of the record date for the special meeting entitles you to 16 votes at the special meeting on all matters properly presented at the meeting.

How to Vote—Shares Held of Record

Voting in Person. If you are a holder of record, you can vote in person by submitting a ballot at the special meeting. Nevertheless, we recommend that you vote by proxy as promptly as possible, even if you plan to attend the special meeting. This will ensure that your vote is received. If you attend the special meeting, you may vote by ballot, thereby canceling any proxy previously submitted.

Voting by Proxy. Your proxy card includes instructions on how to vote by mailing in the proxy card. If you choose to vote by proxy, please mark each proxy card you receive, sign and date it, and promptly return it in the envelope enclosed with the proxy card. If you sign and return your proxy without instruction on how to vote your shares, your shares will be voted “FOR” the North merger proposal, “FOR” the North share issuance proposal, “FOR” the North charter amendment proposal and “FOR” the North adjournment proposal. At this time, the North board of directors is unaware of any other matters that may be presented for action at the special meeting. If any other matters are properly presented, however, and you have signed and returned your proxy card, the person(s) named as proxy will have the authority to vote your shares in accordance with his or her judgment with respect to such matters.

Toll-Free number. You may use the toll-free number shown on your proxy card to vote your shares.

Voting by Internet. You may vote your shares by visiting the website shown on your proxy card to vote via the Internet.

How to Vote—Shares Held in “Street Name”

If you are a North stockholder and your shares are held in “street name” through a broker or other nominee, you must provide the record holder of your shares with instructions on how to vote your shares. Please follow the voting instructions provided by the broker or other nominee. You may not vote shares held in street name by returning a proxy card directly to North or by voting in person at the North special meeting unless you provide a “legal proxy,” which you must obtain from your broker or other nominee. Further, brokers or other nominees who hold shares of North common stock on behalf of their customers may not give a proxy to North to vote those

 

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shares with respect to any of the proposals without specific instructions from their customers, as brokers and other nominees do not have discretionary voting powers on these matters. Therefore, if you are a North stockholder and you do not instruct your broker or other nominee on how to vote your shares:

 

    your broker or other nominee may not vote your shares on the North merger proposal, which broker non-votes, if any, will have the same effect as a vote “AGAINST” this proposal;

 

    your broker or other nominee may not vote your shares on the North share issuance proposal, which broker non-votes, if any, will have no effect on the vote count for this proposal;

 

    your broker or other nominee may not vote your shares on the North charter amendment proposal, which broker non-votes, if any, will have the same effect as a vote “AGAINST” this proposal; and

 

    your broker or other nominee may not vote your shares on the North adjournment proposal, which broker non-votes, if any, will have the same effect as a vote “AGAINST” this proposal.

YOUR VOTE IS VERY IMPORTANT. WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING IN PERSON, IF YOU ARE A RECORD HOLDER, PLEASE MARK, SIGN AND DATE THE ENCLOSED PROXY CARD AND PROMPTLY RETURN IT IN THE ENCLOSED POSTAGE-PAID ENVELOPE OR VOTE ELECTRONICALLY VIA TELEPHONE OR THE INTERNET. IF YOUR SHARES ARE HELD IN STREET NAME BY A BROKER OR OTHER NOMINEE, PLEASE PROMPTLY COMPLETE YOUR BROKER VOTING INSTRUCTION CARD AND RETURN IT IN THE ENCLOSED POSTAGE-PAID ENVELOPE FROM YOUR BROKER. RECORD HOLDERS WHO ATTEND THE SPECIAL MEETING MAY REVOKE THEIR PROXIES BY VOTING IN PERSON.

Revocation of Proxies

Shares Held of Record. You can revoke your proxy at any time before your shares are voted. If you are a holder of record, then you can revoke your proxy by:

 

    submitting another valid proxy card bearing a later date;

 

    prior to the special meeting, logging onto the Internet website specified on your proxy card in the same manner you would to submit your proxy electronically or calling the telephone number specified on your proxy card, in each case if you are eligible to do so, and following the instructions on the proxy card;

 

    attending the special meeting in person, notifying the corporate secretary and voting by ballot at the special meeting; or

 

    delivering prior to the special meeting a written notice of revocation to Kathy A. Klotzberger, Corporate Secretary, First Citizens BancShares, Inc., 4300 Six Forks Road, Raleigh, North Carolina 27609.

If you choose to send a completed proxy card bearing a later date or a notice of revocation, the new proxy card or notice of revocation must be received before the beginning of the North special meeting. Attendance at the special meeting will not, in and of itself, constitute revocation of a proxy.

Shares Held in “Street Name.” If you hold your shares in street name with a broker or other nominee, you must follow the directions you receive from your broker or other nominee to change your vote. Your last vote will be the vote that is counted.

 

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Shares Held by Directors and Executive Officers

As of the North record date, directors and executive officers of North and their affiliates owned and were entitled to vote [            ] shares of North Class A common stock and [            ] shares of North Class B common stock, representing approximately [        ]% of the shares of North Class A common stock, approximately [        ]% of the shares of North Class B common stock outstanding and entitled to vote on that date, respectively, and [            ] total votes (each holder of North Class A common stock can cast one vote for each share of North Class A common stock owned on the North record date and each holder of North Class B common stock can cast 16 votes for each share of North Class B common stock owned on the North record date). As of the North record date, South and directors and executive officers of South and their affiliates owned and were entitled to vote [            ] shares of North Class A common stock and [            ] shares of North Class B common stock, representing approximately [        ]% of the shares of North Class A common stock and [        ]% of the shares of North Class B common stock outstanding and entitled to vote on that date, respectively, and [            ] total votes.

Solicitation of Proxies

The proxy for the special meeting is being solicited on behalf of the North board of directors. North will bear the entire cost of soliciting proxies from you. North will reimburse brokerage firms and other custodians, nominees and fiduciaries for reasonable expenses incurred by them in sending proxy materials to the beneficial owners of North common stock. Proxies will be solicited principally by mail, but may also be solicited by the directors, officers and other employees of North in person or by telephone, facsimile or other means of electronic communication. Directors, officers and employees will receive no compensation for these activities in addition to their regular compensation, but may be reimbursed for out-of-pocket expenses in connection with such solicitation.

Attending the Meeting

All holders of North common stock, including holders of record and holders who hold their shares in street name through brokers or other nominees, are cordially invited to attend the special meeting. Holders of record can vote in person at the special meeting. If you are not a holder of record and would like to vote in person at the special meeting, you must produce a “legal proxy” executed in your favor by the record holder of your shares. In addition, you must bring a form of personal photo identification with you in order to be admitted at the special meeting. North reserves the right to refuse admittance to anyone without proper proof of share ownership or without proper photo identification. The use of cameras, sound recording equipment, communications devices or any similar equipment during the special meeting is prohibited without North’s express written consent.

Questions and Additional Information

If you have more questions about the merger or how to submit your proxy or vote, or if you need additional copies of this joint proxy statement/prospectus or the enclosed proxy card or voting instructions, please contact North at:

First Citizens BancShares, Inc.

4300 Six Forks Road

Raleigh, North Carolina 27609

Attn: Kathy A. Klotzberger, Corporate Secretary

 

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INFORMATION ABOUT THE SOUTH SPECIAL MEETING

This section contains information about the special meeting that South has called to allow South shareholders to vote on certain proposals related to the merger agreement and the merger, as more fully described below. The South board of directors is mailing this joint proxy statement/prospectus to you, as a South shareholder, on or about [            ], 2014. Together with this joint proxy statement/prospectus, the South board of directors is also sending to you a notice of the special meeting of South shareholders and a form of proxy that the South board of directors is soliciting for use at the special meeting and at any adjournments or postponements of the special meeting.

Time, Date, and Place

The special meeting is scheduled to be held on [            ], 2014 at [            ], local time, at [            ].

Matters to be Considered at the Meeting

At the special meeting, South shareholders will be asked to consider and vote on:

 

    a proposal to approve the merger agreement;

 

    a proposal of the South board of directors to adjourn or postpone the special meeting, if necessary or appropriate, including to permit further solicitation of proxies if there are not sufficient votes at the time of the special meeting to approve the South merger proposal; and

 

    any other matters as may properly be brought before the special meeting or any adjournment or postponement of the special meeting.

Holders of South voting and non-voting common stock at the close of business on the South record date can vote on the South merger proposal. Only holders of South voting common stock on the South record date can vote on the South adjournment proposal.

At this time, the South board of directors is unaware of any other matters that may be presented for action at the special meeting. If any other matters are properly presented, however, and you have completed, signed and submitted your proxy, the person(s) named as proxy will have the authority to vote your shares in accordance with his or her judgment with respect to such matters. A copy of the merger agreement is attached to this joint proxy statement/prospectus as Appendix A, and we encourage you to read it carefully in its entirety.

South merger proposal. In the merger, South will merge with and into North, with North as the surviving company. It is expected that, following the merger, South Bank will merge with and into North Bank, with North Bank as the surviving bank. For a detailed description of the merger and the merger agreement, see the sections entitled “The Merger” and “The Merger Agreement” beginning on pages [    ] and [    ], respectively, of this joint proxy statement/prospectus.

South adjournment proposal. If the number of shares of South common stock present or represented by proxy and voting in favor of the South merger proposal is insufficient to approve such proposal, South may move to adjourn the South special meeting in order to solicit additional proxies for such proposal. South does not intend to call a vote on the South adjournment proposal if the South merger proposal has been approved at the South special meeting.

Recommendation of the South Board of Directors

The South board of directors recommends that South shareholders vote “FOR” the South merger proposal and “FOR” the South adjournment proposal. See “The Merger—Recommendation of South’s Board of Directors and Reasons for the Merger” beginning on page [    ] of this joint proxy statement, prospectus.

 

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Record Date and Quorum

[            ], 2014 has been fixed as the record date for the determination of South shareholders entitled to notice of, and to vote at, the special meeting and any adjournment or postponement thereof. At the close of business on the record date, there were (i) [            ] shares of South voting common stock outstanding and entitled to vote at the special meeting, held by approximately [        ] holders of record, and (ii) [            ] shares of South non-voting common stock outstanding and entitled to vote at the special meeting, held by approximately [            ] holders of record.

A quorum is necessary to transact business at the special meeting. The presence, in person or by proxy, of the holders of a majority of the outstanding shares of the total South voting and non-voting common stock entitled to vote at the special meeting, as well as a majority of the outstanding shares of the voting common stock entitled to vote at the special meeting and a majority of the outstanding shares of the non-voting common stock entitled to vote at the meeting, is necessary to constitute a quorum. Shares of South common stock represented at the special meeting but not voted, including shares that a shareholder abstains from voting and shares held in “street name” with a broker or other nominee for which a shareholder does not provide voting instructions, will be counted for purposes of establishing a quorum. Once a share of South common stock is represented at the special meeting, it will be counted for the purpose of determining a quorum not only at the special meeting but also at any adjournment or postponement of the special meeting. In the event that a quorum is not present at the special meeting, it is expected that the special meeting will be adjourned or postponed.

Required Vote

Under the provisions of the South Carolina Business Corporation Act, to be adopted, the South merger proposal must be approved by: (i) two-thirds of the South voting and non-voting common stock entitled to be cast on the merger, voting as a group, (ii) two-thirds of the South voting common stock entitled to be cast on the merger, voting as a separate group, and (iii) two-thirds of the South non-voting common stock entitled to be cast on the merger, voting as a separate group. In addition, it is a condition to the merger that a majority of the votes entitled to be cast on the merger by persons who are “minority holders” of South common stock not be cast against the merger. The term “minority holders” was negotiated by the North Committee and the South Committee, on the basis of South’s share records and related information, to include, generally, South shareholders who were not members of the Frank B. Holding family and South shareholders who were not affiliated with Mr. Holding or his family. The South adjournment proposal will be approved if the votes cast by South voting common stock in favor of the South adjournment proposal exceed the votes cast against the South adjournment proposal. For each proposal, you may vote “FOR,” “AGAINST,” or “ABSTAIN.”

If you vote to “ABSTAIN” with respect to the South merger proposal or if you fail to vote on the South merger proposal, or fail to instruct your broker or other nominee how to vote with respect to the South merger proposal, this will have the same effect as voting “AGAINST” the South merger proposal.

