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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 10-Q
(MARK ONE)
[X]QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1994
[_]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
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COMMISSION FILE NUMBER 0-7871
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BB&T FINANCIAL CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
NORTH CAROLINA 56-1056232
(STATE OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
223 WEST NASH STREET 27893
WILSON, NORTH CAROLINA (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE
OFFICES)
(919) 399-4291
(REGISTRANT'S TELEPHONE NUMBER INCLUDING AREA CODE)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES X NO
---- ----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
COMMON STOCK, $2.50 PAR VALUE 36,519,514
(SHARES OUTSTANDING AS OF
SEPTEMBER 30, 1994)
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BB&T FINANCIAL CORPORATION
TABLE OF CONTENTS
PAGE
----
PART I--FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets 1
Consolidated Statements of Income 2
Consolidated Statements of Shareholders' Equity 3
Consolidated Statements of Cash Flows 4
Notes to Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 6-10
Supplemental Financial Information 11-16
PART II--OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 17
SIGNATURES 18
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BB&T FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30,
1994 1993 1993
------------- ------------ -------------
($ IN THOUSANDS, EXCEPT PER SHARE)
ASSETS
Cash and due from banks............... $ 413,707 355,818 342,265
Interest-bearing bank balances........ 18,302 79,663 25,404
Federal funds sold.................... 15,900 35,050 14,200
Securities available for sale (at fair
value in 1994, fair value in 1993 of
$737,611, and $563,127,
respectively)........................ 2,311,390 726,658 549,112
Securities held to maturity (fair
value of $105,662, $1,722,284, and
$1,725,318 respectively)............. 101,786 1,701,317 1,698,408
Loans................................. 6,986,594 6,688,332 6,145,688
Less allowance for loan losses........ 95,344 93,315 89,783
----------- --------- ---------
Net loans......................... 6,891,250 6,595,017 6,055,905
Bank premises and equipment........... 150,233 147,666 130,128
Accrued interest receivable........... 70,764 63,607 66,713
Other assets.......................... 214,502 162,602 144,873
----------- --------- ---------
Total assets...................... $10,187,834 9,867,398 9,027,008
=========== ========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Noninterest-bearing................. $ 893,981 861,786 828,228
Interest-bearing.................... 6,602,758 6,704,154 6,050,572
----------- --------- ---------
Total deposits.................... 7,496,739 7,565,940 6,878,800
Short-term borrowed funds............. 1,258,768 1,046,789 962,332
Long-term debt........................ 490,790 350,736 311,778
Other liabilities..................... 113,986 106,949 101,987
----------- --------- ---------
Total liabilities................. 9,360,283 9,070,414 8,254,897
Shareholders' equity:
Common stock $2.50 par value,
100,000,000 shares authorized; shares
issued of 36,519,514, 36,398,619 and
35,934,365, respectively............. 91,299 90,997 89,836
Paid-in capital....................... 284,940 286,774 276,440
Retained earnings..................... 484,273 425,667 410,561
Less loan to employee stock ownership
plan................................. 4,419 4,419 4,726
Less unvested restricted stock........ 1,908 2,035 --
Net unrealized (losses) on securities
available for sale................... (26,634) -- --
----------- --------- ---------
Total shareholders' equity........ 827,551 796,984 772,111
----------- --------- ---------
Total liabilities and
shareholders' equity............. $10,187,834 9,867,398 9,027,008
=========== ========= =========
1
BB&T FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
--------------------- ---------------------
1994 1993 1994 1993
---------- ---------- ---------- ----------
($ IN THOUSANDS, EXCEPT PER SHARE)
INTEREST INCOME
Interest on loans.................. $ 144,631 122,737 $ 406,747 353,423
Interest and dividends on securi-
ties:
Taxable.......................... 28,488 28,671 88,808 84,808
Tax exempt....................... 1,801 2,403 5,839 7,482
Interest on short-term investments. 624 505 1,998 1,222
---------- ---------- ---------- ----------
Total interest income.......... 175,544 154,316 503,392 446,935
---------- ---------- ---------- ----------
INTEREST EXPENSE
Interest on deposits............... 59,217 52,578 168,384 159,763
Interest on short-term borrowed
funds............................. 13,286 7,278 33,946 17,036
Interest on long-term debt......... 5,642 2,880 15,387 6,870
---------- ---------- ---------- ----------
Total interest expense......... 78,145 62,736 217,717 183,669
---------- ---------- ---------- ----------
NET INTEREST INCOME................ 97,399 91,580 285,675 263,266
Provision for loan losses.......... 750 4,363 5,250 14,769
---------- ---------- ---------- ----------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES................... 96,649 87,217 280,425 248,497
---------- ---------- ---------- ----------
NONINTEREST INCOME
Service charges on deposit ac-
counts............................ 11,279 10,662 33,445 29,504
Other service charges, commissions
and fees.......................... 5,725 4,559 15,928 13,242
Mortgage banking income............ 2,875 4,950 11,096 11,990
Gains on sales of securities....... 995 214 2,120 1,476
Trust income....................... 3,185 2,839 9,045 7,950
Insurance commissions.............. 3,124 2,767 9,425 7,383
Other operating income............. 6,344 4,680 16,340 14,528
---------- ---------- ---------- ----------
Total noninterest income....... 33,527 30,671 97,399 86,073
---------- ---------- ---------- ----------
NONINTEREST EXPENSE
Salaries and wages................. 32,056 31,414 96,844 87,372
Other personnel expense............ 8,495 6,806 25,487 21,102
Net occupancy expense.............. 5,932 5,765 17,622 16,186
Furniture and equipment expense.... 6,430 6,893 20,093 19,360
Deposit insurance premiums......... 4,156 3,794 12,588 11,301
Other operating expense............ 23,100 23,011 71,311 64,610
---------- ---------- ---------- ----------
Total noninterest expense...... 80,169 77,683 243,945 219,931
---------- ---------- ---------- ----------
INCOME BEFORE INCOME TAXES......... 50,007 40,205 133,879 114,639
Income taxes....................... 17,800 13,183 46,293 36,678
---------- ---------- ---------- ----------
NET INCOME......................... $ 32,207 27,022 $ 87,586 77,961
========== ========== ========== ==========
NET INCOME PER SHARE
Primary............................ $ .88 .74 $ 2.39 2.21
Fully diluted...................... .88 .74 2.39 2.17
========== ========== ========== ==========
AVERAGE NUMBER OF SHARES AND
EQUIVALENT SHARES
Primary............................ 36,771,045 36,454,962 36,627,132 35,280,533
