UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
Of the Securities Exchange Act of 1934
January 24, 2001
Date of Report (Date of earliest event recorded)
BB&T Corporation
(Exact name of registrant as specified in its charter)
Commission file number: 1-10853
North Carolina 56-0939887
(State of Incorporation) (I.R.S. Employer Identification No.)
200 West Second Street
Winston-Salem, North Carolina 27101
(Address of Principal Executive Offices) (Zip Code)
(336) 733-2000
(Registrant's Telephone Number, Including Area Code)
- --------------------------------------------------------------------------------
This Form 8-K has 36 pages.
Item 5. Other Events
BB&T to acquire F&M National Corporation
of Winchester, Va.
WINSTON-SALEM, N.C. - BB&T Corporation (NYSE: BBT) today said it plans to
buy F&M National Corporation (NYSE: FMN) of Winchester, Va., in a $1.17 billion
stock swap. The acquisition, one of two BB&T announced today, would expand
BB&T's presence along the Interstate 81 and Interstate 95 corridors into
northern Virginia and the economically strong markets of Richmond and metro
Washington, D.C.
F&M National, with $4 billion in assets, is the parent company to 12
community banking subsidiaries (including pending acquisitions) in Virginia,
West Virginia and Maryland. It operates 163 banking offices, 13 mortgage banking
offices, three trust offices and six insurance offices.
The F&M National merger would move BB&T into the No. 5 market share
position in the Washington, D.C. metropolitan statistical area, the nation's
wealthiest MSA in terms of per capita income; give it the No. 1 deposit market
share position in Virginia's Tidewater area (Norfolk, Virginia Beach and Newport
News); and strengthen its position in Richmond, Va., a fast-growing technology
center.
The announcement comes on the same day BB&T said it would buy
Fredericksburg, Va.-based Virginia Capital Bancshares Inc. Together, the mergers
will increase BB&T's Virginia assets to more than $11 billion and move BB&T from
sixth to a tie for fourth in market share in the state.
The transaction, approved by the directors of both companies, is valued at
$40.67 per F&M National share based on BB&T's closing price Tuesday of $37.31.
The exchange ratio will be fixed at 1.09 BB&T shares for each F&M National
share. The transaction will be accounted for as a pooling-of-interests.
"BB&T's acquisition strategy is to pursue very high quality banks and
thrifts in our market areas that improve our financial performance and franchise
value," said BB&T Chairman and Chief Executive Officer John Allison. "We
couldn't be more pleased with the prospects of a merger with F&M National, which
clearly meets this objective.
"BB&T and F&M National both have strong branch office networks and very
compatible corporate cultures. This transaction will enable us to grow our
franchise value and build on our momentum in selling fee-based products and
services."
F&M National's market area includes north, central and south Virginia
including the Shenandoah Valley, as well as the eastern panhandle of West
Virginia, and Montgomery and Prince George's counties in Maryland.
F&M was formed in 1969 to serve as the holding company of its then sole
subsidiary, F&M Winchester, organized in 1902. Since 1998, F&M has acquired
approximately $1.4 billion in assets and $1.2 billion in deposits through 15
acquisitions.
"Like BB&T, our strategy has been to provide the products and services of a
regional bank, while maintaining the local appeal and autonomy of a community
bank," said F&M National Vice Chairman, President and Chief Executive Officer
Alfred B. Whitt.
"We're committed to local decision making that results in responsible,
reliable and empathetic client service. The fact that BB&T shares this approach
makes this a perfect fit."
The BB&T community banking network is currently divided into 23 autonomous
regions. Each region has its own president and operates like a community bank.
Nearly all lending decisions are made locally.
The merger, which is subject to the approval of F&M shareholders and
banking regulators, is expected to be completed in the third quarter.
With today's announcements, BB&T will take a self-imposed 90-day moratorium
on bank and thrift acquisitions, Allison said.
Winston-Salem-based BB&T Corporation, with $60.9 billion in assets,
operates 889 banking offices in the Carolinas, Georgia, Virginia, Maryland, West
Virginia, Tennessee, Kentucky and Washington, D.C.
BB&T Corporation is the nation's 17th largest financial holding company.
More information is available at www.BBandT.com.
This press release contains forward-looking statements as defined by
federal securities laws. These statements may address issues that involve
significant risks, uncertainties, estimates and assumptions made by management.
Actual results could differ materially from current projections.
Please refer to BB&T's filings with the Securities and Exchange Commission
for a summary of important factors that could affect BB&T's forward-looking
statements. BB&T undertakes no obligation to revise these statements following
the date of this press release.
BB&T's news releases are available at no charge through PR Newswire's
Company News On-Call facsimile service. For a menu of BB&T's news releases or to
retrieve a specific release call 1-800-758-5804, extension 809325.
The foregoing may be deemed to be offering materials of BB&T Corporation in
connection with BB&T's proposed acquisition of F&M National Corporation, on the
terms and subject to the conditions in the Agreement and Plan of Reorganization,
dated Jan. 23, 2001, between BB&T and F&M National Corporation. This disclosure
is being made in connection with Regulation of Takeovers and Security Holder
Communications (Release Nos. 33-7760 and 34-42055) adopted by the Securities and
Exchange Commission ("SEC").
