EXHIBIT 8.4
(LETTERHEAD OF PEAT MARWICK APPEARS HERE)
January 3, 1994
Board of Directors
Home Savings Bank of Albemarle, S.S.B.
155 West South Street
Albemarle, North Carolina 28002
Board of Directors
BB&T Financial Corporation
223 West Nash Street
Wilson, North Carolina 27893
Gentlemen:
You have requested our opinion as to the federal and North Carolina income tax
consequences resulting from a plan pursuant to which there will be offered
shares of newly issued common stock of BB&T Financial Corporation ("BB&T
Financial") in simultaneous subscription and community offerings (the
"Offerings"). Under the plan, Home Savings Bank of Albemarle, S.S.B.,
Albemarle, North Carolina ("Home Savings") will convert from a North
Carolina-chartered mutual savings bank to a North Carolina-chartered stock
savings bank (the "Conversion") and will concurrently become a wholly-owned
subsidiary of BB&T Financial (the "Acquisition"). The Conversion and the
Acquisition will be referred to herein as the Conversion/Acquisition. After
the Conversion/Acquisition, and after any interim steps as may be necessary or
advisable, Home Savings will be merged or otherwise combined with and into
Branch Banking and Trust Company ("BB&T-NC"), a North Carolina chartered
commercial bank and a wholly-owned subsidiary of BB&T Financial (the "Bank
Merger").
You have submitted for our consideration certain representations as to the
proposed transaction and copies of the Plan of Conversion (the "Plan"), the
Agreement and Plan of Reorganization, dated as of May 27, 1993, (the
"Reorganization Agreement"), the Form S-3 Registration Statement filed with the
Securities and Exchange Commission ("SEC") on July 9, 1993, Pre-Effective
Amendment No. 1 to the Form S-3, as filed with the SEC on August 9, 1993, Post-
Effective Amendment No. 1 to the Form S-3, as filed with the SEC on October 29,
1993 and Post-Effective Amendment No. 2 to the Form S-3 to be filed with the SEC
on or about January 5, 1994. Our opinion is based on a review of the
information above and certain assumptions of fact. It is also based on existing
tax law and authorities that are subject to change. We have not reviewed the
legal documents necessary to effectuate the steps to be undertaken and we assume
that all steps will be effectuated under state and federal law and will be
consistent with the legal documentation and with the list of steps submitted to
us.
(LOGO OF PEAT MARWICK APPEARS HERE)
Board of Directors
January 3, 1994
Page 2
Facts
BB&T Financial, a North Carolina corporation, is a registered bank holding
company under federal and North Carolina law, a registered savings institution
holding company under North Carolina law and the parent holding company of
BB&T-NC, and through BB&T Financial Corporation of South Carolina (which is
wholly owned by BB&T Financial), Branch Banking and Trust Company of South
Carolina ("BB&T-SC"). BB&T Financial has authorized two classes of capital
stock, consisting of common and nonvoting preferred. Common stockholders are
entitled to one vote for each share of stock held.
Home Savings is a North Carolina-chartered mutual savings bank. As a mutual
savings bank, Home Savings has no authorized capital stock. Instead, the
residual proprietary interest in Home Savings' reserves and undivided profits
belong to all of its depositors. Each depositor is entitled to interest on his
or her account balance that is declared and paid by Home Savings. In addition,
each depositor has an intangible ownership interest in the net proceeds on
liquidation of the institution equal to the proportion that his or her deposit
balance bears to the aggregate deposit balances of all depositors. However,
liquidation of the institution requires approval by the Administrator of the
North Carolina Savings Institutions Division (the "NC Administrator"). Voting
rights in Home Savings are held by the depositors and by certain borrowers on
outstanding loans. All voting and ownership interests of a depositor cease when
he or she closes his or her account(s) with Home Savings.
The Conversion/Acquisition will enable Home Savings to offer a wider range of
services and products to its existing customers and market area due to the
stronger financial and managerial resources of BB&T Financial. BB&T Financial
will be acquiring all of the capital stock of Home Savings and the combined
resources of Home Savings and BB&T Financial will enable BB&T Financial to
maintain and expand the business of Home Savings.
In the Conversion/Acquisition, Home Savings will convert from a North
Carolina-chartered mutual savings bank to a North Carolina-chartered stock
savings bank and simultaneously become a wholly-owned subsidiary of BB&T
Financial. After the Conversion/Acquisition, and after any interim steps as may
be necessary or advisable, Home Savings will be merged or otherwise combined
with and into BB&T-NC in the Bank Merger.