Fully diluted...................... 36,771,045 36,461,966 36,627,132 36,042,790
========== ========== ========== ==========
2
BB&T FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
LOAN TO NET UNREALIZED
EMPLOYEE GAINS (LOSSES)
COMMON STOCK UNVESTED ON SECURITIES TOTAL
SHARES COMMON PAID-IN RETAINED OWNERSHIP RESTRICTED AVAILABLE SHAREHOLDERS'
OUTSTANDING STOCK CAPITAL EARNINGS PLAN STOCK FOR SALE EQUITY
----------- ------- ------- -------- --------- ---------- -------------- -------------
($ IN THOUSANDS, EXCEPT PER SHARE)
Balance, January 1,
1993................... 26,311,915 $65,780 187,671 310,395 (2,938) -- -- 560,908
Equity at January 1,
1993 of pooled
companies acquired in
1993 and 1994.......... 6,373,015 15,933 29,552 47,637 -- -- -- 93,122
---------- ------- ------- ------- ------ ------ ------- -------
Balance, January 1, 1993
as restated............ 32,684,930 81,713 217,223 358,032 (2,938) -- -- 654,030
Net income.............. -- -- -- 77,961 -- -- -- 77,961
Cash dividends paid
($.75 per share)....... -- -- -- (22,519) -- -- -- (22,519)
Common stock issued by
pooled companies prior
to merger.............. 92,769 231 873 -- -- -- -- 1,104
Cash dividends paid by
pooled companies prior
to merger.............. -- -- -- (2,914) -- -- -- (2,914)
Common stock issued:
Dividend reinvestment
plan.................. 189,328 473 5,614 -- -- -- -- 6,087
Employee benefit and
stock option plans.... 390,728 977 9,947 -- -- -- -- 10,924
Conversion of deben-
tures................. 1,916,084 4,790 28,521 -- -- -- -- 33,311
Acquisitions........... 829,344 2,074 21,035 -- -- -- -- 23,109
Offerings.............. 507,182 1,268 14,029 -- -- -- -- 15,297
Loan to employee stock
ownership plan......... -- -- -- -- (1,788) -- -- (1,788)
Redemption of common
stock.................. (676,000) (1,690) (20,801) -- -- -- -- (22,491)
---------- ------- ------- ------- ------ ------ ------- -------
Balance, September 30,
1993.................. 35,934,365 $89,836 276,441 410,560 (4,726) -- -- 772,111
========== ======= ======= ======= ====== ====== ======= =======
Balance, January 1,
1994................... 32,476,387 $81,191 266,822 401,953 (4,419) (2,035) -- 743,512
Equity at January 1,
1994 of pooled company
acquired in 1994....... 3,922,232 9,806 19,952 23,714 -- -- -- 53,472
---------- ------- ------- ------- ------ ------ ------- -------
Balance, January 1, 1994
as restated............ 36,398,619 90,997 286,774 425,667 (4,419) (2,035) -- 796,984
Adjustment of securities
available for sale to
fair value at January
1...................... -- -- -- -- -- -- 9,286 9,286
Net income.............. -- -- -- 87,586 -- -- -- 87,586
Cash dividends paid
($.83 per share)....... -- -- -- (27,920) -- -- -- (27,920)
Common stock issued by
pooled company prior to
merger................. 14,409 36 393 -- -- -- -- 429
Cash dividends paid by
pooled company prior to
merger................. -- -- -- (1,060) -- -- -- (1,060)
Common stock issued:
Dividend reinvestment
plan.................. 81,495 204 2,142 -- -- -- -- 2,346
Employee benefit and
stock option plans.... 396,149 990 9,610 -- -- -- -- 10,600
Acquisitions........... 73,842 185 (256) -- -- -- -- (71)
Unvested restricted
stock.................. -- -- -- -- -- 127 -- 127
Redemption of common
stock.................. (445,000) (1,113) (13,723) -- -- -- -- (14,836)
Change in net unrealized
gains (losses) on secu-
rities available for
sale................... -- -- -- -- -- -- (35,920) (35,920)
---------- ------- ------- ------- ------ ------ ------- -------
Balance, September 30,
1994.................. 36,519,514 $91,299 284,940 484,273 (4,419) (1,908) (26,634) 827,551
========== ======= ======= ======= ====== ====== ======= =======
3
BB&T FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED
SEPTEMBER 30,
--------------------
1994 1993
---------- --------
(THOUSANDS)
CASH FLOWS FROM OPERATING ACTIVITIES
Interest received........................................ $ 498,183 442,856
Noninterest income received.............................. 86,253 83,995
Interest paid............................................ (216,719) (189,032)
Noninterest expense paid................................. (225,255) (208,644)
Income taxes paid........................................ (76,883) (43,304)
---------- --------
Net cash provided by operating activities............ 65,579 85,871
---------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales of securities available for sale..... 466,500 166,397
Proceeds from maturities or calls of securities.......... 509,162 441,298
Purchase of securities................................... (1,002,694) (782,877)
Net decrease in loans.................................... (307,487) (453,800)
Proceeds from sales of premises and equipment............ 3,178 1,181
Purchases of property and equipment...................... (19,093) (35,127)
Proceeds from sales of foreclosed properties............. 9,428 20,392
Cash of companies acquired, net.......................... -- 42,591
Purchase of officers' life insurance policies............ -- (30,000)
Other.................................................... 949 (10,198)
---------- --------
Net cash used in investing activities................ (340,057) (640,143)
---------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in demand deposits, interest
checking and savings accounts........................... (104,300) 98,925
Net increase (decrease) in certificates of deposit and
other time deposits..................................... 34,563 (67,163)
Net increase in short-term borrowed funds................ 211,980 319,521
Net increase in long-term debt........................... 140,054 201,643
Proceeds from issuance of common stock................... 13,375 31,387
Redemption of common stock............................... (14,836) (22,491)
Dividends paid........................................... (28,980) (25,433)
---------- --------
Net cash provided by financing activities............ 251,856 536,389
---------- --------
Net decrease in cash and cash equivalents................ (22,622) (17,883)
Cash and cash equivalents on January 1................... 470,531 399,752
---------- --------
Cash and cash equivalents on September 30................ $ 447,909 381,869
========== ========
Supplemental Disclosure of Noncash Investing Activities
Common stock issued:
Purchased company...................................... $ -- 22,298
Employee benefit plans................................. -- 1,788
Conversion of debentures............................... -- 33,311
Loans transferred to foreclosed properties............... $ 10,522 11,694
========== ========
4
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BB&T FINANCIAL CORPORATION AND SUBSIDIARIES
NOTE 2. PENDING MERGERS
At September 30, 1994, BB&T had an agreement to merge with Commerce Bank of
Virginia Beach, Virginia. The merger of Commerce will be accounted for as a
pooling-of-interests and approximately 4,000,000 shares of BB&T common stock
will be issued for all of the outstanding stock of Commerce. At the end of
September, Commerce had total assets of approximately $700 million and
shareholders' equity of approximately $47 million.