If you vote to “ABSTAIN” with respect to the South adjournment proposal or if you fail to vote on the South adjournment proposal, or fail to instruct your broker or other nominee how to vote with respect to the South adjournment proposal, this will have no effect on the vote count for the South adjournment proposal.

Each share of South voting common stock you own as of the record date for the special meeting entitles you to one vote at the special meeting on all matters properly presented at the meeting. Each share of South non-voting common stock you own as of the record date for the special meeting entitles you to one vote at the special meeting on the South merger proposal.

How to Vote—Shares Held of Record

Voting in Person. If you are a holder of record, you can vote in person by submitting a ballot at the special meeting. Nevertheless, we recommend that you vote by proxy or electronically via telephone or the Internet as

 

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promptly as possible, even if you plan to attend the special meeting. This will ensure that your vote is received. If you attend the special meeting, you may vote by ballot, thereby canceling any proxy previously submitted.

Voting by Proxy. Your proxy card includes instructions on how to vote by mailing in the proxy card. If you choose to vote by proxy, please mark each proxy card you receive, sign and date it, and promptly return it in the envelope enclosed with the proxy card. If you sign and return your proxy without instruction on how to vote your shares, your shares will be voted “FOR” the South merger proposal and “FOR” the South adjournment proposal. At this time, the South board of directors is unaware of any other matters that may be presented for action at the special meeting. If any other matters are properly presented, however, and you have signed and returned your proxy card, the person(s) named as proxy will have the authority to vote your shares in accordance with his or her judgment with respect to such matters. Please do not send in your South stock certificates with your proxy card. If the merger is completed, then you will receive a separate letter of transmittal and instructions on how to surrender your South stock certificates for the merger consideration.

Toll-Free number. You may use the toll-free number shown on your proxy card to vote your shares.

Voting by Internet. You may vote your shares by visiting the website shown on your proxy card to vote via the Internet.

How to Vote—Shares Held in “Street Name”

If you are a South shareholder and your shares are held in “street name” through a broker or other nominee, you must provide the record holder of your shares with instructions on how to vote your shares. Please follow the voting instructions provided by the broker or other nominee. You may not vote shares held in street name by returning a proxy card directly to South or by voting in person at the South special meeting unless you provide a “legal proxy,” which you must obtain from your broker or other nominee. Further, brokers or other nominees who hold shares of South common stock on behalf of their customers may not give a proxy to South to vote those shares with respect to any of the proposals without specific instructions from their customers, as brokers and other nominees do not have discretionary voting power on these matters. Therefore, if you are a South shareholder and you do not instruct your broker or other nominee on how to vote your shares:

 

    your broker or other nominee may not vote your shares on the South merger proposal, which broker non-votes, if any, will have the same effect as a vote “AGAINST” this proposal; and

 

    your broker or other nominee may not vote your shares on the South adjournment proposal, which broker non-votes, if any, will have no effect on the vote count for this proposal.

YOUR VOTE IS VERY IMPORTANT. WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING IN PERSON, IF YOU ARE A RECORD HOLDER, PLEASE MARK, SIGN AND DATE THE ENCLOSED PROXY CARD AND PROMPTLY RETURN IT IN THE ENCLOSED POSTAGE-PAID ENVELOPE OR VOTE ELECTRONICALLY VIA TELEPHONE OR THE INTERNET. IF YOUR SHARES ARE HELD IN STREET NAME BY A BROKER OR OTHER NOMINEE, PLEASE PROMPTLY COMPLETE YOUR BROKER VOTING INSTRUCTION CARD AND RETURN IT IN THE ENCLOSED POSTAGE-PAID ENVELOPE FROM YOUR BROKER. RECORD HOLDERS WHO ATTEND THE SPECIAL MEETING MAY REVOKE THEIR PROXIES BY VOTING IN PERSON.

Revocation of Proxies

Shares Held of Record. You can revoke your proxy at any time before your shares are voted. If you are a shareholder of record, then you can revoke your proxy by:

 

    submitting another valid proxy card bearing a later date;

 

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    prior to the special meeting, logging onto the Internet website specified on your proxy card in the same manner you would to submit your proxy electronically or calling the telephone number specified on your proxy card, in each case if you are eligible to do so and following the instructions on the proxy card;

 

    attending the special meeting in person, notifying the corporate secretary and voting by ballot at the special meeting; or

 

    delivering prior to the special meeting a written notice of revocation to Melissa A. Mendenall, Corporate Secretary at the following address: First Citizens Bancorporation, Inc., 1230 Main Street, Columbia, South Carolina 29201.

If you choose to send a completed proxy card bearing a later date or a notice of revocation, the new proxy card or notice of revocation must be received before the beginning of the South special meeting. Attendance at the special meeting will not, in and of itself, constitute revocation of a proxy.

Shares Held in “Street Name.” If you hold your shares in street name with a broker or other nominee, you must follow the directions you receive from your broker or other nominee to change your vote. Your last vote will be the vote that is counted.

Shares Held by Directors and Executive Officers

As of the South record date, directors and executive officers of South and their affiliates owned and were entitled to vote an aggregate of [            ] shares of South voting and non-voting common stock, representing approximately [        ]% of the aggregate shares of South voting and non-voting common stock outstanding and entitled to vote on that date. As of the South record date, directors and executive officers of South and their affiliates owned and were entitled to vote [            ] shares of South voting common stock and [            ] shares of South non-voting common stock, representing approximately [        ]% of the shares of South voting common stock and [        ]% of the shares of South non-voting common stock outstanding and entitled to vote on that date, respectively. As of the South record date, North and directors and executive officers of North and their affiliates owned and were entitled to vote an aggregate of [            ] shares of South voting and non-voting common stock, representing approximately [        ]% of the aggregate shares of South voting and non-voting common stock outstanding and entitled to vote on that date. As of the South record date, North and directors and executive officers of North and their affiliates owned and were entitled to vote [            ] shares of South voting common stock and [            ] shares of the South non-voting common stock, representing approximately [        ]% of the shares of South voting common stock and [        ]% of the shares of South non-voting common stock outstanding and entitled to vote on that date, respectively.

Solicitation of Proxies

The proxy for the special meeting is being solicited on behalf of the South board of directors. South will bear the entire cost of soliciting proxies from you. South will reimburse brokerage firms and other custodians, nominees and fiduciaries for reasonable expenses incurred by them in sending proxy materials to the beneficial owners of South common stock. Proxies will be solicited principally by mail, but may also be solicited by the directors, officers and other employees of South in person or by telephone, facsimile or other means of electronic communication. Directors, officers and employees will receive no compensation for these activities in addition to their regular compensation, but may be reimbursed for out-of-pocket expenses in connection with such solicitation. South may also engage a proxy soliciting firm to assist with solicitation of proxies.

Attending the Meeting

All holders of South common stock, including holders of record and holders who hold their shares in street name through brokers or other nominees, are cordially invited to attend the special meeting. Holders of record

 

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can vote in person at the special meeting. If you are not a holder of record and would like to vote in person at the special meeting, you must produce a “legal proxy” executed in your favor by the record holder of your shares. In addition, you must bring a form of personal photo identification with you in order to be admitted at the special meeting. South reserves the right to refuse admittance to anyone without proper proof of share ownership or without proper photo identification. The use of cameras, sound recording equipment, communications devices or any similar equipment during the special meeting is prohibited without South’s express written consent.

Questions and Additional Information

If you have more questions about the merger or how to submit your proxy or vote, or if you need additional copies of this joint proxy statement/prospectus or the enclosed proxy card or voting instructions, please contact South at:

First Citizens Bancorporation, Inc.

1230 Main Street

Columbia, South Carolina 29201

Attention: Melissa A. Mendenall, Corporate Secretary

 

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THE MERGER

Structure

The North board of directors and the South board of directors have approved and adopted the merger agreement and the transactions contemplated thereby including the merger. In the merger, South will merge with and into North, with North surviving the merger and South ceasing to exist. It is expected that following the merger, South’s wholly-owned subsidiary, South Bank, will merge with and into North’s wholly-owned subsidiary, North Bank, with North Bank surviving the merger and South Bank ceasing to exist.

Merger Consideration

Under the terms of the merger agreement, each share of South common stock will be converted into the right to receive 4.0 shares of North Class A common stock and $50.00 in cash, unless the holder of such share elects, pursuant to a letter of transmittal that will be delivered after closing of the merger, for each share of such holder’s South common stock to be converted into the right to receive 3.58 shares of North Class A common stock and 0.42 shares of North Class B common stock. Cash will be paid in lieu of issuing fractional shares of North common stock. The total number of shares of North Class A common stock to be issued in the merger is expected to be between 2,331,479 and 2,605,004, and the total number of shares of North Class B common stock to be issued in the merger is expected to be between 0 and 273,526, which represents approximately 21.7% of the economic interest in North, and between approximately 9.7% and approximately 21.7% of the voting interest in North, depending on the number of South shareholders who elect to receive North Class B common stock as part of the merger consideration.

Background of the Merger

As part of its ongoing consideration and evaluation of its long-term strategies, North senior management and the North board of directors regularly have reviewed and assessed business objectives and opportunities, including strategic opportunities, all with the goal of strengthening North and enhancing long-term stockholder value. In the summer of 2013, senior management of North identified the acquisition of South as a potential synergistic opportunity that would enhance long-term stockholder value.

Later in 2013, Mr. Holding, Jr. discussed the possibility of a combination of North and South with certain of his family members, including Frank B. Holding, Mr. Holding, Jr.’s father, Peter M. Bristow, President of South and Mr. Holding, Jr.’s brother-in-law, and Hope H. Bryant, to ascertain whether they would be receptive to the two organizations exploring the possibility of a combination. Thereafter, Frank B. Holding, who owns shares of North and South stock, and is a former director of both North and South, did not participate in the events described herein. See “Questions and Answers about the Merger and the Special Meeting—Who are the members of the Holding family and what interests do they have in North and South?,” “—Interests of North and/or North Bank’s Directors and Executive Officers in the Merger” and “— Interests of South and/or South Bank’s Directors and Executive Officers in the Merger.” See also “Questions and Answers about the Merger and the Special Meetings” beginning on page [    ] of this joint proxy statement/prospectus and “Information about South—Security Ownership of South Management and Certain South Beneficial Owners” beginning on page [    ] of this joint proxy statement prospectus.

Following the discussions among the Holding family, Mr. Bristow discussed with senior management of South the possibility of a combination of North and South. In late 2013, Mr. Holding, Jr. indicated to management of North that he believed various members of the Holding family would be receptive to the two organizations exploring the possibility of a combination. Thereafter, in early 2014, senior management of North and South each had preliminary internal discussions to assess their respective views of the feasibility of a combination of North and South. Based on a preliminary assessment, each management team separately concluded that a combination would be positive for both North and South, and their respective shareholders, and therefore, that it was desirable to discuss the opportunity with the respective boards of directors of North and South, with a view towards establishing an independent process to consider the opportunity further.

 

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The management of North discussed its analysis of the potential opportunity with the North board of directors at an educational meeting held on January 27, 2014. At its regularly scheduled board meeting on January 28, 2014, the independent directors of North established the North Committee comprised of Victor E. Bell, H. Lee Durham, Jr., and Lucius S. Jones (Chairman), each of whom was deemed to be an independent director, and authorized it to act with the full authority of the board in considering whether to recommend a possible transaction with South. The North board of directors authorized the full group of independent directors to take final action with respect to any such recommendation by the North Committee. Directors Frank B. Holding, Jr. and Hope H. Bryant recused themselves from this portion of the meeting and did not participate.

On January 30, 2014, the South board of directors met with Haynsworth Sinkler Boyd, P.A. (“Haynsworth”), South’s outside legal counsel. Mr. Holding, Jr. and Mr. Bristow recused themselves from the meeting and did not participate. Jim Apple, South’s Chief Executive Officer, and C. S. McLaurin III, a former executive officer of South who provides consulting services to South, also recused themselves from the meeting and did not participate. The following directors participated in the meeting and are referred to by South as the independent directors of South: David E. Dukes, J. Earle Furman, Jr., M. Craig Garner, Jr., Robert B. Haynes, Wycliffe E. Haynes, Robert R. Hoppe, Floyd L. Keels, Kevin B. Marsh and Allen H. McIntyre. In addition to recusing himself from South board deliberations related to a potential transaction between North and South, Mr. Bristow also did not participate in his capacity as a member of South’s management in any matter related to the transaction. For purposes of the remainder of this discussion, references to South management do not include Mr. Bristow.