Shareholders of F&M National Corporation and other investors are urged to
read the proxy statement/prospectus that will be included in the registration
statement on Form S-4, which BB&T will file with the SEC in connection with the
proposed merger because it will contain important information about BB&T, F&M
National Corporation, the merger, the persons soliciting proxies in the merger
and their interests in the merger and related matters.
After it is filed with the SEC, the proxy statement/prospectus will be
available for free, both on the SEC web site (http://www.sec.gov) and from BB&T
and F&M National Corporation as follows:
Alan W. Greer, Shareholder Reporting, BB&T Corporation, P.O. Box 1290,
Winston-Salem, NC, 27102. Telephone: (336) 733-3021.
Michael Bryan, Secretary and General Counsel, F&M National Corporation, 9
Court Square, Winchester, VA, 22601. Telephone: (540) 665-4200.
In addition to the proposed registration statement and proxy
statement/prospectus, BB&T and F&M National Corporation file annual, quarterly
and special reports, proxy statements and other information with the SEC. You
may read and copy any reports, statements or other information filed by either
company at the SEC's public reference rooms at 450 Fifth Street, N.W.,
Washington, D.C. 20549 or at the SEC's other public reference rooms in New York
and Chicago.
Please call the SEC at 1-800-SEC-0330 for further information on the public
reference rooms. BB&T's and F&M National's filings with the SEC are also
available to the public from commercial document-retrieval services and on the
SEC's web site at http://www.sec.gov.
BB&T
and
F&M National Corporation
Winchester, VA
Expanding a Great Franchise
Analyst Presentation
January 24, 2001
1
Forward-Looking Information
BB&T has made forward-looking statements in the accompanying analyst
presentation materials that are subject to risks and uncertainties. These
statements are based on the beliefs and assumptions of the management of BB&T,
and on the information available to management at the time the analyst
presentation materials were prepared. In particular, the analyst materials in
this report include statements regarding estimated earnings per share of BB&T on
a stand alone basis, expected cost savings from the merger, estimated
restructuring charges relating to the merger, the anticipated accretive effect
of the merger, and BB&T's anticipated performance in future periods. With
respect to estimated cost savings and restructuring charges, BB&T has made
assumptions about, among other things, the extent of operational overlap between
BB&T and F&M National Corporation, the amount of general and administrative
expense consolidation, costs relating to converting F&M National Corporation's
bank operations and data processing to BB&T's systems, the size of anticipated
reductions in fixed labor costs, the amount of severance expenses, the extent of
the charges that may be necessary to align the companies' respective accounting
reserve policies, and the cost related to the merger. The realization of cost
savings and the amount of restructuring charges are subject to the risk that the
foregoing assumptions are inaccurate.
Any statements in the accompanying exhibit regarding the anticipated accretive
effect of the merger and BB&T's anticipated performance in future periods are
subject to risks relating to, among other things, the following possibilities:
(1) expected cost savings from this merger or other previously announced mergers
may not be fully realized or realized within the expected time frame; (2)
deposit attrition, customer loss or revenue loss following proposed mergers may
be greater than expected; (3) competitive pressure among depository and other
financial institutions may increase significantly; (4) costs or difficulties
related to the integration of the businesses of BB&T and its merger partners,
including F&M National Corporation may be greater than expected; (5) changes in
the interest rate environment may reduce margins; (6) general economic or
business conditions, either nationally or regionally, may be less favorable than
expected, resulting in, among other things, a deterioration in credit quality,
or a reduced demand for credit; (7) legislative or regulatory changes, including
changes in accounting standards, may adversely affect the businesses in which
BB&T and F&M National Corporation are engaged; (8) adverse changes may occur in
the securities markets; and (9) competitors of BB&T and F&M National Corporation
may have greater financial resources and develop products that enable such
competitors to compete more successfully than BB&T and F&M National Corporation.
BB&T believes these forward-looking statements are reasonable; however, undue
reliance should not be placed on such forward-looking statements, which are
based on current expectations. Such statements are not guarantees of
performance. They involve risks, uncertainties and assumptions. The future
results and shareholder value of BB&T following completion of the merger may
differ materially from those expressed in these forward-looking statements. Many
of the factors that will determine these results and values are beyond
management's ability to control or predict.
2
Outline
- - Background and transaction terms
- - Financial data
- - Rationale and strategic objectives
- - Investment criteria
- - Summary
3
BB&T Corporation (BBT)
- - $63.2 billion financial holding company*
- - 939 branch locations in NC, SC, VA, GA, MD, WV, KY, TN, AL and the District
of Columbia*
For 3 months
ended 12/31/00**
--------------
- - ROA 1.63%
- - Cash Basis ROA 1.76%
- - ROE 20.78%
- - Cash Basis ROE 26.24%
- - Cash Basis Efficiency Ratio 46.58%
* Includes the pending acquisitions of FirstSpartan Financial Corp. and Century
South Banks, Inc.