On July 29, 1994, BB&T and Southern National Corporation (SNC) of Winston-
Salem, North Carolina entered a definitive agreement of merger providing for
the merger of the two companies. The merger will be accounted for as a pooling-
of-interests. To effect the merger, BB&T shareholders will receive 1.45 shares
of common stock of the surviving company for each outstanding share of BB&T
common stock and SNC shareholders will receive 1.00 shares for each outstanding
share of SNC common stock. At September 30, SNC had total assets of
approximately $8.5 billion and total shareholders' equity of approximately $609
million.
5
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
MANAGEMENT'S DISCUSSION AND ANALYSIS
The following discussion and analysis is intended to assist in understanding
BB&T's results of operations and changes in financial position for the nine
months and third quarter ended September 30, 1994. This discussion and analysis
should be read in conjunction with the consolidated financial statements and
supplemental financial data contained herein.
On June 30, 1994, BB&T acquired L.S.B. Bancshares, Inc. of South Carolina in
a transaction accounted for as a pooling-of-interests. Accordingly, the
financial information contained herein has been restated to include the
operations of L.S.B. for all periods presented.
OVERVIEW
Net income for the nine months ended September 30 totalled $87.6 million,
compared with $78.0 million in 1993, an increase of 12.3%. Fully diluted net
income per share for the period was $2.39, compared with $2.17 for 1993.
Consolidated net income for the third quarter totalled $32.2 million, $.88
per share, compared with $27.0 million, $.74 per share for the same quarter of
1993.
On an annualized basis, the return on average assets was 1.18% for the first
nine months of this year, compared with 1.23% for the same period of 1993. For
the third quarter, the ROA was 1.28%, compared with 1.20% in the same quarter
last year. The annualized returns on average shareholders' equity were 14.59%
for the first nine months of 1994 and 15.71% for the third quarter, compared
with 14.39% and 14.05%, respectively, in 1993.
NET INTEREST INCOME
Net interest income for the first nine months totalled $285.7 million. This
represented an increase of $22.4 million or 8.5% over the $263.3 million
recorded for the first nine months of 1993. For the quarter ended September 30,
net interest income increased $5.8 million or 6.4%.
After several years of declining market rates of interest, there was a
reversal of this trend late in 1993, and there have been significant increases
in interest rates over the four most recent quarters. As a result, BB&T has
experienced compression in its net interest spreads and net interest margins
and a lower rate of growth in net interest income.
The yield on average earning assets declined from 7.75% for the first nine
months of 1993 to 7.42% for the first three quarters of this year. There are
two primary reasons for the decline in yields on assets. First, while the prime
rate of interest and rates in general have increased in 1994, loans which were
added to the portfolios in the latter half of 1993 were priced at lower rates
than those which were rolling off. This was true for both consumer loans and
mortgage loans. Also, BB&T added a significant volume (increased average
balance of approximately $119 million for the first nine months) of variable
rate mortgages, which have lower rates of interest for the first year.
The second factor leading to the lower yield on assets was the rollover in
the portfolios of investment securities. The average life of the portfolios of
securities at BB&T is relatively short (BB&T generally invests in U.S. Treasury
obligations with maturities of 2-5 years). Securities with yields of 6-8%
matured in the second half of 1993 and were replaced with securities with
yields of 4-5%. As a result, the average taxable equivalent yield on investment
securities was 5.52% for the first nine months of this year, down from 6.51%
for the comparable period last year.
The average cost of interest-bearing liabilities of 3.58% for the first nine
months of this year was unchanged from last year. The average cost of all
categories of deposits was down in the first nine months of this year, with the
average cost of deposits declining to 3.42% from 3.60%. However, the average
cost of short-term borrowed funds increased from 2.97% to 3.84% in the first
nine months of this year, an increase of 87 basis points. The average balance
of short-term borrowed funds was $1.18 billion for the first nine months of
this year, compared with $766.7 million for the same period last year.
Moreover, although the
6
average cost of long-term debt was 31 basis points lower than for the first
nine months of last year, the average cost of 5.44% was greater than the
average cost of either deposits or short-term borrowed funds.
BB&T uses various hedging instruments to manage its net interest income. The
primary instruments used are interest rate swaps, collars, floors and ceilings.
The hedging activities contributed $2.6 million to net interest income for the
first nine months this year, compared with $14.6 million last year. (See "OFF-
BALANCE SHEET DERIVATIVES ACTIVITIES").
As a result of all of these factors, taxable equivalent net interest income
increased 8.1% for the first three quarters of 1994, while average earning
assets rose 17.3% and average interest-bearing liabilities were up 18.7%.
PROVISION AND ALLOWANCE FOR LOAN LOSSES
BB&T's subsidiaries maintain allowances for loan losses to absorb potential
future losses. Provisions for loan losses are charged against earnings to
maintain the allowances at appropriate levels.
The provision for loan losses for the first nine months of this year was $5.3
million and was approximately $9.5 million or 64.5% below the $14.8 million
recorded in the first nine months of 1993. A provision of $750,000 was recorded
in the third quarter, compared with a provision of $4.4 million in the three
months ended September 30, 1993. The reduced charges against earnings for
possible losses were made possible by improvement in asset quality and the
resultant lower level of actual charge-offs.
On an annualized basis, net charge-offs as a percent of average loans
outstanding were .06% for the first nine months of this year, compared with
.18% for the first nine months of last year. For the third quarter, the ratio
was .11% this year, compared with .25% in the year earlier quarter. At the end
of September, nonperforming assets (nonaccrual and restructured loans and
foreclosed property) totalled $28.4 million or .28% of total assets. This
compares with nonperforming assets of $45.8 million (.51% of total assets) on
September 30, 1993.
The allowance for loan losses of $95.3 million was 1.36% of loans outstanding
at the end of the quarter. This compares with an allowance of $89.8 million, or
1.46% of loans outstanding, a year earlier. The allowance was 5.80 times
nonperforming loans on September 30, up from 3.12 times nonperforming loans at
the end of the third quarter last year. In management's opinion, the allowance
for loan losses on September 30 was adequate.