At the January 30, 2014 South board of directors meeting, South’s independent directors established the South Committee comprised of M. Craig Garner, Jr. (Chairman), Robert Hoppe, Allen McIntyre and Kevin Marsh. The independent directors of South determined that the members of the South Committee (i) were not employees of South or its subsidiaries, (ii) were not affiliated with North or the controlling shareholders of South or North and (iii) had no financial interest in the merger that is materially different from South’s minority shareholders, except for considerations arising from their positions as directors of South. The independent directors of South authorized the South Committee to act with the full authority of the board in considering a possible transaction with North. The independent directors of South authorized the South Committee to determine whether a combination between South and North is in the best interests of South and its shareholders and, if determined desirable, to make recommendations to the board about the terms and conditions of such combination.

In late January and early February, the North Committee engaged Smith Anderson, as special counsel, and Sandler O’Neill, as its financial advisor. The North Committee discussed its role and duties with Smith Anderson and confirmed the scope of its authority and the independence of each of its members. In connection with its engagement of Sandler O’Neill, the North Committee considered, among other things, that Sandler O’Neill had previously represented South in connection with the repurchase of South stock held by Carmen Holding Ames, and concluded that Sandler O’Neill was independent for purposes of advising the North Committee with respect to the potential transaction with South.

In early February, a representative of the North Committee also contacted members of North management, including Mr. Holding, Jr., to apprise them regarding communication policies established by the North Committee to ensure that the North Committee controlled any communications among the North Committee and members of North management or the Holding family and any relevant communications with South. A representative of the North Committee also inquired of Mr. Holding, Jr. whether he anticipated that he or his family members, as stockholders, would desire a three-party consideration of the transaction among the South Committee, the North Committee, and such Holding family stockholders. Mr. Holding, Jr. indicated that he did not desire three-party negotiations; but rather, desired that the possibility of a transaction be considered and recommended by two-party discussions between the South Committee and the North Committee.

On February 6, 2014, following a search process to identify independent legal counsel, the South Committee engaged Robinson, Bradshaw & Hinson, P.A. (“Robinson Bradshaw”). After a discussion and identification of potential candidates, the South Committee authorized Robinson Bradshaw to coordinate interviews with prospective financial advisors.

 

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On February 12, 2014, the North Committee met with Mr. Holding, Jr. to discuss his views of the combined operations and management of North and South should these parties decide to pursue a transaction. Mr. Holding, Jr. shared his views with the North Committee and left the meeting. The North Committee then discussed whether to include the composition of the board of directors and management of the combined company as a term of any proposal to the South Committee. The North Committee decided that it would include, as part of any subsequent proposal, a term providing for limited South representation on the North board of directors because the likely level of equity owned by South shareholders would make such a provision customary and expected. Given the fact that North is much larger than South, however, the North Committee decided that it would not include a term concerning the composition of management of the combined company and that it was more favorable to North to remain silent on management composition thus leaving the decision within the authority of the North board of directors. Also on February 12, 2014, the North Committee discussed with its advisors the North Committee’s preliminary views of a combined organization. The North Committee concluded that pursuing a potential transaction with South would have the potential of providing long-term strategic benefits to North and its stockholders. Accordingly, the North Committee discussed alternatives for proceeding to engage in discussions with the South Committee and to pursue a potential transaction.

On February 13, 2014, the South Committee met with Robinson Bradshaw and discussed the role of a special committee in considering a transaction, such as the one proposed to be entered into by North and South, and various related matters, including matters of fiduciary duty, independence, process, and the role of legal and financial advisors. The South Committee also discussed a draft confidentiality agreement delivered to Robinson Bradshaw by Smith Anderson, at the request of the North Committee. The South Committee requested the removal of an exclusivity provision that would have prohibited South from soliciting other indications of interest for South and the North Committee accepted this revision.

On February 14, 2014, North and South entered into the revised confidentiality agreement and the North Committee provided a due diligence request list and requested that South schedule management interviews with North’s financial advisors so that the North Committee could better ascertain the potential for a transaction. Smith Anderson also provided to Robinson Bradshaw a draft merger agreement.

On February 18, 2014, the South Committee and Robinson Bradshaw met to interview potential financial advisors. The South Committee had numerous questions for each firm, including with respect to each firm’s and each proposed team member’s experience with special committee representations, experience with the banking industry, current and previous relationships with North, South, and their respective affiliates, and perspectives on the South Committee’s evaluation of the proposed transaction. After extensive discussion regarding the qualifications of each firm, the South Committee unanimously selected BofA Merrill Lynch as its financial advisor in connection with a potential transaction. BofA Merrill Lynch was engaged as of February 18, 2014 and the written engagement letter was entered into on March 3, 2014. Among the reasons for the selection of BofA Merrill Lynch were its recent experience in evaluating companies in the banking industry, its experience in advising special committees, its reputation in the investment community, the South Committee’s assessment of BofA Merrill Lynch’s independence from North and South, and the South Committee’s confidence in the capabilities of the members of the BofA Merrill Lynch team.

At its February 18, 2014 meeting, the South Committee authorized Haynsworth to establish an electronic data room and begin responding to the North Committee’s due diligence requests, other than requests for certain financial information.

On February 26, 2014, the South Committee met with its legal advisors, and the South Committee determined that it would provide information to the North Committee and its advisors sufficient to allow the North Committee to formulate an offer of financial terms and then, after the receipt of that offer, the South Committee would determine whether to move forward with further discussions.

On March 3, 2014, the South Committee met with its legal and financial advisors. The South Committee authorized BofA Merrill Lynch to initiate discussions with South management regarding management’s

 

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development of financial projections for South. The South Committee determined to deny the North Committee’s pending request to interview South management and provide a markup of the draft merger agreement until the parties engaged in further discussions regarding economic terms.

Later on March 3, 2014, at a special meeting of the board of directors of South, the independent directors of South received an update from the South Committee on its progress and a report from Haynsworth regarding legal standards potentially applicable to directors considering a transaction such as the one proposed to be entered into by North and South. The South Committee informed the other independent directors of South that the South Committee had determined that it would be desirable to continue discussions with North regarding a possible combination. The independent directors of South adopted resolutions providing that the board of directors of South would not recommend any transaction to the South shareholders for approval that was not recommended by the South Committee.

Between March 4 and March 18, 2014, the North Committee and its advisors continued their due diligence review of South. Also during this period, South management developed financial projections for South.

On March 18, 2014 and March 20, 2014 the South Committee met with its legal and financial advisors and South management. South management reviewed in detail with the South Committee the financial projections for South prepared by South management. At its March 20 meeting, the South Committee directed BofA Merrill Lynch to provide the financial projections prepared by South management to the North Committee and its advisors.

At its meeting on March 24, 2014, the North Committee concluded that, at the right price, a transaction with South would be in the long-term strategic interest of North and its stockholders, and that the North Committee was prepared to move forward with a financial proposal as requested by the South Committee before the South Committee would make South management available for interviews. The North Committee discussed the form and substance of a potential proposal, including whether to propose an exchange of only North Class A common stock or whether to propose an exchange of an appropriate proportion of North Class A common stock and North Class B common stock. The North Committee decided to make a proposal based on a fixed exchange ratio of 3.4240 shares of North Class A common stock for each share of voting and non-voting South common stock. The proposal required South to redeem its preferred stock and provided that North would assume South’s trust preferred securities and subordinated debt.

On March 25, 2014, Sandler O’Neill delivered the North Committee’s non-binding proposal to BofA Merrill Lynch.

On March 26, 2014, the South Committee met with its legal and financial advisors to consider the proposal. The South Committee determined that although the exchange ratio proposed by the North Committee was not acceptable, the proposal provided a reasonable starting point for further discussions. The South Committee directed BofA Merrill Lynch to request from the North Committee financial projections for North.

Following the South Committee meeting on March 26, 2014, representatives of BofA Merrill Lynch contacted Sandler O’Neill and requested that the North Committee provide financial projections for North to the South Committee. The request was denied by the North Committee. The North Committee requested a response to its proposed exchange ratio, its request to interview South management and its request to receive a markup of the merger agreement, before it would provide financial projections for North.

On March 27, 2014, the South Committee met with its legal and financial advisors and decided to request from BofA Merrill Lynch a financial analysis that did not utilize financial projections for North. The South Committee also agreed to facilitate interviews of South management by representatives of the North Committee and its advisors during the following week. The South Committee also determined that it was not prepared to make a counteroffer to the North Committee’s financial proposal.

 

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On March 29, 2014, BofA Merrill Lynch contacted Sandler O’Neill and indicated that the South Committee was prepared to schedule management interviews, but was not prepared to make a counteroffer to the North Committee’s financial proposal. BofA Merrill Lynch indicated that the South Committee believed the offer was inadequate. The North Committee decided to proceed with management interviews of South and otherwise to defer responding to the South Committee.

On March 29, 2014, the South Committee met with its legal and financial advisors and BofA Merrill Lynch presented its preliminary financial analysis.

On April 2, 2014, South management and representatives of BofA Merrill Lynch met in person in Charlotte, North Carolina with representatives of each of North management, the North Committee and Sandler O’Neill for the purpose of the North Committee’s conducting interviews of South management.

On April 2 and 3, 2014, the North Committee further evaluated financial information, comparable transactions and participated in management interviews along with Sandler O’Neill. The North Committee also authorized providing the South Committee and its advisors with initial financial projections for North prepared by North management.

On April 3, 2014, the South Committee met with its legal and financial advisors and received a report from Robinson Bradshaw regarding certain legal and practical implications of requiring that a transaction be approved by a majority of the minority shareholders of South (in this case, shareholders unrelated to the Holding family). The South Committee also directed Robinson Bradshaw to contact Mr. Holding, Jr. to ask whether the Holding family would consider any transaction involving South other than a merger of South into North. In addition, the South Committee reviewed information provided by BofA Merrill Lynch at the request of the South Committee regarding investment, commercial and corporate banking relationships during the past two years between BofA Merrill Lynch and its affiliates, on the one hand, and North, on the other hand.

On April 7, 2014, on behalf of the South Committee, Robinson Bradshaw contacted Mr. Holding, Jr. and asked whether Mr. Holding, Jr. and his family would support any transaction involving South, other than a merger of South into North. Mr. Holding, Jr. stated that the Holding family would not support the sale of South to any other party, regardless of premium, and would not support alternative transactions such as a public offering or recapitalization. Mr. Holding, Jr. encouraged the South Committee to do anything it believed to be appropriate to maximize value for the South shareholders. In separate telephonic conversations, Robinson Bradshaw received a similar response from each of Mr. Holding, Jr.’s mother, Ella Ann Holding, and his sisters, Hope H. Bryant and Olivia B. Holding.

On April 10, 2014, the South Committee met with its legal and financial advisors and BofA Merrill Lynch presented its preliminary financial analysis. The South Committee determined that the terms of the North Committee’s March 25 proposal other than the exchange ratio (all stock, Class A shares of North common stock, fixed exchange ratio) would be acceptable. After extensive discussion among the members of the South Committee, including discussion of BofA Merrill Lynch’s preliminary financial analysis, the South Committee directed BofA Merrill Lynch to propose to Sandler O’Neill an exchange ratio of 4.6666, which implied a price to tangible book value multiple of 1.4x based on the then-current trading price for North Class A common stock and the tangible book value of South as of December 31, 2013.

On April 15, 2014, the North Committee received and considered the South Committee’s proposed exchange ratio of 4.6666, and after fulsome discussions decided to increase its proposed exchange ratio from 3.4240 to 3.5952.

On April 16, 2014, on behalf of the South Committee, Robinson Bradshaw spoke separately with Mr. Holding, Jr.’s sisters, Claire H. Bristow and Carson H. Brice, who each confirmed that she would not support any transaction involving South, other than a merger of South into North. Between April 7 and 16, 2014, members of the Holding family with more than 40% of the voting common stock of South represented to be in

 

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their control (enough to vote down a fundamental corporate transaction, such as a merger, under South Carolina law) indicated that they would not support any transaction involving South other than a merger into North.

On April 17, 2014, the South Committee met with its legal and financial advisors to consider the North Committee’s proposed exchange ratio of 3.5952, and directed BofA Merrill Lynch to request that the North Committee facilitate due diligence interviews of North management to be conducted on behalf of the South Committee. The South Committee also discussed that due to indications from members of the Holding family that they would not support any alternative transaction the only realistic options for South were to remain independent or to engage in a transaction with North.