** Recurring earnings
4
F&M National Corporation (FMN)
- - $4.0 billion bank holding company*
- - 163 locations in Virginia, West Virginia, and Maryland*
For 3 months
ended 12/31/00**
--------------
- - ROA 1.39%
- - Cash Basis ROA 1.48%
- - ROE 14.77%
- - Cash Basis ROE 15.62%
- - Cash Basis Efficiency Ratio 57.94%
* Includes the pending acquisitions of Atlantic Financial Corporation and
Community Bankshares of Maryland
**Recurring earnings
5
Pro Forma Company Profile*
- - Size: $67.7 billion in assets
$16.9 billion in market capitalization**
- - Offices: NC: 339
VA: 283
GA: 133
SC: 101
WV: 98
MD: 97
TN: 35
KY: 10
DC: 8
AL: 2
----------------
Total 1,106
* Includes pending acquisitions of FirstSpartan Financial Corporation and
Century South Banks, Inc., as well as the acquisition of Virginia Capital
Bancshares, Inc. which is being announced concurrently with this transaction.
**Based on closing prices as of 01/23/01
6
Terms of the Transaction
7
Terms of the Transaction
- - Purchase price: $40.67 per share*
- - Aggregate value: $1.17 billion*
- - Consideration: A fixed exchange ratio of 1.09 shares of BB&T stock
for each share of F&M National
- - Structure: Tax-free exchange of stock equal to 100% of purchase
price
- - Accounting Treatment: Transaction will be accounted for as a
pooling-of-interests
- - Due Diligence Period: To be completed by February 21, 2001
- - Lock-up provision: Stock option agreement
- - Expected closing: Third quarter 2001
*Based on BB&T's closing stock price of $37.3125 as of 01/23/01
8
Pricing
- - Purchase price $40.67
- - Premium/market 47.2%*
- - Price/12-31-00 stated book 2.95x
- - Price/LTM EPS 21.18x
- - BB&T shares issued 31.3 million**
*Based on FMN's closing stock price of $27.625 as of 01/23/01
**BB&T shares issued based on FMN's shares outstanding and shares to be issued
for pending acquisitions adjusted for stock options using the treasury method.
9
Acquisition Comparables*
Comparable Acquisitions Announced since October 1, 2000
with Seller Assets over $250 Million
Date Seller Deal Value/ Deal Pr/
Buyer Seller Announced Total Assets Deal Value Assets Stock Pr
----- ------ --------- ------------ ---------- ------ --------
($M) ($M) (%) (%)
FleetBoston Financial Summit Bancorp 10/2/2000 38,985.0 6,990.7 17.9 15.7
Firstar Corp. U.S. Bancorp 10/4/2000 86,174.0 21,086.6 24.5 14.0
Wachovia Corporation Republic Security
Financial Corporation 10/30/2000 3,397.0 342.9 10.1 17.9
Hudson River Bancorp Inc. Cohoes Bancorp Inc. 11/24/2000 739.3 160.7 21.7 14.7
BB&T Corp. Century South Banks, Inc. 12/5/2000 1,614.5 428.2 26.5 26.7
United Community Financial Corp. Industrial Bancorp, Inc. 12/9/2000 415.7 91.8 22.1 38.1
SouthTrust Corporation Bay Bancshares Inc. 12/11/2000 332.7 53.0 15.9 20.1
Fulton Financial Corporation Drovers Bancshares
Corporation 12/27/2000 755.3 146.6 19.4 44.0
Maximum 86,174.0 21,086.6 26.5 44.0
Minimum 332.7 53.0 10.1 14.0
Average 16,551.7 3,662.6 19.8 23.9
Median 1,184.9 251.8 20.6 19.0
Deal Price: $40.67
BB&T Corp F&M National Corporation 4,038.0 1,168.6 28.9 47.2
Over/(Under) Average Comparables (2,493.9) 9.2 23.3
Deal Pr/ Deal Pr/
Date Deal Deal Pr/ LTM LTM Core
Buyer Seller Announced Pr/Bk Tg Bk EPS EPS
----- ------ --------- ----- ----- --- ---
(%) (%) (x) (x)
FleetBoston Financial Summit Bancorp 10/2/2000 235.7 291.9 15.2 14.9
Firstar Corp. U.S. Bancorp 10/4/2000 265.0 443.2 13.6 13.2
Wachovia Corporation Republic Security
Financial Corporation 10/30/2000 165.1 184.7 13.5 14.9
Hudson River Bancorp Inc. Cohoes Bancorp Inc. 11/24/2000 124.8 125.9 25.7 21.0
BB&T Corp. Century South Banks, Inc. 12/5/2000 271.2 290.6 23.0 20.4
United Community Financial Corp. Industrial Bancorp, Inc. 12/9/2000 153.9 153.9 15.2 15.2
SouthTrust Corporation Bay Bancshares Inc. 12/11/2000 182.0 235.7 16.5 17.3
Fulton Financial Corporation Drovers Bancshares
Corporation 12/27/2000 267.8 268.1 25.9 26.8
Maximum 271.2 443.2 25.9 26.8
Minimum 124.8 125.9 13.5 13.2
Average 208.2 249.2 18.6 18.0
Median 208.8 251.9 15.9 16.2
Deal Price: $40.67
BB&T Corp F&M National Corporation 294.9 325.3 21.2 21.1
Over/(Under) Average Comparables 86.7 76.1 2.6 3.1
*Source for Acquisition Comparables: SNL Securities.