NONINTEREST INCOME
Noninterest income for the first three quarters totalled $97.4 million, an
increase of 13.2% from last year. Major categories of noninterest income
include service charges on deposit accounts, mortgage banking income, trust
income, gains on sales of securities and insurance commissions. All categories
of noninterest income, other than mortgage banking income, reported increases
for the first nine months of this year.
Service charges on deposit accounts provide the largest amount of noninterest
income. Service charges on deposit accounts increased $3.9 million or 13.4% to
a total of $33.4 million for the first nine months of the year. For the third
quarter, the increase over the comparable quarter of 1993 was $617,000 or 5.8%.
The growth in service charges on deposit accounts was derived from increased
fee schedules and growth in the average balances of noninterest-bearing
deposits. Noninterest-bearing deposits including both personal and business
accounts, represent the largest sources of service charges and commercial
analysis fees. The average balance of noninterest-bearing demand deposits for
the first nine months was approximately $80.8 million or 10.9% above the level
of the first nine months of 1993.
BB&T has developed a significant mortgage banking business, in recent years,
with an emphasis on the origination and servicing of single family mortgages.
This emphasis has been heightened and expanded by the acquisition of 14 thrifts
during the period 1990-93. Income from mortgage banking activities totalled
$11.1 million for the first nine months of the year, compared to $12.0 million
for 1993. For the third quarter ended September 30, mortgage banking income
totalled $2.9 million, compared with $5.0 million a year ago. There was a heavy
volume of mortgage loan originations in 1993, as home mortgages were refinanced
to take
7
advantage of lower interest rates. As a result, BB&T recorded income from the
origination and sale of mortgage loans totalling $9.4 million in the first nine
months of 1993. The volume of originations has declined in 1994, although still
historically higher than those experienced before 1993. Because of the lower
volume of originations and less favorable interest rate movements, income from
the origination and sale of mortgage loans declined to $2.9 million in the
first nine months of this year. Mortgage loan servicing fees were approximately
$8 million for the first nine months of both 1994 and 1993. In 1993 large
amounts of loan repayments made it necessary for BB&T to accelerate the
amortization of its mortgage loan excess servicing asset. During the first nine
months of last year BB&T charged-off approximately $5.5 million of its excess
servicing asset.
Through its trust division, BB&T offers both corporate and personal trust
services. Trust revenues increased 13.8% for the first nine months of 1994 to a
total of $9.0 million. For the third quarter, trust revenues totalled $3.2
million, compared with $2.8 million in the quarter ended September 30, 1993.
Trust revenues also included approximately $815,000 in mutual fund management
fees for the first nine months of this year.
BB&T operates a statewide network of insurance agencies. Insurance
commissions for the first nine months totalled $9.4 million, an increase of
27.7% over the $7.4 million recorded in the first nine months of last year. The
third quarter, insurance revenues totalled $3.1 million, compared with $2.8
million in the third quarter last year. BB&T purchased four agencies in 1993
and added one additional agency in the first half of 1994. BB&T now operates 20
insurance offices in North Carolina.
BB&T has offered investment brokerage services to its customers for many
years. Beginning in 1992, BB&T began to expand its capabilities in investment
sales and, in the fourth quarter of 1993, organized BB&T Investment Services,
Inc. as a subsidiary of the North Carolina Bank. BB&T established a second
brokerage company, BB&T Investment Services of South Carolina, Inc. as a
subsidiary of its South Carolina bank in the third quarter. BB&T earned
approximately $2.4 million in brokerage fees in the first nine months of 1994,
compared with $1.2 million in the same period of 1993.
Other operating income totalled $16.3 million this year, compared with $14.5
million in last year's first nine months. The biggest component of other
operating income for the first nine months was $3.9 million in amortized
negative goodwill. In recent years BB&T recorded negative goodwill, (which
represents the excess of net assets acquired over cost) in the acquisition of
thrift institutions which had operated as mutual associations. Other operating
income this year also includes $1.2 million earned on life insurance policies
on officers' lives, compared with $1.1 million in the first three quarters last
year. In the third quarter of 1994, BB&T recorded a gain of approximately
$800,000 from the sale of bankcard accounts.
NONINTEREST EXPENSE
Noninterest expense for the first nine months of this year totalled $243.9
million, an increase of 10.9% over the $219.9 million recorded last year. For
the third quarter, noninterest expense increased 3.2% to a total of $80.2
million from $77.7 million in the corresponding quarter last year. Personnel
costs, including salaries, wages and fringe benefits represent the largest
component of noninterest expense. Personnel costs totalled $122.3 million for
the first nine months, an increase of $13.9 million or 12.8% over the $108.5
million in the first nine months of 1993. For the third quarter, personnel cost
increased 6.1% from $38.2 million in 1993 to $40.6 million this year. For the
first nine months of 1994, salaries and wages increased 10.8% while other
personnel expense rose 20.8%. Aside from compensation paid to employees, the
most significant change was an increase of $1.5 million or 81.8% in pension
plan expense. The cost of maintaining the pension plan was $3.4 million for the
first nine months of 1994.
The cost of maintaining facilities rose $2.2 million or 6.1% in the first
nine months of 1994. Net occupancy expense rose 8.9% to a total of $17.6
million, while furniture and equipment expense rose 3.8% to a total of $20.1
million. Over the past 18 months, BB&T added 43 branches in acquisitions
accounted for as purchases. BB&T also completed an addition to its operations
center in Wilson in the second quarter of this year. The addition doubled the
size of the operation facility. During the first half of this year BB&T
completed its loan platform automation project and upgraded and significantly
expanded the capabilities of
8
its teller automation network. BB&T has closed ten branches so far in 1994 and
at the end of September operated 280 branches in North and South Carolina.
Deposit insurance premiums paid to the FDIC represent a significant cost for
financial institutions. Because of its strong performance and financial
strength, BB&T pays the lowest rate for deposit insurance. Nevertheless,
deposit insurance premiums increased 11.4% to a total of $12.6 million in the
first nine months of this year, up from $11.3 million last year. The increase
was the result of growth in deposits, principally those added through
acquisition.
Other operating expense totalled $71.3 million in 1994, compared with $64.6
million in the nine months ended September 30, 1993. This represents an
increase of $6.7 million or 10.4%. The largest increase was $2.1 million in the
amortization of goodwill. BB&T recorded goodwill of approximately $28 million
in a purchase acquisition in the fourth quarter of 1993. Goodwill amortization
totalled $2.9 million for the first nine months. Other operating expense
includes items such as postage, telephone expense, advertising, professional
services, supplies, loans and lease expense, and deposit related expense,
including the cost of checks.