On April 23, 2014, the South Committee met with its advisors and reviewed legal issues related to the draft merger agreement previously provided by Smith Anderson to Robinson Bradshaw. The North Committee provided to the South Committee and its advisors completed financial projections for North prepared by North management in anticipation of North management interviews on April 25, 2014.

On April 25, 2014, North management and representatives of Sandler O’Neill met in person in Charlotte, North Carolina, with South management and representatives of BofA Merrill Lynch for the purpose of South’s management conducting interviews of North management on behalf of the South Committee.

On April 28, 2014, the South Committee met with its legal and financial advisors and received an initial report from South management regarding South management’s review of the financial projections for North prepared by North management. BofA Merrill Lynch presented its preliminary financial analysis and the South Committee continued its review of legal issues with counsel. The South Committee determined to decrease its proposed exchange ratio by 5% (from 4.6666 to 4.4333) in response to the prior 5% increase by the North Committee (from 3.424 to 3.5952) and directed BofA Merrill Lynch to communicate this proposal to Sandler O’Neill.

Later on April 28, 2014, the board of directors of South held a regularly scheduled meeting and the independent directors received an update from the South Committee on the status of negotiations.

On April 29, 2014, in response to the South Committee’s proposed exchange ratio of 4.4333, the North Committee increased its offer from 3.5952 to 3.6979. In connection with the North Committee’s new proposal, Sandler O’Neill discussed with BofA Merrill Lynch the possibility of having representatives of the North Committee and the South Committee and their respective advisors meet in person for further negotiations. Sandler O’Neill indicated that the North Committee requested a response to its offer of an exchange ratio of 3.6979 before it would schedule such face-to-face meetings.

On April 30, 2014, the South Committee met with its legal and financial advisors to review the proposal and the South Committee determined that it would be agreeable to the proposed in-person meetings. The South Committee directed BofA Merrill Lynch to propose an exchange ratio of 4.3306 and discuss with Sandler O’Neill arrangements to meet in person with the North Committee and its advisors.

On May 1, 2014, the South Committee met with its legal and financial advisors to consider a new proposal from the North Committee conveyed by Sandler O’Neill to BofA Merrill Lynch earlier in the day. Sandler O’Neill indicated that the North Committee did not believe that face-to-face meetings were necessary at that time and proposed that it would increase its exchange ratio offer from 3.6979 to 3.800 if the South Committee would move from 4.3306 to 4.2000. The South Committee determined that it would be willing to propose an exchange ratio of 4.2285. The South Committee also determined at this time that it would not seek pricing collars because it expected a positive market reaction to the announcement of a merger between North and South and a collar could limit the benefit to South shareholders of an increase in the price of North stock.

At its May 1, 2014 meeting, the South Committee continued its review of legal issues and consulted with a nationally-recognized proxy solicitor regarding the feasibility of a majority of the minority vote from a

 

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solicitation point of view. The South Committee determined to include certain legal terms in its next proposal. The South Committee directed BofA Merrill Lynch to propose to Sandler O’Neill an exchange ratio of 4.2285 and condition that proposal on the inclusion in the merger agreement of a majority of the minority vote, a go shop provision and a requirement of voting agreements with certain members of the Holding family.

On May 3, 2014, Smith Anderson and Robinson Bradshaw discussed the legal terms included in the South Committee’s May 1 proposal. Smith Anderson stated that the North Committee opposed any go shop period and expressed reservations against a majority of the minority voting condition, citing the North Committee’s concern that South’s minority shareholder base includes retail shareholders with small holdings, some of whom are unknown, and all of whom generally are inactive and unlikely to attend any meeting to vote on a merger, either in person or by proxy.

On May 4, 2014, the South Committee met with its advisors to further discuss legal issues. The South Committee modified the legal terms included in its May 1 proposal to request a majority of the minority condition based on votes cast (rather than a majority of all minority shares), a window shop period of 30 days (rather than a go shop) and voting agreements with members of the Holding family. The South Committee also determined to propose that termination fees be set at 2.5% overall, with a 1% fee related to the window shop period. The South Committee directed Robinson Bradshaw to revise the draft merger agreement to include these terms and to provide to Smith Anderson a full markup of the agreement. The markup was provided on May 5, 2014.

On May 7, 2014, Robinson Bradshaw received from Smith Anderson a revised merger agreement, with many of the changes proposed by Robinson Bradshaw having been accepted, although certain key terms remained subject to further discussion. Also on May 7, 2014, on behalf of the South Committee, Robinson Bradshaw contacted Mr. Holding, Jr. regarding the request that members of the Holding family enter into voting agreements with North and South. During this telephonic meeting, Robinson Bradshaw disclosed to Mr. Holding, Jr. the current exchange ratio and the South Committee’s current proposal to the North Committee regarding certain other legal issues, including majority of the minority of votes cast and window shop.

During the morning of May 8, 2014, Mr. Holding, Jr. informed Robinson Bradshaw that the Holding family would like for South shareholders to have the option to receive shares of North Class B common stock as part of the merger consideration payable to South shareholders in any merger with North.

During the afternoon of May 8, 2014, the South Committee met with its legal and financial advisors to discuss the Holding family’s request, open legal issues and ongoing due diligence matters. The South Committee discussed that the North Class B common stock has the same rights as the North Class A common stock, except that the North Class B common stock has 16 votes per share and trades over-the-counter, currently at a discount to the trading price of the North Class A common stock. The South Committee noted that a choice between shares of North Class A common stock and North Class B common stock would be a choice between a more liquid and currently higher-priced stock (Class A) and a less liquid and currently lower-priced stock that has greater voting rights (Class B). The South Committee decided that it would be in favor of including shares of North Class B common stock as part of the merger consideration, so long as all South shareholders were given an option of which form of consideration to choose.

At the same meeting, the South Committee authorized Robinson Bradshaw and BofA Merrill Lynch to contact Mr. Holding, Jr. and the advisors to the North Committee to further explore the request to include shares of North Class B common stock as part of the merger consideration. The South Committee also authorized BofA Merrill Lynch to discuss with Mr. Holding, Jr. the current exchange ratio (3.800 to 4.2285, suggesting a midpoint of 4.0143) and the South Committee’s current proposal to the North Committee regarding certain legal issues (majority of the minority of votes cast, window shop, voting agreements), and inquire whether the controlling shareholders would support a transaction that included such terms. The South Committee noted that it was the South Committee’s understanding, based upon prior communications with members of the Holding family, that Mr. Holding, Jr. and other members of his family would not support any alternative transaction. The South Committee then directed BofA Merrill Lynch to contact Mr. Holding, Jr. and ask him, in light of the proposed

 

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transaction terms, whether he and other members of his family still would not support any alternative transaction, in order to confirm whether the South Committee’s understanding was correct.

During the evening of May 8, 2014, the respective legal and financial advisors of the North and South Committees discussed the Holding family’s request that the merger consideration payable to South shareholders in any merger include shares of North Class B common stock. The North Committee’s advisors indicated that the North Committee previously had determined not to include North Class B common stock as part of the merger consideration. The North Committee’s advisors also stated that to the extent that North Class B common stock is introduced now, the North Committee would oppose any structure that did not limit the amount of North Class B common stock issuable to the South shareholders in the aggregate, and to any individual South shareholder. In addition, the North Committee’s advisors indicated that the North Committee did not believe that the currently lower trading price of the North Class B common stock relative to the North Class A common stock required a higher exchange ratio for North Class B common stock, since the two classes of stock had the same rights, except that the shares of North Class B common stock have more votes per share.

During the morning of May 9, 2014, BofA Merrill Lynch met by telephone with Mr. Holding, Jr. to discuss the Holding family’s request to include shares of North Class B common stock as part of the merger consideration. BofA Merrill Lynch informed Mr. Holding, Jr. that the North Committee had requested that any proposal involving shares of North Class B common stock include a mechanism to insure that (i) the aggregate voting interest of South shareholders in the surviving company would not exceed the aggregate pro forma economic interest of South shareholders in the surviving company and (ii) each South shareholder would be limited to the shareholder’s pro rata portion of the aggregate amount of North Class B common stock issuable. In addition, the same exchange ratio would apply to both classes of stock, even though the North Class B common stock currently trades at a discount to the North Class A common stock.

During the telephonic meeting with Mr. Holding, Jr., BofA Merrill Lynch also discussed, at the direction of the South Committee, certain terms under discussion between the North Committee and the South Committee (exchange ratio, majority of the minority, window shop, voting agreements) in order to ascertain whether the Holding family would support a transaction including such terms. BofA Merrill Lynch also reiterated a question previously posed to Mr. Holding, Jr. and other members of his family about their support for an alternative transaction. At the direction of the South Committee, BofA Merrill Lynch informed Mr. Holding, Jr. that it was the understanding of the South Committee, based upon prior communications with members of the Holding family, that the controlling shareholders would not support any alternative transaction, and that the South Committee wanted to test that understanding in light of the proposed transaction terms. Mr. Holding, Jr. told BofA Merrill Lynch that he, his mother and his four sisters would not support any alternative proposal, including a potential transaction with another buyer at a higher price, or other fundamental transactions, such as a stock offering or recapitalization. Mr. Holding, Jr. repeated that he and his family would not support a different transaction, even if an offer to sell South to a different buyer than North at a significantly higher price were proposed.

During the afternoon of May 9, 2014, the South Committee met with its legal and financial advisors to determine whether to make a proposal to the North Committee regarding the inclusion of shares of North Class B common stock as part of the merger consideration. The South Committee determined that it should propose that the South shareholders be given a choice to receive shares of North Class B common stock in the merger, subject to the limitations on the issuance of North Class B common stock requested by the North Committee. The South Committee directed its advisors to communicate such proposal to the advisors of the North Committee, and to reiterate that the South Committee’s proposal included a majority of minority of votes cast condition, voting agreements with members of the Holding family, a 30-day window shop period, a fiduciary out for intervening events, and termination fees to be set at 2.5% overall, with a 1% fee related to the window shop period.

During the evening of May 9, 2014, the respective legal and financial advisors of the North Committee and the South Committee met by telephone to discuss the South Committee’s proposal regarding the inclusion of shares of North Class B common stock as part of the merger consideration, as well as the other terms of the South Committee’s proposal.

 

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The North Committee met the evening of May 9, 2014, to consider the proposal and to review all other open issues. The North Committee noted that the South Committee’s proposal would not enable one South shareholder to elect residual North Class B common stock not elected by another South shareholder. As a result of this element of the proposal, no South shareholder would be able to obtain a disproportionate interest in North Class B common stock. In light of this limitation and the fact that the South Committee’s proposal applied the same basis for determining the exchange ratio for North Class A common and North Class B common stock and would result in South shareholders owning a voting interest in North no greater than the economic interest it would be acquiring in North, the North Committee decided that the South Committee’s proposal was acceptable. The North Committee authorized Sandler O’Neill to communicate to the South Committee that its proposal regarding North Class A common stock and North Class B common stock was acceptable, assuming other issues were resolved.

Late in the evening of May 9, 2014, the advisors to the North Committee communicated to the advisors of the South Committee the North Committee’s response to the South Committee’s proposal made earlier in the evening. The North Committee accepted the South Committee’s proposal regarding the inclusion of shares of North Class B common stock as part of the merger consideration. In addition, the North Committee proposed an exchange ratio of 3.9857. The North Committee also (i) rejected the request for a majority of the minority of votes cast condition, (ii) rejected the request for voting agreements with the Holding family, which voting agreements would not have served their intended purpose in the absence of a majority of the minority condition, (iii) accepted the request for a 30-day window shop period, (iv) accepted a fiduciary out to withdraw the board’s recommendation due to an intervening event and (v) accepted a 1% termination fee related to the window shop and termination fees of 2.5% for other termination events.

On May 10, 2014, the South Committee met with its legal and financial advisors to discuss the revised proposal. The South Committee determined that it would not accept the proposed exchange ratio of 3.9857. In addition, in response to the rejection of the majority of the minority condition, the South Committee determined that it would propose further revisions to the draft merger agreement. The South Committee authorized its advisors to negotiate for the provision of a fiduciary out upon the occurrence of an intervening event, which fiduciary out would include an early termination right (as opposed to a right to withdraw the board’s recommendation) and a reasonably low termination fee.