10
Acquisition Comparables
Comparable Acquisitions Announced in the Southeast since October 1, 2000
with Seller Assets over $50 Million
Date Seller Deal Value/ Deal Pr/
Buyer Seller Announced Total Assets Deal Value Assets Stock Pr
----- ------ --------- ------------ ---------- ------ --------
($M) ($M) (%) (%)
Alabama National BanCorp. Peoples State Bk of Groveland 10/10/2000 116.4 15.5 13.31 NA
First Bancorp Century Bancorp Inc. 10/20/2000 100.5 21.7 21.58 37.54
Wachovia Corp. Republic Security Financial 10/30/2000 3,397.0 342.9 10.09 17.89
WesBanco Inc. Freedom Bancshares Inc. 11/24/2000 97.2 11.0 11.31 NA
BB&T Corporation Century South Banks, Inc. 12/5/2000 1,614.5 428.2 26.50 26.70
Trustmark Corporation Barret Bancorp, Inc. 12/13/2000 510.2 102.4 20.07 NA
F.N.B. Corporation Citizens Community Bancorp, Inc. 12/18/2000 154.4 38.6 25.00 100.00
Pocahontas Bancorp, Inc. Walden/Smith Financial Group, Inc. 1/4/2001 151.0 28.0 18.55 NA
Average 767.7 123.5 18.3 45.5
Median 152.7 33.3 19.3 8.9
Deal Price: $40.67
BB&T Corp F&M National Corporation 4,038.0 1,168.6 28.9 47.2
Over/(Under) Average Comparables 10.6 1.7
Deal Pr/ Deal Pr/
Date Deal Deal Pr/ LTM LTM Core
Buyer Seller Announced Pr/Bk Tg Bk EPS EPS
----- ------ --------- ----- ----- --- ---
(%) (%) (x) (x)
Alabama National BanCorp. Peoples State Bk of Groveland 10/10/2000 183.0 183.0 NA 12.8
First Bancorp Century Bancorp Inc. 10/20/2000 121.2 121.2 21.1 21.1
Wachovia Corp. Republic Security Financial 10/30/2000 165.1 184.7 14.9 13.5
WesBanco Inc. Freedom Bancshares Inc. 11/24/2000 146.2 146.8 NA 18.6
BB&T Corporation Century South Banks, Inc. 12/5/2000 271.2 290.6 23.0 20.4
Trustmark Corporation Barret Bancorp, Inc. 12/13/2000 122.0 140.1 13.2 NA
F.N.B. Corporation Citizens Community Bancorp, Inc. 12/18/2000 210.3 210.3 45.8 45.8
Pocahontas Bancorp, Inc. Walden/Smith Financial Group, Inc. 1/4/2001 181.5 184.5 16.6 NA
Average 175.1 182.7 22.4 22.0
Median 173.3 183.7 15.8 16.0
Deal Price: $40.67
BB&T Corp F&M National Corporation 294.9 325.3 21.2 21.1
Over/(Under) Average Comparables 119.9 142.7 (1.2) (1.0)
11
Financial Data
12
Financial Summary
For Quarter Ended: 12/31/00 12/31/00
BB&T* FMN*
---- ---
ROA 1.63% 1.39%
ROE 20.78 14.77
Net interest margin (FTE) 4.17 4.40
CB Efficiency ratio 46.58 57.94
Net charge-offs/(recoveries) .32 .18
Reserve/NPLs 346.96 183.48
NPAs/assets .33 .62
*Recurring earnings
13
Capital Strength
BB&T FMN
(12/31/00) (12/31/00)
---------- ----------
Equity/assets 8.1% 9.5%
Leverage capital ratio 7.1% 9.2%
Total risk-based capital 12.0% 15.2%*
*As of 9/30/00
14
Rationale For Acquisition
- - BB&T has an announced strategy to pursue in-market (Carolinas/Virginia/West
Virginia/DC/Maryland/Georgia/ Tennessee) and contiguous state acquisitions
of high quality banks and thrifts in the $250 million to $10 billion range.
The acquisition of F&M National is consistent with this strategy.
- - This acquisition is very consistent with past acquisitions which we have
successfully executed, i.e. it fits our model.
- - The acquisition of F&M National ties BB&T for the number 4* market share
position in the state of Virginia. This acquisition also provides BB&T
with the number 5 market share position in the Washington, DC MSA, and the
number 1 market share position in the Norfolk/Virginia Beach/Newport News
MSA.