FINANCIAL POSITION
Growth has been relatively slow at BB&T over the past year. This has been
particularly true for the first three quarters of 1994. Between September 30,
1993 and September 30, 1994, total assets grew approximately $1.2 billion or
12.9%. Approximately $700 million of the growth during that 12 month period
resulted from the acquisition of thrifts accounted for as purchases. For the
twelve months ended September 30, 1994, loans increased $841 million or 13.7%,
while deposits rose $618 million or 9.0%.
While the growth has not been strong at BB&T, the balance sheet continues to
be financially solid with an emphasis on earnings capacity, good liquidity and
a strong capital position. Earning assets continue to represent approximately
92.6% of total assets. Investment securities, including both those available
for sale and those held to maturity, have remained steady at approximately 24%
of total assets, while loans represent approximately 69% of total assets.
BB&T continues to be very liquid, although short-term borrowed funds did
increase to $1.26 billion at the end of September, compared with $962 million a
year earlier. At the end of the quarter, short-term borrowed funds included
approximately $71 million of securities sold under agreements to repurchase and
$184 million of master notes of BB&T Corporation. Repos and master notes
represent core funding to BB&T in that substantially all the balances represent
investable funds of customers in the cash management program. The loan to
deposit ratio of BB&T did increase to 93.2% at the end of September, compared
with 89.3% twelve months earlier and 88.4% at the end of 1993. However, BB&T
considers its core funding to be deposits, securities sold under agreements to
repurchase, master notes and long-term debt. The ratio of loans to core funding
at the end of September was 84.8%, compared with 81.7% on September 30, 1993.
In addition to the liquidity provided by core funding, BB&T's portfolio of
approximately $2.4 billion in investment securities (which had an average
maturity of one year ten months at the end of September and are comprised
primarily of obligations of the U.S. Treasury and other investment grade
securities) is a source of liquidity. BB&T's strong credit ratings also provide
liquidity. Although federal funds purchased totalled $1.0 billion on September
30, BB&T had unused federal funds lines in excess of $3.5 billion at that time
and also unused lines of credit totalling $55 million. Finally, the retention
of earnings provides liquidity. BB&T has maintained a return on equity in the
range of 14-15% for several years and a dividend payout ratio of 30-35%. As a
result, BB&T has been able to maintain a rate of internal capital generation in
the range of 9-10%.
BB&T has maintained and enhanced its traditionally strong equity and capital
positions in recent years. The ratio of equity to assets at the end of
September was 8.12%, compared with 8.55% a year earlier. Equity has been
generated from acquisitions and the issuance of new shares, as well as the
retentional funds generated from operations.
Regulators use other ratios to measure the capital adequacy of financial
institutions. The principal measures are the risk-based capital ratios. BB&T
had a Tier 1 capital ratio of 12.21% and a total capital
9
ratio of 13.46% on September 30. These ratios compare with 12.80% and 14.77%,
respectively at the end of the third quarter last year. The minimum required
Tier 1 capital ratio is 4% and the required total capital ratio is 8%.
Regulators also use a leverage ratio to evaluate the capital adequacy of banks.
The leverage ratio measures the relationship of tangible equity to tangible
assets. The leverage ratio of BB&T was 8.16% on September 30 compared with
8.52% twelve months earlier. The required regulatory minimum is 3%.
OFF-BALANCE SHEET DERIVATIVES ACTIVITIES
BB&T uses hedging instruments to manage interest rate sensitivity and net
interest income. These instruments, commonly referred to as derivatives,
primarily consist of interest rate swaps, collars, floors and ceilings. BB&T
does not trade or deal in derivatives, but uses them only as part of its
asset/liability management strategy.
Derivative contracts are written in amounts referred to as notional amounts.
Notional amounts do not represent amounts to be exchanged between parties and
are not a measure of financial risk, but only provide the basis for calculating
interest payments between the counterparties. On September 30, 1994, BB&T had
outstanding derivative contracts with notional amounts totalling approximately
$2 billion.
The derivatives used at BB&T provide for the exchange of interest payments
between counterparties--either variable for fixed or fixed for variable. Thus,
the credit risk arises when amounts receivable from a counterparty exceed those
payable. The risk of loss with any counterparty is limited to a small fraction
of the notional amount. BB&T deals only with national market makers with strong
credit ratings in its derivative activities. BB&T further controls the risk of
loss by subjecting counterparties to credit reviews and approvals similar to
those used in making loans and other extensions of credit. All of the
derivative contracts to which BB&T is a party settle monthly, quarterly or
semiannually. Accordingly, the amount of on-balance sheet credit exposure to
which BB&T is exposed at any time is immaterial. Further, BB&T has netting
agreements with the dealers with which it does business. Because of the netting
agreements, BB&T had a minimal amount of off-balance sheet credit exposure at
September 30, 1994.
The fair value of derivatives contracts is equal to the difference between
the amounts to be received over the lives of the contracts and the amounts to
be paid. The estimated fair value of open derivative contracts used for
assets/liability management purposes at September 30, 1994, reflected a net
unrealized loss of $34.6 million, compared with a net unrealized gain of $16.4
million at the end of 1993. Increases in interest rates resulted in the
unrealized loss in 1994. The unrealized loss does not include the impact,
either favorable or unfavorable, on the values of assets and liabilities being
hedged.
PENDING MERGERS
On July 29, 1994, BB&T and Southern National Corporation (SNC) of Winston-
Salem, North Carolina agreed to merge the two companies. The merger will be
effected through the issuance of 1.45 shares of common stock of the surviving
corporation for each outstanding share of BB&T common stock and 1.00 shares of
common stock of the surviving corporation for each outstanding share of SNC
common stock. The merger will be accounted for as a pooling-of-interests. At
the end of September, SNC had total assets of approximately $8.5 billion and
total shareholders' equity of approximately $609 million. The combined
corporation will be named Southern National Corporation, while the combined
subsidiary banks will be named Branch Banking and Trust Company and operate
using the BB&T logo. The new corporation would become the 35th largest bank
holding company in the United States and the sixth largest bank holding company
in the Southeastern United States. Based on the FDIC Deposit Survey of June 30,
1993, (the latest date for which information is available), the combined bank
would have the largest deposit share in North Carolina and the third largest
deposit share in South Carolina.