On May 11, 2014, the North Committee and the South Committee reached agreement on all terms but the exchange ratio. The draft merger agreement was revised to include (i) a 30-day window shop period, with a 1% termination fee, (ii) a fiduciary out in response to an intervening event, with an early termination right and a termination fee of $10 million, and (iii) a 3.5% termination fee for terminations in response to superior proposals received after the window shop period.

By May 15, 2014, the draft merger agreement was in substantially final form, but negotiations regarding the exchange ratio had reached an impasse, with the North Committee and the South Committee unable to reach agreement between the North Committee’s offer of 3.9857 and the South Committee’s offer of 4.2285. On May 15, 2014, the South Committee met with its legal and financial advisors and determined that it would require further due diligence before making any further proposals regarding the exchange ratio.

On May 16, 2014, on behalf of the North Committee, Sandler O’Neill informed BofA Merrill Lynch that the North Committee remained committed to pursuing a transaction with South and would be willing to proceed with an exchange ratio within the range of 4.000 - 4.0143.

From May 16, 2014 through May 28, 2014 the North Committee and the South Committee continued discussions and conducted further due diligence.

On May 23, 2014, the South Committee met with its legal and financial advisors and members of South management in order for the South Committee to receive an update from South management on the additional due diligence being conducted by South management on behalf of the South Committee and the due diligence information being provided by South to the North Committee.

 

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On May 28, 2014, the South Committee met with its legal and financial advisors and determined to propose an exchange ratio of 4.2150 as its best and final offer. The South Committee authorized one of its members, Robert Hoppe, to communicate this offer to Lee Durham, a member of the North Committee. The South Committee directed BofA Merrill Lynch, upon receiving confirmation from Mr. Hoppe that he had spoken to Mr. Durham, to contact Sandler O’Neill to communicate the South Committee’s offer and its rationale for that offer.

On May 30, 2014, on behalf of the North Committee, Sandler O’Neill communicated to BofA Merrill Lynch that the North Committee remained committed to a transaction based on an exchange ratio of 4.0000 and requested the South Committee’s reply. Later the same day, the South Committee met with its legal and financial advisors to consider the message from Sandler O’Neill. The South Committee directed BofA Merrill Lynch to reiterate to Sandler O’Neill that 4.2150 was the South Committee’s best and final offer. In order to bring the matter to a conclusion, the South Committee also directed BofA Merrill Lynch to request a response by 5:00 p.m. on Monday, June 2, 2014.

On June 1, 2014, Mr. Durham, representing the North Committee, and Mr. Hoppe, representing the South Committee, met in person to further discuss the positions of their respective committees.

The North Committee met several times over the weekend and on Monday, June 2, 2014 to consider alternatives. At its meeting on June 2, the North Committee concluded to make a proposal to the South Committee based on a 4.000 exchange ratio and the payment of cash.

During the early afternoon of June 2, 2014, the respective advisors to the North Committee and the South Committee met by telephone to discuss a revised proposal from the North Committee. The North Committee proposed to bridge the gap between the parties’ proposed exchange ratios by adding additional merger consideration in the form of cash and by reinserting in the merger agreement a variation on the majority of the minority voting condition previously requested by South. Specifically, the North Committee proposed that (i) South would not be required to close the merger if a majority of the shares held by the minority holders of South common stock (shareholders unrelated to the Holding family) were voted against the merger and (ii) each South shareholder would be allowed to choose to receive in exchange for each share of South common stock:

 

  (A) 4.000 shares of North Class A common stock and $36.59 in cash

or

 

  (B) 3.580 shares of North Class A common stock and 0.420 shares of North Class B common stock

Later on June 2, 2014, the South Committee met with its legal and financial advisors to review the North Committee’s proposal. The South Committee determined that it would be willing to accept the North Committee’s June 2 proposal with the following modification and clarification: (i) the per share cash consideration payable to South shareholders receiving shares of North Class A common stock and cash would be increased from $36.59 to $50.00 and (ii) the option to receive North Class A common stock and cash would be the default option, so that any holder would have to affirmatively elect to receive a mix of North Class A common stock and North Class B common stock.

During the evening of June 2, 2014, at the direction of the South Committee, the South Committee’s advisors met telephonically with the North Committee’s advisors to convey the South Committee’s requested modifications to the North Committee’s June 2 proposal.

In anticipation of its meeting on June 3, 2014, the North Committee instructed a representative to contact Mr. Holding, Jr. to describe to him the financial terms of the proposed transaction and ascertain whether Mr. Holding, Jr. would be supportive of it since it would be futile to submit a transaction that was likely to be opposed by controlling stockholders. Mr. Holding, Jr. indicated that he intended to support the transaction as described. Accordingly, the North Committee authorized giving notice of a meeting of the board of directors of North to be held on June 10, 2014, to be preceded immediately by a meeting of the North Committee to consider final action on a recommendation to the North board of directors in favor of the proposed transaction.

 

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On June 3, 2014, the North Committee communicated its acceptance of the modifications proposed by the South Committee and the parties confirmed having reached agreement in principle. Also on June 3, 2014, the South Committee met with its legal and financial advisors and determined to make arrangements to present the proposed transaction for approval at a meeting of the South board of directors on June 10, 2014. The North Committee and the South Committee also agreed, solely for purposes of the majority of the minority voting condition in the merger agreement, that certain South shareholders owning in the aggregate approximately 37.0% of the South voting common stock constituted the minority holders of South common stock.

On June 6, 2014, the South Committee met with its legal and financial advisors and BofA Merrill Lynch presented its financial analysis. Robinson Bradshaw reviewed the final terms of the merger agreement and the approving resolutions and other materials to be distributed that afternoon to the South board of directors in preparation for the meeting of the South board of directors on June 10, 2014.

On June 10, 2014, the South Committee met with its legal and financial advisors. At this meeting, BofA Merrill Lynch reviewed with the South Committee its financial analysis of the merger consideration and delivered to the South Committee an oral opinion, which was confirmed by delivery of a written opinion dated June 10, 2014, to the effect that, as of that date and based on and subject to various assumptions and limitations described in its opinion, the merger consideration to be received by the minority holders of South common stock who do not elect to receive North Class B common stock as part of the merger consideration in the merger was fair, from a financial point of view, to such minority holders of South common stock. See “—Opinion of South’s Financial Advisor.” The South Committee then unanimously (i) approved the merger agreement and the proposed merger of South into North and (ii) recommended that the board of directors of South approve and adopt the merger agreement, approve the proposed merger of South into North and recommend that the South shareholders approve the merger of South into North.

On June 10, 2014, the South board of directors met, with representatives of Haynsworth, Robinson Bradshaw and BofA Merrill Lynch in attendance. Mr. Bristow did not participate in the meeting, and following the conduct of business unrelated to the transaction, Mr. Holding, Jr. recused himself from the remainder of the meeting. The board received a report from the South Committee, which contained a summary of the proposed legal terms from Robinson Bradshaw and a summary of the financial analysis from BofA Merrill Lynch, all of which was supplementary to the written materials distributed to the board in advance of the meeting. After considering the proposed terms of the merger agreement and the recommendation of the South Committee, and taking into account the matters discussed during the meeting and at prior meetings of the board, the South directors in attendance unanimously determined that a merger of South into North was in the best interests of South and the South shareholders and voted unanimously to approve the merger agreement and the transactions contemplated thereby and to recommend that the South shareholders approve the merger.

On June 10, 2014, the North Committee met and reviewed again the proposed final merger agreement, previously delivered due diligence report and a current oral update and received reports from Smith Anderson and Sandler O’Neill, including the fairness opinion of Sandler O’Neill. At the conclusion of the deliberations, the North Committee unanimously recommended to the North board of directors that it approve the proposed transaction.

Thereafter, on June 10, 2014, the North board of directors held a special meeting. After the consideration of initial board of director business, Mr. Holding, Jr., Ms. Hope Holding Bryant and Mr. James M. Parker recused themselves so that only independent directors could consider the proposed transaction. At the meeting of independent directors:

 

    the North Committee presented its report and recommendation regarding the proposed transaction;

 

    representatives of Smith Anderson reviewed with the directors their duties in the context of an acquisition transaction and the terms and conditions of the proposed merger agreement;

 

    representatives of Sandler O’Neill provided a detailed financial analysis of the proposed transaction; and

 

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    Sandler O’Neill delivered its oral opinion (subsequently confirmed in writing) that, as of that date, and based upon and subject to the assumptions made, matters considered, qualifications and limitations set forth in Sandler O’Neill’s written opinion, dated June 10, 2014, the consideration to be paid to the holders of South common stock pursuant to the merger was fair to North and its stockholders from a financial point of view. See “—Opinion of North’s Financial Advisor.”

The independent members of the North board of directors discussed the next steps to be taken in connection with the execution and announcement of the transaction. After posing questions to legal counsel, and after extensive discussion and deliberation, the independent members of the North board of directors determined that the merger is advisable and in the best interests of North and its stockholders and: (i) adopted and approved the merger agreement and the transactions contemplated thereby, (ii) authorized and approved the transactions contemplated by the merger agreement, including the merger and an amendment to the North charter to enable issuance of shares in the merger, and (iii) recommended that North stockholders approve and adopt the merger agreement, the issuance of shares in the merger, the amendment to the North charter to enable issuance of shares in the merger and all related actions and directed that such matters be submitted to North stockholders at a special meeting.

The parties executed the merger agreement later in the afternoon on June 10, 2014.

On June 10, 2014, after the closing of the U.S. markets, North and South issued a joint press release announcing the execution of the merger agreement.

Recommendation of North’s Board of Directors and Reasons for the Merger

As described above, after careful consideration, the independent members of the North board of directors, at a meeting held on June 10, 2014, acting upon the unanimous recommendation of the North Committee, determined that the merger agreement is in the best interests of North and its stockholders. Accordingly, the independent members of the North board of directors adopted and approved the merger agreement and the merger and the other transactions contemplated by the merger agreement, including the issuance of North common stock and related amendments to the North charter, and recommended that North stockholders vote “FOR” the North merger proposal, “FOR” the North share issuance proposal and “FOR” the North charter amendment proposal. In reaching their respective decisions, the North Committee and the independent members of the North board of directors consulted with North management, as well as its financial and legal advisors, and considered a number of factors, including the following material factors:

 

    each of North’s, South’s and the combined company’s business, operations, financial condition, asset quality, earnings and prospects. In reviewing these factors, the North Committee and the independent members of the North board of directors considered their respective views that South’s business and operations complement those of North and that the merger would result in a combined company with diversified revenue sources, a well-balanced loan portfolio and an attractive funding base, as evidenced by a significant portion of core deposit funding;

 

    their respective understandings of the current and prospective environment in which North and South operate, including national and local economic conditions, the interest rate environment, increasing operating costs resulting from regulatory initiatives and compliance mandates, the competitive environment for financial institutions generally, and the likely effect of these factors on North, both with and without the proposed transaction;

 

    their respective reviews and discussions with North’s management concerning the due diligence investigation of South;

 

    the potential cost savings that could be achieved as a result of operational efficiencies of the combined company;

 

    the complementary nature of the credit cultures of the two companies and existing processing relationships, which management believes should facilitate integration and implementation of the transaction;

 

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    the complementary nature of the branch network of the two companies, which management believes should provide the combined company with greater market density and a greater national branch presence;

 

    management’s expectation that the combined company will have a strong capital position and higher legal lending limits upon completion of the transaction;

 

    South’s successful track record and the North Committee’s and the independent members of the North board of directors’ belief that the combined enterprise would benefit from South’s ability to take advantage of economies of scale and grow in the current economic environment, making South an attractive partner for North;

 

    the opinion of Sandler O’Neill, North’s financial advisor, delivered to the North Committee, to the effect that, as of the date of such opinion, and subject to the procedures followed, assumptions made, matters considered, and qualifications and limitations on the review undertaken by Sandler O’Neill as set forth in such opinion, the merger consideration in the proposed merger is fair to North and its stockholders from a financial point of view, as more fully described below in the section entitled “—Opinion of North’s Financial Advisor”;

 

    the financial and other terms of the merger agreement, including the fixed exchange ratio, which the North Committee and the independent members of the North board of directors believed was consistent with market practice for transactions of this type, the expected tax treatment and deal protection provisions, including the ability of South’s board of directors, under certain circumstances, to withdraw or materially adversely modify its recommendation to South shareholders, and to terminate the merger agreement in order to enter into a definitive agreement with respect to a superior proposal (subject to payment of a termination fee), each of which it reviewed with its outside financial and legal advisors;

 

    the fact that the merger consideration will consist of shares of North Class A common stock, and at the election of South shareholders, either cash or shares of North Class B common stock, which will allow South shareholders to participate in a significant portion of the future performance of the combined business and synergies resulting from the merger, to benefit from the greater liquidity in the trading market for North Class A common stock relative to the market for South common stock due to the listing of North Class A common stock on the NASDAQ Global Select Market, and the value to South shareholders represented by that consideration; and

 

    the regulatory and other approvals required in connection with the merger and the expectation that such regulatory approvals will be received in a timely manner and without the imposition of unacceptable conditions.