* Includes the deposits of Virginia Capital Bancshares, Inc., BB&T's
concurrently announced acquisition.
15
Strategic Objectives
The key strategic objectives achieved in this acquisition:
- - Increases BB&T's existing share in the vibrant Virginia market from 6% to
10% and ties BB&T for the number 4* market share position
- - Moves BB&T into the number 5 market share position in the strategically
important Washington, DC MSA and significantly enhances BB&T's presence
in surrounding Northern Virginia
- - Improves efficiency
- 35% cost savings fully realized in the first 12 months of operations
following conversion
- - Utilizes F&M National's branch franchise to sell BB&T's broad array of
retail and commercial banking products to their existing customer base
and expand the reach of the branch beyond F&M National's traditional
customer
- - Increases product and market penetration through the use of BB&T's world
standard sales system
* Includes the deposits of Virginia Capital Bancshares, Inc., BB&T's
concurrently announced acquisition.
16
Franchise Enhancement
- - Provides BB&T with the #1 deposit market share in the Norfolk/Virginia
Beach/Newport News MSA
- - Extends BB&T's branch distribution system along the I-81 corridor into
northern Virginia and enhances BB&T's branch distribution system in the
strategically important markets of Richmond, VA and Washington, DC
- - Increases BB&T's Virginia trust assets by approximately 63% to $1.8 billion
- - Significant cross-sell opportunities from the addition of BB&T's broad
product line
17
Efficiency Improvement
Targeted Annual Cost Savings
----------------------------
$45.9 million or approximately
35% of FMN's pro forma expense base*
Assumes closing of 15 of 163 locations
or 9% of branches
* F&M expense base pro forma for pending acquisitions of Atlantic Financial
Corporation and Community Bankshares of Maryland. Cost savings include F&M's
announced savings for Atlantic Financial as well as BB&T's projected cost
savings resulting from the divestiture of branches.
18
After-Tax One-Time Charges
One-time after-tax merger-related charges
$55.0 million*
*Net of estimated premium of $9.1 million from divested deposits
19
Branch Locations
[Map showing location of both existing and pending BB&T branches
throughout AL, MD, VA, DC, WV, KY, NC, SC, TN and GA inserted here]
20
Branch Locations
[Map showing location of F&M National Corporation branches
throughout VA, WV and DC inserted here]
21
Market Characteristics
[Graphic of State of Virginia inserted on left side of slide]
- - 1999 unemployment rate - 2.7% (37% below national rate)
- - 12th most populated state
- - Highest per capita income in the Southeast
- - Total employment is projected to expand 19.9% (1993 - 2005)
- - High-tech economy: 2nd largest computer software and 3rd largest advanced
telecommunication industries
- - 76 major corporations with revenues of $200 million or more, including 16
Fortune 500 companies, are headquartered in Virginia
- - The Greater Richmond, Va. Area; which includes Chesterfield, Hanover, and
Henrico counties; is a technology center that is earning worldwide
recognition in semiconductors, microelectronics, information technology,
medical research and biotechnology, chemical synthesis research, and
telecommunications.
22
Market Characteristics
[Graphic of States of Virginia and Maryland and DC area inserted on left side
of slide with Northern VA, Southern Maryland and Metro DC area outlined]
- - With 5 million residents, the Metro DC market is the nation's 5th largest
MSA.
- - Metro DC is the nation's leader in per capita income; 44.2% above the
national average.
- - Total employment in Metro DC is projected to expand 19.9% (1993-2005).
- - The Washington, DC MSA population increased by 11.6% between 1990 and 1999
and the median household income increased by 36.2% in the same
period. The population and the median household income are projected to
grow an additional 3.8% and 14.2%, respectively, through 2004.
23
BB&T Investment Criteria
- - EPS and Cash Basis EPS (accretive by year 2)
- - Internal rate of return (15% or better)
- - Return on equity and Cash Basis ROE (accretive by year 3)
- - Return on assets and Cash Basis ROA (accretive by year 3)
- - Book value per share (accretive by year 5)
- - Must not cause combined leverage capital ratio to go below 7%
Criteria are listed in order of importance. There are sometimes trade-
offs among criteria.
24
Assumptions
- - BB&T's 2001 EPS is based on the First Call estimate of $2.46 and subsequent
years are based on 12% income statement and balance sheet growth.
- - FMN's 2001 EPS, prior to acquisition effects, is based on the First Call
estimate of $2.06.
- - 35% annual cost savings ($45.9 million) fully realized in the first 12
months following conversion.
- - Assumes divestiture of $226.3 million.
- - Growth Rates - Following the acquisition, we have assumed 12% income
statement and balance sheet growth in year 1, 14% in years 2 through 5,
and 12% in years 6 through 10, except for the items noted below:
- FMN's core net interest margin is incrementally decreased in years 1
through 5 to obtain a margin of 4.35%.
- FMN's loan loss allowance is raised to 1.30% to match BB&T's reserve
philosophy.
- FMN's net charge-off rate for loan losses is assumed to be 0.35%.