On September 30, BB&T also had pending a merger with Commerce Bank of
Virginia Beach, Virginia, a $700 million commercial bank. BB&T will effect that
merger by issuing approximately 4,000,000 shares of its common stock for all of
the outstanding shares of Commerce.
10
TABLE 1
QUARTERLY EARNINGS SUMMARY
TWELVE MONTHS 1994 1993
ENDED ----------------------- ---------------
SEPTEMBER 30, THIRD SECOND FIRST FOURTH THIRD
1994 QUARTER QUARTER QUARTER QUARTER QUARTER
------------- ------- ------- ------- ------- -------
($ IN THOUSANDS, EXCEPT PER SHARE)
SUMMARY OF OPERATIONS
Interest income, taxable
equivalent.............. $676,726 179,327 171,125 164,244 162,030 158,153
Interest expense......... 282,410 78,145 72,353 67,219 64,693 62,735
-------- ------- ------- ------- ------- -------
Net interest income,
taxable equivalent...... 394,316 101,182 98,772 97,025 97,337 95,418
Taxable equivalent
adjustment.............. 15,118 3,783 3,779 3,742 3,814 3,837
-------- ------- ------- ------- ------- -------
Net interest income...... 379,198 97,399 94,993 93,283 93,523 91,581
Provision for loan
losses.................. 9,529 750 770 3,730 4,279 4,363
-------- ------- ------- ------- ------- -------
Net interest income after
provision for loan
losses.................. 369,669 96,649 94,223 89,553 89,244 87,218
Noninterest income:
Service charges on
deposit accounts...... 44,705 11,279 11,318 10,848 11,260 10,662
Commissions and fees... 61,585 15,299 15,768 16,128 14,390 12,818
Gains on sales of
securities............ 2,364 995 378 747 244 214
Other operating income. 22,199 5,954 3,352 5,333 7,560 6,977
Noninterest expense:
Personnel.............. 161,501 40,551 39,712 42,068 39,170 38,220
Premises and equipment. 51,513 12,362 12,707 12,646 13,798 12,658
Other.................. 112,574 27,256 29,705 26,938 28,675 26,805
-------- ------- ------- ------- ------- -------
Income before income
taxes................... 174,934 50,007 42,915 40,957 41,055 40,206
Income taxes............. 60,297 17,800 14,616 13,877 14,004 13,183
-------- ------- ------- ------- ------- -------
Net income........... $114,637 32,207 28,299 27,080 27,051 27,023
======== ======= ======= ======= ======= =======
PER SHARE DATA
Net income:
Primary................ $ 3.13 .88 .77 .74 .74 .74
Fully diluted.......... 3.13 .88 .77 .74 .74 .74
Cash dividends........... 1.10 .29 .27 .27 .27 .25
Book value............... 22.66 22.66 22.17 22.01 21.90 21.49
Closing market price..... 29.00 29.00 31.25 29.13 33.25 33.88
TABLE 2
PROFITABILITY MEASURES
1994 1993
----------------------- ---------------
THIRD SECOND FIRST FOURTH THIRD
QUARTER QUARTER QUARTER QUARTER QUARTER
------- ------- ------- ------- -------
Return on average assets................ 1.28% 1.15 1.12 1.14 1.20
Return on average equity................ 15.71 14.28 13.76 13.69 14.05
Net interest margin..................... 4.29 4.28 4.27 4.38 4.53
Yield to break even..................... 2.01 2.26 2.30 2.36 2.44
11
TABLE 3
COMPOSITION OF LOAN PORTFOLIO
SEPTEMBER 30, DECEMBER 31,
--------------------- ------------
1994 1993 1993
----------- --------- ------------
(THOUSANDS)
Commercial real estate--nonowner occupied... $ 806,543 822,935 855,049
Residential real estate--construction,
acquisition and development................ 519,868 388,928 403,923
Commercial real estate--owner occupied...... 1,053,904 873,966 910,602
Residential real estate--permanent.......... 2,029,411 1,871,123 2,238,588
Commercial.................................. 1,154,726 976,477 985,324
Consumer.................................... 708,040 595,735 663,641
Home equity lines........................... 453,392 406,407 408,801
Credit card and related plans............... 143,692 133,922 144,319
Other....................................... 120,598 84,058 87,633
----------- --------- ---------
$ 6,990,174 6,153,551 6,697,880
=========== ========= =========
TABLE 4
REAL ESTATE LOANS--RISK CATEGORIES--SEPTEMBER 30, 1994
NONPERFORMING LOANS
----------------------
ACQUISITION
AND % OF
PERMANENT CONSTRUCTION DEVELOPMENT TOTAL AMOUNT LOAN TYPE
--------- ------------ ----------- ---------- ---------- -----------
(THOUSANDS)
COMMERCIAL--NONOWNER OCCUPIED:
Multi-family................ $ 314,717 30,332 14,196 359,245 460 .13%
Hotels/motels............... 94,243 5,879 -- 100,122 -- --
Shopping centers/malls...... 83,499 5,106 14,978 103,583 -- --
Office buildings............ 90,063 7,046 8,521 105,630 50 .05
Warehouse/distribution/light
industrial................. 57,390 7,273 13,417 78,080 430 .55
Acquisition only............ -- -- 59,883 59,883 2,750 4.59
--------- ------- ------- ---------- ----------
Total commercial--nonowner
occupied................. 639,912 55,636 110,995 806,543 3,690 .46
--------- ------- ------- ---------- ----------
RESIDENTIAL--CONSTRUCTION,
ACQUISITION, AND DEVELOPMENT. -- 146,474 238,040 384,514 1,339 .35
--------- ------- ------- ---------- ----------
Total real estate......... $ 639,912 202,110 349,035 1,191,057 5,029 .42%
========= ======= ======= ========== ========== ========
TOTAL LOANS................... $6,990,174 16,440 .24%
TOTAL REAL ESTATE/TOTAL LOANS. 17.04% 30.59
12
TABLE 5
ANALYSIS OF ALLOWANCE FOR LOAN LOSSES
THREE MONTHS ENDED NINE MONTHS ENDED YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31,
------------------------------------- ------------
1994 1993 1994 1993 1993
--------- ----------------- -------- ------------
(THOUSANDS)
Balance, beginning of peri-
od......................... $ 96,524 89,128 93,315 77,889 77,889
Provision for loan losses... 750 4,363 5,250 14,769 19,048
Allowances of purchased com-