The North Committee and the independent members of the North board of directors also identified and considered, along with North management, as well as financial and legal advisors, the following potentially negative factors in its deliberations:

 

    the requirement that South conduct its business in the ordinary course and the other restrictions on the conduct of South’s business prior to the completion of the merger, which may delay or prevent South from undertaking business opportunities that may arise pending completion of the merger;

 

    the potential risk of diverting management attention and resources from the operation of North’s business and towards the completion of the merger;

 

    the dilution to current North stockholders from the issuance of additional shares of North common stock in the merger;

 

    the possible disruption to North’s and South’s business that may result from the announcement of the transaction;

 

    the potential risks associated with achieving anticipated cost synergies and savings and successfully integrating South’s business, operations and workforce with those of North;

 

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    the possibility that the merger may not be completed or may be unduly delayed because conditions to closing may not be satisfied; and

 

    the substantial costs to be incurred in connection with the transaction, including the costs of integrating the businesses of North and South and the transaction expenses arising from the merger.

The foregoing discussion of the factors considered by the North Committee and the independent members of the North board of directors is not intended to be exhaustive, but, rather, includes the material factors considered by the North Committee and the independent members of the North board of directors. In reaching their respective decisions to adopt and approve the merger agreement and the merger and the other transactions contemplated by the merger agreement, neither the North Committee nor the independent members of the North board of directors quantified or assigned any relative weights to the factors considered, and individual directors may have given different weights to different factors. The North Committee and the independent members of the North board of directors considered all these factors as a whole, including discussions with, and questioning of, North’s management and North’s financial and legal advisors, and overall considered the factors to be favorable to, and to support, its determination.

For the reasons set forth above, the independent members of the North board of directors unanimously adopted and approved the merger agreement and the transactions contemplated thereby and unanimously recommend that North stockholders vote “FOR” the North merger proposal, “FOR” the North share issuance proposal and “FOR” the North charter amendment proposal.

Recommendation of South’s Board of Directors and Reasons for the Merger

After careful consideration, the South board of directors at its meeting on June 10, 2014, acting upon the unanimous recommendation of the South Committee, (i) determined that the merger agreement and the transactions contemplated by the merger agreement, including the merger, are in the best interest of South and its shareholders, (ii) approved the merger agreement and the transactions contemplated by the merger agreement, including the merger, and declared it advisable that South enter into the merger agreement and (iii) resolved to recommend that the South shareholders vote to approve the transactions contemplated by the merger agreement, including the merger.

In reaching their respective decisions to recommend the merger agreement, the merger, and the other transactions contemplated by the merger agreement, each of the South Committee and the South board of directors considered a number of factors, including the following:

 

    its assessment of South’s business, operations, financial condition, asset quality, earnings and prospects, and of North’s business, operations, financial condition, asset quality, earnings and prospects, taking into account the financial projections and other information presented to the South Committee, and the results of South’s due diligence review of North;

 

    its assessment of the current environment in the financial services industry, including national, regional and local economic conditions and the interest rate environment, continued consolidation, the uncertainties in the regulatory climate for financial institutions, increased operating costs resulting from regulatory initiatives and compliance mandates, increasing competition, the current environment for larger community banks, particularly in the Southeast, and current financial market conditions and the likely effects of these factors on the two companies’ potential growth, development, productivity and strategic options, and the historical market prices of South and North common stock;

 

    the familiarity of South and North with each other, including management relationships and a number of shared resources and common operating systems, which should aid in the integration of the two companies in an efficient and cost-effective manner;

 

    its belief that combining the two companies would create a larger and more diversified financial institution that is both better equipped to respond to economic and industry developments and better positioned to develop and build on its existing market position;

 

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    the complementary aspects of South and North, including strong customer focus, adjacent geographic markets, business orientation and compatibility of the companies’ cultures and management and operating styles, and the potential expense-saving and revenue enhancing opportunities in connection with the merger and the related potential impact on the combined company’s earnings;

 

    the fact that North is the exclusive owner of the service mark “First Citizens” outside of South Carolina;

 

    the fact that the merger consideration consists primarily of North common stock, giving former South shareholders the opportunity to participate as North stockholders in the benefits of the combination and the future performance of the combined company generally;

 

    the continued representation of three of South’s directors on the board of the resulting company, and the South Committee’s belief that this representation would reduce the integration risk in the combination;

 

    its assessment of the likelihood that the merger would be completed in a timely manner and that the management team of the combined company would be able to successfully integrate and operate the businesses of the combined company after the merger;

 

    the financial terms of the merger, including the fact that, based on recent market prices for South and North stock, the per-share consideration to be received by shareholders of South common stock represents a substantial premium to its current market value;

 

    the opinion of BofA Merrill Lynch, dated June 10, 2014, delivered to the South Committee as to the fairness, from a financial point of view and as of the date of the opinion, of the merger consideration to be received by the minority holders of South common stock who do not elect to receive North Class B common stock as part of the merger consideration, as more fully described in the section entitled “—Opinion of South’s Financial Advisor”;

 

    the fact that the South Committee has not received an opinion regarding the fairness, from a financial point of view, of the consideration to be received in the merger by any holder who is related to the Holding family or any holder who elects to receive North Class B common stock as part of the merger consideration;

 

    the greater market capitalization and anticipated trading liquidity of North Class A common stock after the transaction in the event South shareholders desired to sell the shares of North Class A common stock to be received by them upon completion of the merger;

 

    the fact that South shareholders would have a choice to receive shares of North Class A common stock and cash or to receive a certain portion of their merger consideration in shares of North Class B common stock;

 

    the fact that the South board of directors is permitted, subject to supervision by the South Committee, to change its recommendation that the South shareholders approve the merger agreement in certain circumstances;

 

    the fact that South shareholders who do not vote to approve the merger agreement and who follow certain prescribed procedures are entitled to dissenters’ rights under South Carolina law;

 

    the financial and other terms of the merger agreement, including the fixed exchange ratio, deal protection and termination fee provisions, which it reviewed with its outside legal and financial advisors;

 

    the fact that South may choose not to close the merger if a majority of the shares of South common stock held by South shareholders who are unrelated to the Holding family are voted against the merger;

 

    the need to obtain approval by shareholders of South and North, as well as regulatory approvals, in order to complete the transaction and the risk that those or other conditions will not be satisfied;

 

    the risks associated with the operations of the combined company, including the challenges both of integrating South’s businesses, operations and employees with those of North and of achieving the anticipated cost savings;

 

    the potential risk of diverting management focus and resources from other strategic opportunities and from operational matters while working to implement the merger;

 

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    the fact that some of the directors and executive officers of South have interests in the merger and have arrangements that are different from or in addition to those of South shareholders generally;

 

    the fact that South’s chief executive officer will retire no later than January 30, 2015;

 

    the authority granted to the South Committee by the South board of directors to evaluate the proposed combination of South and North, and to negotiate the terms of the definitive merger agreement with respect to the North proposal, or to determine not to pursue any agreement with North;

 

    the recognition by the South Committee that it had no obligation to recommend the approval of the merger or any other transaction; and

 

    the lack of reasonable alternatives available to the South Committee and the South board of directors other than to reject the proposed transaction with North and for South to remain an independent company, given the South Committee’s belief (based on the Holding family’s communications to the South Committee that they would not vote in favor of any alternative transaction) that a transaction that did not involve North would not be successful.

The foregoing discussion of the information and factors considered by the South Committee and the South board of directors is not intended to be exhaustive, but includes the material factors considered by the South Committee and the South board of directors. In reaching their respective decisions to approve the merger agreement, the merger and the other transactions contemplated by the merger agreement, the South Committee and the South board of directors did not quantify or assign any relative weights to the factors considered, and individual directors may have given different weights to different factors. The South Committee and the South board of directors considered all these factors as a whole, including discussions with, and questioning of, South’s management, South’s legal advisors, the South Committee’s independent financial and legal advisors, and overall considered the factors to be favorable to, and to support, its determination.

For the reasons set forth above, the independent directors of the South board of directors unanimously determined that the merger agreement and the transactions contemplated by the merger agreement, are advisable and in the best interests of South and its shareholders, and unanimously adopted and approved the merger agreement and the transactions contemplated by it.

The independent directors of the South board of directors unanimously recommend that the South shareholders vote “FOR” the approval of the merger proposal.

Opinion of North’s Financial Advisor

By letter dated February 4, 2014, the North Committee retained Sandler O’Neill to provide a fairness opinion in connection with a possible business combination transaction. Sandler O’Neill is a nationally recognized investment banking firm whose principal business specialty is financial institutions. In the ordinary course of its investment banking business, Sandler O’Neill is regularly engaged in the valuation of financial institutions and their securities in connection with mergers and acquisitions and other corporate transactions. The North Committee selected Sandler O’Neill to provide a fairness opinion in connection with a possible business combination based on its qualifications, expertise, reputation and experience in mergers and acquisitions involving financial institutions.

At the June 10, 2014 meeting of the North Committee, Sandler O’Neill delivered to the North Committee its oral opinion, which was subsequently confirmed in writing on June 10, 2014, that, as of June 10, 2014, the merger consideration was fair to North and its stockholders from a financial point of view. The full text of Sandler O’Neill’s opinion is attached as Appendix D to this joint proxy statement/prospectus. The opinion outlines the procedures followed, assumptions made, matters considered and qualifications and limitations on the review undertaken by Sandler O’Neill in rendering its opinion. The description of the opinion set forth below is qualified in its entirety by reference to the full text of the opinion. Holders of North Class A

 

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common stock and North Class B common stock are urged to read the entire opinion carefully in connection with their consideration of the proposed merger.

Sandler O’Neill’s opinion speaks only as of the date of the opinion. The opinion was addressed to the North Committee and is directed only to the fairness of the merger consideration to North and its stockholders from a financial point of view. It does not address the underlying business decision of North to engage in the merger or any other aspect of the merger and is not a recommendation to any shareholder of North or South as to how such shareholder should vote at their special meeting with respect to the merger or any other matter. Sandler O’Neill did not express any opinion as to the fairness of the amount or nature of the compensation to be received in connection with the merger by South’s officers, directors, or employees, or any class of such persons, relative to the merger consideration to be received in the merger by any other shareholders of South.

In connection with rendering its opinion on June 10, 2014, Sandler O’Neill reviewed and considered, among other things:

 

    The merger agreement;

 

    Certain financial statements and other historical financial information of South provided by management of South that Sandler O’Neill deemed relevant;

 

    Certain publicly available financial statements and other historical financial information of North that Sandler O’Neill deemed relevant;

 

    Certain internal financial information and other data relating to the business and financial prospects of South that were provided to Sandler O’Neill by and discussed with the management of South for the years ending December 31, 2014 through December 31, 2018 and not publicly available, including financial forecasts and estimates prepared by the management of South (the “South Forecasts”);

 

    Certain internal financial information and other data relating to the business and financial prospects of North that were provided to Sandler O’Neill by and discussed with the management of North for the years ending December 31, 2014 through December 31, 2018 and not publicly available, including financial forecasts and estimates prepared by the management of North (the “North Forecasts”);

 

    The pro forma financial impact of the merger on North, based on assumptions relating to transaction expenses, purchase accounting adjustments, cost savings and other synergies as prepared by and reviewed with senior management of North;

 

    A comparison of certain financial and other information for South and North including relevant stock trading information, with similar publicly available information for certain other commercial banks similar to each of South and North, the securities of which are publicly traded;

 

    The financial terms and structures of certain recent business combinations involving other similar and related party transactions in the commercial banking industry, to the extent publicly available;

 

    The current market environment generally and the financial services sector in particular; and

 

    Such other information, financial studies, analyses and investigations and financial, economic and market criteria as Sandler O’Neill considered relevant.