25
Earnings Per Share Impact
Accretion Accretion
(Dilution) Pro Forma (Dilution)
Pro Forma Pro Forma Cash Basis Pro Forma
EPS Shares EPS Shares
----------- ----------- ------------ ------------
2001* $ 2.44 $(0.024) $ 2.56 $(0.029)
2002 2.77 0.007 2.89 0.003
2003 3.11 0.014 3.23 0.010
2004 3.48 0.020 3.60 0.016
2005 3.90 0.027 4.02 0.023
2006 4.38 0.036 4.50 0.032
2007 4.91 0.044 5.03 0.040
2008 5.50 0.050 5.62 0.046
2009 6.16 0.056 6.28 0.052
2010 6.90 0.064 7.02 0.060
2011 7.73 0.072 7.85 0.068
Internal rate of return 17.09%
------
* Recurring earnings
26
ROE Impact1
Pro Forma
Pro Forma Cash Basis
ROE(%) Change ROE (%) Change
----------- -------- ------------ --------
2001 2 20.53 (0.36) 24.66 (0.60)
2002 21.07 0.09 24.59 (0.01)
2003 20.72 0.11 23.50 0.03
2004 20.34 0.11 22.54 0.05
2005 19.99 0.11 21.74 0.06
2006 19.70 0.11 21.08 0.07
1 The decrease in ROE results from the build up in equity relative to assets.
If consistent with attaining and maintaining a leverage capital ratio of at
least 7%, BB&T may choose to leverage the balance sheet further through
future purchase acquisitions.
2 Recurring earnings
27
ROA Impact
Pro Forma
Pro Forma Cash Basis
ROA (%) Change ROA (%) Change
----------- -------- ------------ --------
2001* 1.67 (0.00) 1.77 (0.00)
2002 1.70 0.02 1.79 0.02
2003 1.70 0.02 1.78 0.02
2004 1.70 0.02 1.77 0.02
2005 1.71 0.02 1.77 0.02
2006 1.71 0.02 1.76 0.02
* Recurring earnings
28
Book Value/Capital Impact
Pro Forma
Book Value Per Share
-------------------- Pro Forma
Accretion Leverage Accretion
Stated (Dilution) Ratio (Dilution)
-------- ------------ ---------- -----------
2001 $ 12.30 $ (0.03) 7.75% 0.06
2002 14.02 (0.02) 8.07 0.07
2003 16.02 (0.01) 8.36 0.07
2004 18.30 0.01 8.63 0.07
2005 20.85 0.04 8.87 0.07
2006 23.71 0.08 9.08 0.07
2007 26.93 0.12 9.26 0.07
2008 30.53 0.17 9.43 0.08
2009 34.56 0.22 9.57 0.09
2010 39.07 0.29 9.69 0.10
2011 44.13 0.36 9.80 0.11
29
Summary
- - The acquisition of F&M National Corporation is a strong strategic fit:
- It helps accomplish our goal of expanding our Virginia and Washington,
DC area markets
- It fits culturally and geographically
- This is the type of merger we have consistently and successfully
executed
- - Overall Investment Criteria are met:
- EPS and Cash Basis EPS accretive in 2002
- IRR 17.09%
- ROE accretive in 2002 and Cash ROE accretive in 2003
- ROA and Cash ROA accretive in 2002
- Book value accretive in 2004
- Combined leverage ratio remains above 7%
30
Appendix
- - Historical Financial Data
- - Glossary
- - Where to go for additional information about BB&T, F&M National
Corporation and the merger
31
F&M National Corporation
Financial Summary
% % %
1998 Change 1999 Change 2000 Change
--------- ------ ---------- ------ --------- ------
Earnings Summary (In thousands)
Interest Income (FTE)
Interest on loans & leases ............. $ 160,289 7.0% $ 159,422 -0.5% $ 170,078 6.7%
Interest & dividends on securities ..... 47,233 15.4% 52,346 10.8% 64,646 23.5%
Interest on temporary investments ...... 8,266 69.4% 5,336 -35.4% 5,828 9.2%
---------- ---------- ----------
Total interest income (FTE) ........ 215,788 5.3% 217,104 0.6% 240,552 10.8%
---------- ---------- ----------
Interest Expense
Interest expense on deposit accounts ... 84,268 9.0% 78,371 -7.0% 91,642 16.9%
Interest on short-term borrowings ...... 3,849 20.4% 3,968 3.1% 7,008 76.6%
Interest on long-term debt ............. 1,103 6.6% 1,572 42.5% 1,483 -5.7%
---------- ---------- ----------
Total interest expense ............. 89,220 2.8% 83,911 -6.0% 100,133 19.3%
---------- ---------- ----------
Net interest income (FTE) .............. 126,568 7.2% 133,193 5.2% 140,419 5.4%
Less taxable equivalency adjustment 1,483 N/A 1,429 -3.6% 1,735 21.4%
Net interest income .................... 125,085 5.9% 131,764 5.3% 138,684 5.3%
Provision for loan losses .............. 5,541 -6.3% 4,021 -27.4% 3,951 -1.7%
---------- ---------- ----------
Net interest income after provision .... 119,544 6.6% 127,743 6.9% 134,733 5.5%
---------- ---------- ----------
Noninterest Income
Service charges on deposit accounts .... 13,752 23.5% 15,509 12.8% 18,229 17.5%
Non-deposit fees and commissions ....... 18,560 55.6% 25,178 35.7% 33,420 32.7%
Other operating income ................. 4,806 11.5% 4,306 -10.4% 3,153 -26.8%
---------- ---------- ----------
Total noninterest income ........... 37,118 17.5% 44,993 21.2% 54,802 21.8%
---------- ---------- ----------
Noninterest Expense
Personnel .............................. 55,442 13.6% 63,165 13.9% 65,851 4.3%