panies..................... -- 174 -- 4,699 10,560
--------- -------- -------- -------- -------
97,274 93,665 98,565 97,357 107,497
Loans charged off........... 2,967 5,491 8,496 11,683 20,187
Recoveries.................. 1,037 1,609 5,275 4,109 6,005
--------- -------- -------- -------- -------
Net loans charged off....... 1,930 3,882 3,221 7,574 14,182
--------- -------- -------- -------- -------
Balance, end of period...... $ 95,344 89,783 95,344 89,783 93,315
========= ======== ======== ======== =======
Net charge-offs (annualized)
to average loans
outstanding................ .11% .25 .06 .18 .24
Allowance for loan losses to
loans outstanding at end of
period..................... 1.36 1.46 1.36 1.46 1.40
Allowance for loan losses to
nonperforming loans........ 5.80x 3.12 5.80 3.12 2.76
TABLE 6
NONPERFORMING ASSETS AND PAST DUE LOANS
SEPTEMBER 30, DECEMBER 31,
-------------- ------------
1994 1993 1993
------- ------ ------------
(THOUSANDS)
Nonaccrual loans.................................... $15,966 27,402 32,447
Restructured loans.................................. 474 1,420 1,303
Foreclosed property................................. 11,991 16,987 14,074
------- ------ ------
Total nonperforming assets........................ $28,431 45,809 47,824
======= ====== ======
Total nonperforming assets to:
Loans and foreclosed property..................... .41 .74 .71
Total assets...................................... .28 .51 .48
======= ====== ======
Accruing loans past due 90 days..................... $25,371 20,476 19,222
======= ====== ======
13
TABLE 7
AVERAGE BALANCE SHEETS
THREE MONTHS ENDED SEPTEMBER 30,
---------------------------------------------------------------
1994 1993
------------------------------- -------------------------------
AVERAGE INCOME/ AVERAGE AVERAGE INCOME/ AVERAGE
BALANCE EXPENSE YIELD/RATE BALANCE EXPENSE YIELD/RATE
---------- -------- ---------- ---------- -------- ----------
(THOUSANDS)
ASSETS
Loans................... $6,817,221 145,213 8.45% $6,072,508 123,328 8.06%
Securities:
U. S. Government and
other................. 2,370,996 30,590 5.12 2,070,461 30,490 5.84
State and municipal.... 119,738 2,900 9.61 143,864 3,830 10.56
Total securities....... 2,490,734 33,490 5.33 2,214,325 34,320 6.15
Interest-bearing bank
balances............... 27,669 314 4.50 44,123 373 3.35
Federal funds sold...... 26,946 310 4.56 21,810 132 2.40
---------- -------- ---------- --------
Total earning assets... 9,362,570 179,327 7.60 8,352,766 158,153 7.51
---------- -------- ---------- --------
Allowance for loan loss-
es..................... (96,330) (90,453)
Net unrealized (losses)
on securities available
for sale............... (22,518) --
Cash and due from banks,
noninterest-bearing.... 326,060 294,765
Bank premises and equip-
ment................... 149,512 127,284
Other assets............ 260,657 213,616
---------- ----------
Total assets........... $9,979,951 $8,897,978
========== ==========
LIABILITIES AND
SHAREHOLDERS' EQUITY
Interest-bearing depos-
its:
Savings................ $ 845,883 5,162 2.42% $ 619,755 4,474 2.86%
Interest checking...... 1,133,949 5,929 2.07 970,778 5,297 2.16
Money rate savings..... 726,328 4,938 2.70 811,672 4,873 2.38
Certificates of deposit
and other time
deposits.............. 3,903,844 43,188 4.39 3,635,190 37,934 4.14
---------- -------- ---------- --------
Total interest-bearing
deposits.............. 6,610,004 59,217 3.55 6,037,395 52,578 3.46
Short-term borrowed
funds.................. 1,193,981 13,286 4.41 960,391 7,278 3.01
Long-term debt.......... 390,388 5,642 5.73 224,572 2,880 5.09
---------- -------- ---------- --------
Total interest-bearing
liabilities........... 8,194,373 78,145 3.78 7,222,358 62,736 3.45
---------- -------- ---------- --------
Demand deposits, nonin-
terest-bearing......... 837,928 790,815
Other liabilities....... 134,085 121,575
Shareholders' equity.... 813,565 763,230
---------- ----------
Total liabilities and
shareholders' equity.. $9,979,951 $8,897,978
========== ==========
Interest income and rate
earned................. $179,327 7.60% $158,153 7.51%
Interest expense and
rate paid.............. 78,145 3.78 62,736 3.45
Interest rate spread.... 3.82 4.06
NET INTEREST INCOME AND
NET YIELD ON AVERAGE
INTEREST-EARNING AS-
SETS................... $101,182 4.29% $ 95,417 4.53%
======== ========
14
NINE MONTHS ENDED SEPTEMBER 30,
------------------------------------------------------------------------------------
1994 1993
--------------------------------------- -----------------------------------------
AVERAGE INCOME/ AVERAGE AVERAGE INCOME/ AVERAGE
BALANCE EXPENSE YIELD/RATE BALANCE EXPENSE YIELD/RATE
---------- -------- ---------- ---------- -------- ----------
(THOUSANDS)
$6,682,313 408,503 8.17% $5,758,776 355,285 8.25%
2,397,922 94,859 5.29 1,946,186 90,099 6.19
127,366 9,336 9.80 148,764 11,893 10.69
2,525,288 104,195 5.52 2,094,950 101,992 6.51
42,015 1,181 3.76 29,418 743 3.38
28,671 817 3.81 26,476 479 2.42
---------- -------- ---------- --------
9,278,287 514,696 7.42 7,909,620 458,499 7.75
---------- -------- ---------- --------
(96,561) (86,828)
(11,534) --
321,747 293,049
149,402 117,423
250,224 207,491
---------- ----------
$9,891,565 $8,440,755
========== ==========
$ 864,683 16,237 2.51% $ 570,347 12,197 2.86%
1,105,707 16,892 2.04 925,203 15,000 2.17
765,566 14,352 2.51 812,104 15,373 2.53
3,846,505 120,903 4.20 3,623,479 117,193 4.32
---------- -------- ---------- --------
6,582,461 168,384 3.42 5,931,133 159,763 3.60
1,181,175 33,946 3.84 766,744 17,036 2.97
378,192 15,387 5.44 159,865 6,870 5.75
---------- -------- ---------- --------
8,141,828 217,717 3.58 6,857,742 183,669 3.58