Sandler O’Neill also discussed with certain members of the senior management of North the business, financial condition, results of operations and prospects of North and held similar discussions with the senior management of South regarding the business, financial condition, results of operations and prospects of South.

In performing its reviews and analyses and in rendering its opinion, Sandler O’Neill relied upon the accuracy and completeness of all of the financial and other information that was available to Sandler O’Neill from public sources, that was provided to Sandler O’Neill by North or South or their respective representatives or

 

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that was otherwise reviewed by Sandler O’Neill, and Sandler O’Neill assumed such accuracy and completeness for purposes of rendering its opinion. Sandler O’Neill further relied on the assurances of the respective senior managements of North and South that they were not aware of any facts or circumstances that would make any of such information inaccurate or misleading. With respect to the South Forecasts, publicly available median analyst estimates and a publicly available annual growth rate for North as discussed with senior management of North and certain assumptions relating to transaction expenses, purchase accounting adjustments, cost savings and other synergies prepared by and reviewed with senior management of North, Sandler O’Neill assumed that they had been reasonably prepared on a basis reflecting the best currently available estimates and judgments of the respective managements of South and North, as to the future financial performance of South and North, respectively. Sandler O’Neill was not asked to undertake, and did not undertake, an independent verification of any of such information and Sandler O’Neill assumes no responsibility or liability for the accuracy or completeness thereof.

In performing its analyses and in rendering its opinion, Sandler O’Neill assumed that there had not been any material change in the respective assets, financial condition, results of operations, business or prospects of South and North since the date of the most recent historical financial data made available to Sandler O’Neill. In addition, Sandler O’Neill assumed in all respects material to its review and analysis that each of South and North would remain as a going concern for all periods relevant to its analyses. Sandler O’Neill expressed no opinion as to the trading values at which the common stock of South or North may trade at any time. Sandler O’Neill expresses no opinion as to any of the legal, accounting and tax matters relating to the merger and any other transaction contemplated in connection therewith. Sandler O’Neill’s opinion was necessarily based on financial, economic, market and other conditions as in effect on, and the information made available to Sandler O’Neill as of, the date of its opinion. Events occurring after the date thereof could materially affect Sandler O’Neill’s opinion. Sandler O’Neill has not undertaken to update, revise, reaffirm or withdraw its opinion or otherwise comment upon events occurring after the date of its opinion.

In rendering its June 10, 2014 opinion, Sandler O’Neill performed a variety of financial analyses. The following is a summary of the material analyses performed by Sandler O’Neill, but it is not a complete description of all the analyses underlying Sandler O’Neill’s opinion. The summary includes information presented in tabular format. In order to fully understand the financial analyses, these tables must be read together with the accompanying text. The tables alone do not constitute a complete description of the financial analyses. The preparation of a fairness opinion is a complex process involving subjective judgments as to the most appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances. The process, therefore, is not necessarily susceptible to a partial analysis or summary description. Sandler O’Neill believes that its analyses must be considered as a whole and that selecting portions of the factors and analyses to be considered without considering all factors and analyses, or attempting to ascribe relative weights to some or all such factors and analyses, could create an incomplete view of the evaluation process underlying its opinion. Also, no company included in Sandler O’Neill’s comparative analyses described below is identical to South or North and no transaction is identical to the merger. Accordingly, an analysis of comparable companies or transactions involves complex considerations and judgments concerning differences in financial and operating characteristics of the companies and other factors that could affect the public trading values or merger transaction values, as the case may be, of South and North and the companies to which they are being compared.

Transaction Multiples

Sandler O’Neill reviewed the financial terms of the proposed transaction. As described in the merger agreement, each share of South common stock, except for certain shares as described in the merger agreement, will be converted into the right to receive 4.0000 shares of North Class A common stock and $50.00 in cash, unless the holder of such share elects, pursuant to a letter of transmittal that will be delivered after closing of the merger, for each share of such holders’ South common stock to be converted into the right to receive 3.5800 shares of North Class A common stock and 0.4200 shares of North Class B common stock.

 

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Based upon the average per share closing price of $222.85 for North Class A common stock during the 30-day period ended June 5, 2014 plus $50.00 in cash and the average per share closing price of $206.16 for North Class B common stock during the 30-day trading period ended June 5, 2014, Sandler O’Neill calculated merger consideration values of $941.40 and $884.39 per share of South common stock, respectively. Based upon (i) 683,293 shares of South common stock outstanding, (ii) the assumption that there are no outstanding stock options of South, and (iii) the average per share closing price of $222.85 for North Class A common stock during the 30-day trading period ended June 5, 2014 plus $50.00 in cash and the average per share closing price of $206.16 for North Class B common stock during the 30-day trading period ended June 5, 2014, Sandler O’Neill calculated aggregate merger consideration values of $643.3 million and $604.3 million, respectively. Based upon financial information as of the period ended March 31, 2014, Sandler O’Neill calculated transaction ratios for each of the two merger consideration options.

For merger consideration consisting of 4.0000 shares of North Class A common stock and $50.00 in cash for each share of South common stock:

 

Pricing Multiples

   Value

Price/Last Twelve Months Earnings Per Share

   13.5x

Price/Book Value as of March 31, 2014

   84%

Price/Tangible Book Value as of March 31, 2014

   112%

Tangible Book Premium/Core Deposits

   1.0%

Market Premium as of June 5, 2014

   33.5%

For merger consideration consisting of 3.5800 shares of North Class A common stock and 0.4200 shares of North Class B common stock of each share of South common stock:

 

Pricing Multiples

   Value

Price/Last Twelve Months Earnings Per Share

   12.7x

Price/Book Value as of March 31, 2014

   79%

Price/Tangible Book Value as of March 31, 2014

   106%

Tangible Book Premium/Core Deposits

   0.5%

Market Premium as of June 5, 2014

   25.4%

Comparable Company Analysis

Sandler O’Neill used publicly available information to compare selected financial information for South with two peer groups of financial institutions selected by Sandler O’Neill based on Sandler O’Neill’s professional judgment and experience. The first peer group consisted of a group of publicly traded U.S. banks with assets between $2.5 billion and $25 billion and three-month average weekly trading volume to total shares outstanding of less than 0.50%. The following financial institutions were selected for the comparison:

First National of Nebraska, Inc.

Farmers & Merchants Bank of Long Beach

Carter Bank & Trust

W.T.B. Financial Corporation

Mechanics Bank

First National Bank Alaska

Burke & Herbert Bank & Trust Company

 

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The analysis compared publicly available financial information for South and the high, mean, median and low financial and market trading data for the peer group as of or for the period ended March 31, 2014 with pricing data as of June 5, 2014. The results of these analyses are summarized in the following table.

 

     South   

Comparable
Company Ranges

Total Assets ($ in millions)

   $8,532    $16,271 - $2,643

Tangible Common Equity/Tangible Assets

   6.86%    14.38% - 6.84%

Leverage Ratio

   8.31%    14.72% - 6.79%

Total Risk Based Capital Ratio

   18.03%    25.36% - 14.12%

Return on Average Assets

   0.58%    1.30% - 0.57%

Return on Average Equity

   6.50%    11.94% - 6.69%

Net Interest Margin

   2.68%    5.48% - 2.23%

Efficiency Ratio

   74.7%    75.5% - 55.4%

Loan Loss Reserve/Gross Loans

   1.17%    2.58% - 0.94%

Non-Performing Assets/Total Assets

   1.68%    2.66% - 0.92%

Net Charge Offs/Average Loans

   0.21%    1.58% - (0.04)%

Price/Tangible Book Value

   84%    141% - 95%

Price/Last 12 Months Earnings Per Share

   10.1x    17.8x - 11.1x

Price/2014 Est. Earnings Per Share

      19.1x - 12.0x

Current Dividend Yield

   0.20%    3.6% - 0.0%

Market Value ($ in millions)

   $462    $1,909 - $291

The second peer group consisted of the following group of publicly traded U.S. banks with assets between $2.5 billion and $20 billion, tangible common equity to total assets of less than 8.0% and return on average assets of less than 0.75% over the twelve month period ended March 31, 2014:

Astoria Financial Corporation

Sterling Bancorp

Berkshire Hills Bancorp, Inc.

Bancorp, Inc.

Carter Bank & Trust

Simmons First National Corporation

Banc of California, Inc.

Century Bancorp, Inc.

First Bancorp

BNC Bancorp

Capital City Bank Group, Inc.

 

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The analysis compared publicly available financial information for South and the high, mean, median and low financial and market trading data for the peer group as of or for the period ended March 31, 2014 with pricing data as of June 5, 2014. The results of these analyses are summarized in the following table.

 

     South   

Comparable
Company Ranges

Total Assets ($ in millions)

   $8,532    $15,700 - $2,633

Tangible Common Equity/Tangible Assets

   6.86%    7.97% - 5.05%

Leverage Ratio

   8.31%    11.27% - 6.57%

Total Risk Based Capital Ratio

   18.03%    18.10% - 11.16%

Return on Average Assets

   0.58%    0.73% - 0.00%

Return on Average Equity

   6.50%    11.81% - (0.03)%

Net Interest Margin

   2.68%    5.03% - 2.21%

Efficiency Ratio

   74.7%    92.1% - 56.1%

Loan Loss Reserve/Gross Loans

   1.17%    2.05% - 0.59%

Non-Performing Assets/Total Assets

   1.68%    4.74% - 0.25%

Net Charge Offs/Average Loans

   0.21%    1.68% - (0.03)%

Price/Tangible Book Value

   84%    219% - 95%

Price/Last 12 Months Earnings Per Share

   10.1x    61.2x - 9.1x

Price/2014 Est. Earnings Per Share

      35.2x - 14.1x

Current Dividend Yield

   0.20%    4.3% - 0.6%

Market Value ($ in millions)

   $462    $1,317 - $120

Analysis of Selected Merger Transactions

Sandler O’Neill reviewed a group of comparable U.S. merger and acquisition transactions that were announced since January 1, 2010 and had a value between $250 million and $1.0 billion. These transactions involved target companies that (i) had total assets of less than $10.0 billion and (ii) had ratios of non-performing assets to assets that were between 1% and 4%. The group was composed of the following transactions:

Buyer/Target

Valley National Bancorp/1st United Bancorp Inc.

Yadkin Financial Corporation/VantageSouth Bancshares

ViewPoint Financial Group Inc./LegacyTexas Group Inc.

Heritage Financial Corp./Washington Banking Co.

Cascade Bancorp/Home Federal Bancorp

East West Bancorp Inc./MetroCorp Bancshares Inc.

MB Financial Inc./Taylor Capital Group Inc.

Home BancShares Inc./Liberty Bancshares Inc.

Union First Market Bankshares Corp./StellarOne Corp.

SCBT Financial Corp./First Financial Holdings Inc.

United Bankshares Inc./Virginia Commerce Bancorp Inc.

Columbia Banking System Inc./West Coast Bancorp

FirstMerit Corp./Citizens Republic Bancorp Inc.

Hilltop Holdings Inc./PlainsCapital Corp.

Cadance Bancorp LLC/Encore Bancshares, Inc.

Susquehanna Bancshares Inc./Tower Bancorp Inc.

Susquehanna Bancshares Inc./Abington Bancorp Inc.

Nara Bancorp Inc./Center Financial Corp.

 

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Sandler O’Neill then reviewed the following multiples for each of the transactions: transaction price to last twelve months’ earnings; core deposit premium; transaction value as a premium over 1-day market value; and transaction price to tangible book value as a multiple of the buyer’s trading price to tangible book value. Sandler O’Neill then calculated the per share valuation of South imputed by the high, low, mean and median data for the transactions, and compared that to South’s actual data as of March 31, 2014. The results of these analyses are summarized in the following tables.