Occupancy & equipment .................. 15,266 4.2% 16,680 9.3% 17,974 7.8%
Other operating expenses ............... 29,102 7.5% 30,366 4.3% 32,417 6.8%
---------- ---------- ----------
Total noninterest expense .......... 99,810 10.2% 110,211 10.4% 116,242 5.5%
---------- ---------- ----------
Net income before taxes ................ 56,852 6.8% 62,525 10.0% 73,292 17.2%
Income taxes ........................... 19,271 21,320 25,166
---------- ---------- ----------
Net income before nonrecurring charges . 37,581 5.1% 41,205 9.6% 48,126 16.8%
---------- ---------- ----------
Nonrecurring charges ................... 1,357 1,797 (172)
---------- ---------- ----------
Net income ......................... $ 38,938 8.8% $ 43,002 10.4% $ 47,954 11.5%
========== ========== ==========
Basic EPS .............................. $ 1.55 7.7% $ 1.72 11.1% $ 1.93 12.2%
Diluted EPS ............................ 1.54 8.5% 1.71 11.0% 1.92 12.3%
Diluted EPS before nonrecurring charges 1.49 N/A 1.64 10.2% 1.93 17.7%
Book value ............................. $ 12.77 8.3% $ 12.36 -3.2% $ 13.79 11.6%
EOP shares ............................. 24,423 24,896 24,613
Basic shares ........................... 25,112 24,970 24,820
Diluted shares ......................... 25,277 25,145 24,961
32
F&M National Corporation
Financial Summary
% % %
1998 Change 1999 Change 2000 Change
----------- ------ ----------- ------ ----------- ------
Average Balance Sheet
(In thousands)
Assets
Loans .................................. $1,785,338 4.4% $1,867,025 4.6% $1,991,099 6.6%
Securities ............................. 757,646 12.0% 846,438 11.7% 994,451 17.5%
Other earning assets ................... 163,778 65.4% 98,524 -39.8% 79,435 -19.4%
----------- ----------- -----------
Total interest-earning assets ...... 2,706,762 8.9% 2,811,987 3.9% 3,064,985 9.0%
----------- ----------- -----------
Goodwill & other intangibles ........... 10,846 17.5% 10,280 -5.2% 19,158 86.4%
Other assets ........................... 246,195 7.3% 246,452 0.1% 262,860 6.7%
----------- ----------- -----------
Total assets ....................... $2,963,803 8.8% $3,068,719 3.5% $3,347,003 9.1%
=========== =========== ===========
Net interest margin .................... 4.68% 4.74% 4.58%
Liabilities & Shareholders' Equity
Interest-bearing deposits:
Money Market & NOW ..................... $ 692,529 13.8% $ 741,350 7.0% $ 769,402 3.8%
Savings ................................ 221,768 -0.6% 230,293 3.8% 232,523 1.0%
CD's and other time .................... 1,102,712 2.4% 1,081,345 -1.9% 1,209,491 11.9%
----------- ----------- -----------
Total interest-bearing deposits .... 2,017,009 5.7% 2,052,988 1.8% 2,211,416 7.7%
Short-term borrowed funds .............. 102,017 10.9% 116,277 14.0% 154,186 32.6%
Long-term debt ......................... 18,469 15.7% 25,884 40.1% 22,998 -11.1%
----------- ----------- -----------
Total interest-bearing liabilities . 2,137,495 6.0% 2,195,149 2.7% 2,388,600 8.8%
Demand deposits ........................ 496,856 20.2% 535,997 7.9% 605,460 13.0%
Other liabilities ...................... 26,548 23.2% 25,338 -4.6% 29,248 15.4%
----------- ----------- -----------
Total liabilities .................. 2,660,899 8.5% 2,756,484 3.6% 3,023,308 9.7%
----------- ----------- -----------
Preferred equity ....................... -- -- --
Common equity .......................... 302,904 11.0% 312,235 3.1% 323,695 3.7%
----------- ----------- -----------
Total equity ....................... 302,904 11.0% 312,235 3.1% 323,695 3.7%
----------- ----------- -----------
----------- ----------- -----------
Total liabilities & shareholders' equity $2,963,803 8.8% $3,068,719 3.5% $3,347,003 9.1%
=========== =========== ===========
33
F&M National Corporation
Financial Summary
% % %
1998 Change 1999 Change 2000 Change
-------------- ------ ------------- ------ ------------ ------
Ratio Analysis
ROA ................................... 1.27% 1.34% 1.44%
ROCE .................................. 12.41% 13.20% 14.87%
Efficiency ratio ...................... 61.0% 61.9% 59.5%
Adj. noninterest income / Adj. revenues 22.7% 25.3% 28.1%
Average equity / Average assets ....... 10.2% 10.2% 9.7%
Credit Quality
(In thousands)
Beginning ............................. $ 23,095 $ 23,509 $ 24,051
-------------- -------------- ------------
Provision ............................. 5,541 4,021 3,951
Acquired allowance .................... -- -- --
Net charge-offs ....................... (5,127) (3,479) (3,465)
-------------- -------------- ------------
Ending allowance ...................... $ 23,509 $ 24,051 $ 24,537