---------- -------- ---------- --------
821,624 740,836
125,729 117,954
802,384 724,223
---------- ----------
$9,891,565 $8,440,755
========== ==========
$514,696 7.42% $458,499 7.75%
217,717 3.58 183,669 3.58
3.84 4.17
$296,979 4.28% $274,830 4.65%
======== ========
15
TABLE 8
NONINTEREST INCOME AND EXPENSE
THREE MONTHS ENDED SEPTEMBER 30 NINE MONTHS ENDED SEPTEMBER 30
------------------------------------------ --------------------------------------------
PERCENT OF PERCENT OF
PERCENT AVERAGE ASSETS PERCENT AVERAGE ASSETS
INCREASE --------------- INCREASE ---------------
1994 1993 (DECREASE) 1994 1993 1994 1993 (DECREASE) 1994 1993
------- ------ ---------- ------- ------- -------- ------- ---------- ------- -------
(THOUSANDS)
NONINTEREST INCOME
Service charges on de-
posit accounts......... $11,279 10,662 5.8% .45 .48 33,445 29,504 13.4% .45 .47
Other service charges,
commissions and fees... 5,725 4,559 25.6 .23 .20 15,928 13,242 20.3 .22 .21
Mortgage banking income. 2,875 4,950 (41.9) .11 .22 11,096 11,990 (7.5) .15 .19
Gains on sales of secu-
rities................. 995 214 365.0 .04 .01 2,120 1,476 43.6 .03 .02
Trust income............ 3,185 2,839 12.2 .13 .13 9,045 7,950 13.8 .12 .13
Insurance commissions... 3,124 2,767 12.9 .12 .12 9,425 7,383 27.7 .13 .12
Other operating income.. 6,344 4,680 35.6 .25 .21 16,340 14,528 12.5 .22 .22
------- ------ ----- ------- ------- -------- ------- ---- ------- -------
$33,527 30,671 9.3% 1.33 1.37 $ 97,399 86,073 13.2% 1.32 1.36
======= ====== ===== ======= ======= ======== ======= ==== ======= =======
NONINTEREST EXPENSE
Salaries and wages...... $32,056 31,414 2.0% 1.26 1.40 $ 96,844 87,372 10.8% 1.31 1.38
Other personnel expense. 8,495 6,806 24.8 .34 .30 25,487 21,102 20.8 .34 .33
Net occupancy expense... 5,932 5,765 2.9 .24 .26 17,622 16,186 8.9 .24 .26
Furniture and equipment
expense................ 6,430 6,893 (6.7) .26 .30 20,093 19,360 3.8 .27 .31
Deposit insurance premi-
ums.................... 4,156 3,794 9.5 .17 .17 12,588 11,301 11.4 .17 .18
Other operating expense. 23,100 23,011 .4 .92 1.03 71,311 64,610 10.4 .97 1.02
------- ------ ----- ------- ------- -------- ------- ---- ------- -------
$80,169 77,683 3.2% 3.19 3.46 $243,945 219,931 10.9% 3.30 3.48
======= ====== ===== ======= ======= ======== ======= ==== ======= =======
EFFICIENCY RATIO........ 59.95% 61.71 62.19% 61.19
======= ====== ======== =======
TABLE 9
SELECTED RATIOS
1994 1993
------------------------ ---------------
THIRD SECOND FIRST FOURTH THIRD
QUARTER QUARTER QUARTER QUARTER QUARTER
------- ------- ------- ------- -------
CAPITAL ADEQUACY
Average equity to average assets....... 8.15% 8.06 8.13 8.33 8.58
Equity to assets at period end......... 8.12 8.14 7.99 8.08 8.55
Risk-based capital ratios:
Tier 1 capital....................... 12.21 12.26 12.11 11.94 12.80
Total capital........................ 13.46 13.52 13.41 13.73 14.77
Tier 1 leverage ratio.................. 8.16 7.96 7.79 8.05 8.52
LIQUIDITY
Average loans to:
Average deposits..................... 91.53% 89.97 89.21 89.44 88.93
Average deposits and short-term
borrowed funds...................... 78.89 77.35 77.24 78.13 77.97
STOCK PERFORMANCE
Market price (period end).............. $29.00 31.25 29.13 33.25 33.88
Price/earnings ratio (based on quarter
end stock price and trailing 12 months
fully diluted earnings per share)..... 9.27x 10.45 9.87 11.43 12.74
Price/book ratio (period end).......... 1.28 1.41 1.32 1.52 1.58
16
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THE
REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED THEREUNTO DULY AUTHORIZED.
BB&T Financial Corporation
(Registrant)
/s/ Scott E. Reed
By: _________________________________
Scott E. Reed
Senior Executive Vice President
and Chief Financial Officer
Date: November 14, 1994
18
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
EXHIBIT INDEX
Exhibit No. Description of Exhibit Reference
- - - --------------------------------------------------------------------------------
(2)(a) Agreement and Plan of Reorganization dated
June 24, 1994 and Amendment I to the
Agreement and Plan of Reorganization dated
August 25, 1994 between Commerce Bank
and Registrant Exhibit (99.8)/1/
(4)(a) Definitive Form of Certificate for common
stock, $2.50 par value, of Registrant Exhibit "B"/2/
(10)(a) Form of Branch Banking and Trust Company
Long Term Incentive Plan Exhibit (19)/3/
(10)(b) Form of Branch Banking and Trust Company
Executive Incentive Compensation Plan Exhibit (10)(b)/4/
(10)(c) Form of BB&T Financial Corporation
Non-Employee Director Stock Option Plan Exhibit (10)(c)/5/
(11) Statement re Computation of Per Share
Earnings Filed Herewith
(1) Incorporated by reference to the identified exhibit under Registrant's
Form S-4, File No. 33-55313, filed August 31, 1994.
(2) Incorporated by reference to the identified exhibit under Registrant's Form
10-Q, File No. 2-50199, filed October 14, 1979.
(3) Incorporated by reference to the identified exhibit under Registrant's Form
10-Q, File No. 0-7871, filed May 14, 1991.
(4) Incorporated by reference to the identified exhibit under Registrant's Form
10-K, File No. 0-7871, filed February 22, 1985.
(5) Incorporated by reference to the identified exhibit under Registrant's Form
10-K, File No. 0-7871, filed March 16, 1992.
II-1
(b). Reports on Form 8-K
On August 2, 1994, the Registrant filed Form 8-K announcing the signing of
a definitive agreement of merger between the Registrant and Southern National
Corporation of Winston-Salem, North Carolina.
On August 31, 1994, the Registrant filed Form 8-K restating the 10-K to
include L.S.B. Bancshares, Inc.
II-2