 

    

Nationwide M&A

Transactions

(Ranges)

Price / Last 12 Months Earnings

   49.6x - 2.6x

Core Deposit Premium

   17.6% - 3.3%

Transaction Value as a Premium over 1-day Market Value

   40.6% - 5.2%

Transaction Price to Tangible Book Value over Buyer’s Trading Price to Tangible Book Value

   1.77x - 0.59x

 

    

Imputed South Per Share
Valuation for

Precedent Nationwide

M&A Transactions

(Ranges)

Price / Last 12 Months Earnings

   $3,455.14 - $181.12

Core Deposit Premium

   $2,614 - $1,166

Transaction Value as a Premium over 1-day Market Value

   $991 - $742

Transaction Price to Tangible Book Value over Buyer’s Trading Price to Tangible Book Value

   $1,479 - $492

 

South Data as of March 31, 2014

Last 12 Months Earnings

Per Share

  

Book Value

Per Share

  

Tangible Book Value

Per Share

   Core Deposits
$69.66    $1,115.07    $837.19    $6,901,749

South - Net Present Value Analysis

Sandler O’Neill performed an analysis that estimated the net present value per share of South common stock through December 31, 2018. Sandler O’Neill based the analysis on South’s projected earnings stream (as reflected in projections provided by South’s management) for the years ending December 31, 2014 through 2018, which projections assumed (i) tangible book value as of December 31, 2014 of $888.10 per share, (ii) a discount rate of 13.50% and (iii) 683,293 outstanding shares of common stock. South’s projections are summarized below in the section entitled “—Certain South Unaudited Prospective Financial Information.”

To approximate the terminal value of South’s common stock at December 31, 2018, Sandler O’Neill applied price to earnings multiples of 9.0x to 19.0x and multiples of tangible book value ranging from 50% to 150% as determined by Sandler O’Neill in its professional judgment and experience. Sandler O’Neill selected the price to earnings multiples based on price to earnings multiples of South’s first peer group. Sandler O’Neill selected the tangible book value multiples based on tangible book value multiples of the South peer group.

 

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The income streams and terminal values were then discounted to present values using different discount rates ranging from 10.3% to 15.3%. Sandler O’Neill determined the discount rate based on the 10-year treasury bond yield of 2.59%, an equity risk premium of 5.70%, a size premium of 3.81%, and an industry premium of 3.20%. These analyses resulted in the following reference ranges of implied present values per share of South common stock:

 

Range of Implied Earnings Per Share

Based on Price/Earnings

   Range of Implied Tangible Book Value Per
Share Based on Tangible Book Value
$726.48 - $1,885.39    $348.73 - $1,278.06

Sandler O’Neill also considered and discussed with the North Committee how this analysis would be affected by changes in the underlying assumptions, including variations with respect to net income. To illustrate this impact, Sandler O’Neill performed a similar analysis assuming South’s net income varied from 40% above projections to 40% below projections. Using a discount rate of 12.8%, the midpoint of the range used in the prior analysis, for this analysis, Sandler O’Neill noted a range of $485.72 to $2,371.20 per share of South common stock.

During the June 10, 2014 meeting of the North Committee, Sandler O’Neill noted that the net present value analysis is a widely used valuation methodology, but the results of such methodology are highly dependent upon the numerous assumptions that must be made, and the results thereof are not necessarily indicative of actual values or future results.

North Comparable Company Analysis

Sandler O’Neill used publicly available information to compare selected financial information for North and a group of financial institutions selected by Sandler O’Neill based on Sandler O’Neill’s professional judgment and experience. The peer group consisted of publicly traded U.S. banks with total assets of between $15 billion and $25 billion, non-performing assets to total assets of less than 2% and tangible common equity to total assets greater than 8%.

The following financial institutions were selected for the comparison:

Signature Bank

Commerce Bancshares, Inc.

Hancock Holding Company

Susquehanna Bancshares, Inc.

EverBank Financial Corp

Fulton Financial Corporation

First National of Nebraska, Inc.

BankUnited, Inc.

 

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The analysis compared publicly available financial information for North and the high, mean, median and low financial and market trading data for the peer group as of or for the period ended March 31, 2014 (with the exception of First National of Nebraska, Inc. for which financial data was as of December 31, 2013, the most recently publicly available data) with pricing data as of June 5, 2014. The results of these analyses are summarized in the following table.

 

     North   

Comparable Company
Ranges

Total Assets ($ in millions)

   $22,155    $23,104 - $15,752

Tangible Common Equity/Tangible Assets

   8.96%    12.18% - 8.22%

Leverage Ratio

   9.66%    12.12% - 8.51%

Total Risk Based Capital Ratio

   16.05%    20.27% - 13.20%

Return on Average Assets

   0.63%    1.53% - 0.73%

Return on Average Equity

   6.73%    13.79% - 6.30%

Net Interest Margin

   3.55%    5.50% - 3.10%

Efficiency Ratio

   77.4%    71.9% - 36.0%

Loan Loss Reserve/Gross Loans

   1.65%    2.39% - 0.44%

Non-Performing Assets/Total Assets

   0.83%    1.75% - 0.13%

Net Charge Offs/Average Loans

   0.08%    1.58% - (0.01)%

Price/Tangible Book Value

   112%    302% - 129%

Price/Last 12 Months Earnings Per Share

   16.4x    23.9x - 11.5x

Price/2014 Consensus Estimated Earnings Per Share

      20.7x - 12.9x

Price/2015 Consensus Estimated Earnings Per Share

      18.1x - 12.2x

Current Dividend Yield

   0.5%    3.1% - 0.0%

Market Value ($ in millions)

   $2,193    $5,810 - $1,909

North – Net Present Value Analysis

Sandler O’Neill also performed an analysis that estimated the net present value of North through December 31, 2018. Sandler O’Neill based the analysis on North’s projected earnings stream as derived from median publicly available analyst estimates and long-term earnings growth rate for the years ending 2014 through 2018.

To approximate the terminal value of North’s common stock at December 31, 2018, Sandler O’Neill applied price to earnings multiples of 15.0x to 20.0x and multiples of tangible book value ranging from 100% to 200% as determined by Sandler O’Neill in its professional judgment and experience. Sandler O’Neill selected the price to earnings multiples of 15.0x to 20.0x based on the range of trades multiples in North’s peer group. The income streams and terminal values were then discounted to present values using different discount rates ranging from 10.1% to 12.6%. Sandler O’Neill determined the discount rate based on the 10-year treasury bond yield of 2.59%, an equity risk premium of 5.70%, a size premium of 1.12%, and an industry premium of 3.20%. These analyses resulted in the following reference ranges of implied earnings per share and implied tangible book value per share of North common stock:

 

Range of Implied Earnings Per Share

Based on Price/Earnings

   Range of Implied Tangible Book Value Per
Share Based on Tangible Book Value

$197.77 - $291.35

   $158.09 - $346.28

Sandler O’Neill also considered and discussed with the North Committee how this analysis would be affected by changes in the underlying assumptions, including variations with respect to net income. To illustrate this impact, Sandler O’Neill performed a similar analysis assuming North’s net income varied from 40% above median publicly available analyst estimates and long-term earnings growth rate for the years ending 2014

 

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through 2018 to 40% below median publicly available analyst estimates and long-term earnings growth rate for the years ending 2014 through 2018. Using a discount rate of 11.4%, the midpoint of the range used in the prior analysis, for this analysis, Sandler O’Neill noted a range of $126.97 - $384.84 per share of North common stock.

At the June 10, 2014 meeting of the North Committee, Sandler O’Neill noted that the net present value analysis is a widely used valuation methodology, but the results of such methodology are highly dependent upon the numerous assumptions that must be made, and the results thereof are not necessarily indicative of actual values or future results.

Pro Forma Results

Sandler O’Neill analyzed certain potential pro forma effects of the merger, assuming the following: (i) the merger closes in the fourth quarter of 2014; (ii) per share merger consideration value is $941.40 or $884.39 per share depending on the form of consideration elected; (iii) South’s performance is consistent with the financial forecasts and estimates prepared by its management; (iv) North’s performance is consistent with financial forecasts and estimates prepared by its management; (v) certain purchase adjustments occur, including that South’s loan portfolio gross credit mark of ($116.7) million (vi) core deposit intangibles are 1.37% of South’s core deposits amortized on a straight line basis over a 10-year period; (vii) North is able to achieve cost savings of $51.0 million per year, with 50% realization in 2015 and 100% realization thereafter (viii) pre-tax deal related costs total $30.5 million; and (ix) pre-tax cash opportunity cost is 1.00%. The actual results achieved by the combined company, however, may vary from projected results and the variations may be material.

The tables below shows Sandler O’Neill’s projected accretion/dilution percentages for North for each of the two merger consideration options as of closing and for each of the years 2014-2017.

For merger consideration consisting of 4.0000 shares of North Class A common stock and $50.00 in cash for each share of South common stock:

 

     Closing
12/31/2014
    Year
Ending
12/31/2015
    Year
Ending
12/31/2016
    Year
Ending
12/31/2017
 

North Earnings Per Share Accretion/(Dilution)—Excluding Transaction Expenses

     —          42.1     42.8     37.9

North Tangible Book Value Accretion/(Dilution)

     (1.5 %)      0.3     3.1     6.0

For merger consideration consisting of 3.5800 shares of North Class A common stock and 0.4200 shares of North Class B common stock of each share of South common stock:

 

     Closing
12/31/2014
    Year
Ending
12/31/2015
    Year
Ending
12/31/2016
    Year
Ending
12/31/2017
 

North Earnings Per Share Accretion/(Dilution)—Excluding Transaction Expenses

     —          44.0     44.8     39.9

North Tangible Book Value Accretion/(Dilution)

     (0.1 %)      1.7     4.6     7.5

 

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Other Information Reviewed By Sandler O’Neill

Stock Price Performance

Sandler O’Neill also reviewed for informational purposes the publicly reported trading prices of North’s common stock for the three-year period ended June 5, 2014. Sandler O’Neill then compared the relationship between the movements in the price of North’s common stock against the movements in the prices of an index of North’s peer group, the NASDAQ Bank Index and the S&P 500.

Three-Year Comparative Stock Performance

 

     Beginning
Value
    Ending
    Value    
 

North Class A Common Stock

     100     123.2

North Class B Common Stock

     100     109.8

North Peers

     100     144.5

NASDAQ Bank Index

     100     149.2

S&P 500

     100     149.2

Miscellaneous

Sandler O’Neill rendered a fairness opinion to the North Committee in connection with the merger and will receive a fee in an amount equal to $300,000, which became due and payable in immediately available funds at the time such written opinion was delivered to North. Sandler O’Neill will receive an additional fee of $600,000 upon and subject to closing of the merger. North has also agreed to reimburse Sandler O’Neill’s reasonable out-of-pocket expenses incurred in connection with its engagement and to indemnify Sandler O’Neill and its affiliates and their respective partners, directors, officers, employee and agents against certain expenses and liabilities, including liabilities under the securities laws.

Over the past three years, Sandler O’Neill received aggregate revenues from South and certain of its affiliates of approximately $175,000 for investment banking services. In the ordinary course of its respective broker and dealer businesses, Sandler O’Neill may purchase securities from and sell securities to South and North and their respective affiliates. Sandler O’Neill may also actively trade the debt and/or equity securities of South or North or their respective affiliates for their own accounts and for the accounts of their customers and, accordingly may at any time hold a long or short position in such securities.

Certain North Unaudited Prospective Financial Information

North does not as a matter of course make public projections as to future revenues, earnings or other financial results due to, among other reasons, the uncertainty of the underlying assumptions and estimates. However, North is including the unaudited prospective financial information to provide its stockholders access to information that was made available to the South Committee, the North Committee and North’s financial advisors in connection with the merger. This unaudited prospective financial information is referred to as the North Forecasts in the section “—Opinion of North’s Financial Advisor.” The inclusion of this information should not be regarded as an indication that North or any of its representatives or any other recipient of this information considered, or now considers, it to be necessarily predictive of actual future results.

This information was prepared solely for internal use and is subjective in many respects. While presented with numeric specificity, the unaudited prospective financial information reflects numerous estimates and assumptions made with respect to business, economic, market and financial conditions and matters specific to North’s business, all of which are difficult to predict and many of which are beyond North’s control. North can give no assurance that the unaudited prospective financial information and the underlying estimates and assumptions will be realized. Further, since the unaudited prospective financial information covers multiple

 

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years, such information by its nature becomes less predictive and less reliable with each successive year. Actual results are likely to differ materially from those set forth below, and important factors that may affect actual results and cause the unaudited prospective financial information to be inaccurate include, but are not limited to, risks and uncertainties relating to North’s business, industry performance, the interest rate and regulatory environment and general business and economic conditions. For other factors that could cause actual results to differ please see the