-------------- -------------- ------------
Allowance ............................. 1.29% 1.27% 1.19%
Charge-off rate ....................... 0.29% 0.19% 0.17%
Period end loans & leases ............. $ 1,825,420 3.0% $ 1,887,315 3.4% $ 2,068,702 9.6%
Period end common equity .............. $ 311,949 8.3% $ 307,682 -1.4% $ 339,428 10.3%
Period end total assets ............... $ 3,100,117 7.8% $ 3,098,167 -0.1% $ 3,568,780 15.2%
34
Glossary
Return on Assets - recurring earnings for the period as a percentage of average
assets for the period.
Return on Equity - recurring earnings for the period as a percentage of average
common equity for the period.
Cash Basis Performance Results and Ratios - These calculations exclude the
effect on net income of amortization expense applicable to certain intangible
assets. The ratios also exclude the effect of the unamortized balances of these
intangibles from assets and equity.
Efficiency Ratio - calculated as recurring noninterest expense as a percentage
of the sum of recurring net interest income on a fully taxable equivalent basis
and recurring noninterest income.
Leverage Capital Ratio - Common shareholders' equity excluding unrealized
securities gains and losses and certain intangible assets as a percentage of
average assets for the most recent quarter less certain intangible assets.
Total Risk-Based Capital Ratio - The sum of shareholders' equity, a qualifying
portion of subordinated debt and a qualifying portion of the allowance for loan
and lease losses as a percentage of risk-weighted assets.
Net Charge-Off Ratio - Loan losses net of recoveries as a percentage of average
loans and leases.
Internal Rate of Return - The interest rate that equates the present value of
future returns to the investment outlay. An investment is considered acceptable
if its IRR exceeds the required return. The investment is defined as the market
value of the stock and/or other consideration to be received by the selling
shareholders.
Recurring Results or Ratios - earnings excluding charges and expenses
principally related to completing mergers and acquisitions.
Certain of the ratios discussed above may be annualized if the applicable
periods are less than a full year.
35
The foregoing may be deemed to be offering materials of BB&T Corporation in
connection with BB&T's proposed acquisition of F&M National Corporation on the
terms and subject to the conditions in the Agreement and Plan of Reorganization,
dated January 23, 2001, between BB&T and F&M National . This filing is being
made in connection with Regulation of Takeovers and Security Holder
Communications (Release Nos. 33-7760 and 34-42055) adopted by the Securities and
Exchange Commission ("SEC").
Shareholders of F&M National and other investors are urged to read the proxy
statement/prospectus that will be included in the registration statement on Form
S-4 which BB&T will file with the SEC in connection with the proposed merger
because it will contain important information about BB&T, F&M National, the
merger, the persons soliciting proxies in the merger and their interests in the
merger and related matters. After it is filed with the SEC, the proxy
statement/prospectus will be available for free, both on the SEC's web site
(http://www.sec.gov) and from FMN and BB&T as follows:
Michael L. Bryan Alan W. Greer
Corporate Secretary, General Counsel Shareholder Reporting
F&M National Corporation BB&T Corporation
9 Court Square Post Office Box 1290
Winchester, Virginia 22601 Winston-Salem, North Carolina 27102
Phone: (540) 665-4200 Phone: (336) 733-3021
In addition to the proposed registration statement and proxy
statement/prospectus, BB&T and FMN file annual, quarterly and special reports,
proxy statements and other information with the SEC. You may read and copy any
reports, statements or other information filed by either company at the SEC's
public reference rooms at 450 Fifth Street, N.W., Washington, D.C. 20549 or at
the SEC's other public reference rooms in New York, New York and Chicago,
Illinois. Please call the SEC at 1-800-SEC-0330 for further information on the
public reference rooms. BB&T's and FMN's filings with the SEC are also available
to the public from commercial document-retrieval services and on the SEC's web
site at http://www.sec.gov.
36
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
BB&T CORPORATION
(Registrant)
By: /S/ SHERRY A. KELLETT
Sherry A. Kellett
Senior Executive Vice President and Controller
(Principal Accounting Officer)
Date: January 24, 2001.