In accordance with the NC Administrator's regulations regarding conversions,
upon completion of the Conversion/Acquisition, a liquidation account will be
established by Home Savings for the
(LOGO OF KPMG PEAT MARWICK APPEARS HERE)
Board of Directors
January 3, 1994
Page 3
benefit of the depositors who held accounts in Home Savings at January 31, 1993
in an amount equal to the net worth of Home Savings as shown on its statement of
financial condition as of September 30, 1993. Each depositor would be entitled
to his or her pro rata interest in the liquidation account in the event of a
complete liquidation of Home Savings following the Conversion/Acquisition. Each
depositor would have an initial interest in such liquidation account for each
deposit account held at Home Savings on January 31, 1993. A depositor's
interest as to the liquidation account will be in the same proportion to the
total liquidation account as the balance of his or her deposit account was to
the balance in all deposit accounts held by depositors of Home Savings as of
the eligibility record date (January 31, 1993). However, if the amount in the
deposit account on any subsequent measurement date is less than the amount in
such account on the eligibility record date, or the amount in such account on
any previous measurement date, then such depositor's interest in the
liquidation account would be reduced from time to time by an amount
proportionate to any such reduction and his or her interest would cease to
exist if such deposit account were closed. The interest in the liquidation
account would never be increased despite any subsequent increase in the related
deposit account after the Conversion/Acquisition.
Pursuant to the Plan, shares of BB&T Financial Common Stock (the "Conversion
Stock") are being offered through nontransferable subscription rights granted
first to an employee stock ownership plan and trust established for the benefit
of employees of Home Savings (the "Home Savings ESOP") and then to holders of
qualifying deposit accounts of Home Savings as of the eligibility record date
("Eligible Member Subscribers") and to certain other members of Home Savings
who are eligible to vote on the Plan ("Voting Members"), in a subscription
offering (the "Subscription Offering"). Shares offered but not sold in the
Subscription Offering are being offered simultaneously to residents of Stanly,
Anson, Cabarrus, Davidson, Montgomery, Rowan, Mecklenburg and Union counties,
North Carolina in a community offering (the "Community Offering").
The number of shares of Conversion Stock to be offered will be determined based
upon an independent appraisal of the pro forma market value of Home Savings and
the price of the Conversion Stock. The price of the Conversion Stock will be
equal to a percentage (85% in the case of Eligible Member Subscribers
participating in the Subscription Offering that consent to a four month holding
period restriction, subject to certain purchase limitations, 95% in the case of
Eligible Member Subscribers participating in the Subscription Offering that do
not consent to a four month holding period restriction, 95% in the case of
participants in the Community
(LOGO OF PEAT MARWICK APPEARS HERE)
Board of Directors
January 3, 1994
Page 4
Offering, 85% or 95% in the case of the Home Savings ESOP and 100% in the case
of Voting Members) of the last sale price of the common stock of BB&T Financial
as reported on the NASDAQ National Market System (trading symbol "BBTF") on the
Community Expiration Date, as defined in the Plan, rounded to the nearest cent,
with any amount equal to $.0050 rounded to the next higher $.01.
In exchange for all of the net proceeds from the sale of the Conversion Stock,
BB&T Financial will be issued all of the capital stock of Home Savings.
Irrespective of the amount of Conversion Stock sold in the Subscription and
Community Offerings, BB&T Financial will invest cash or other qualified assets
in Home Savings equal to the appraised value of Home Savings less the expenses
of the Conversion/Acquisition, but in no event less than the current net worth
of Home Savings. BB&T Financial does not anticipate selling any shares that are
not sold in the Offerings, in a public offering or otherwise pursuant to the
Plan. The Conversion/Acquisition is subject to the receipt of regulatory
approval from appropriate parties, including the NC Administrator and the Board
of Governors of the Federal Reserve System.
In connection with the Conversion/Acquisition, the Eligible Member Subscribers
of Home Savings will receive a one-time bonus interest payment ("Bonus
Interest") in an amount equal to two (2.00) additional percentage point of the
balance in each deposit account on January 31, 1993. The Bonus Interest will
be paid to depositors within thirty days of the closing of the
Conversion/Acquisition (the "Closing Date").
Immediately after the Conversion/Acquisition, BB&T Financial has agreed to grant
to the directors and certain officers of Home Savings shares of restricted stock
of BB&T Financial in a manner designed to encourage such individuals to remain
with BB&T Financial following the Conversion/Acquisition.
The shares of restricted stock vest in equal increments over a five year period
beginning on the first anniversary of the date of grant, subject to acceleration
with 100% vesting at the individual's earlier retirement from the director or
officer position due to health reasons, death or disability, and also subject
to approval by the BB&T Compensation Committee that vesting be accelerated in
the event of termination of employment by BB&T Financial other than for cause.
In addition, BB&T Financial will pay cash bonuses to the individuals receiving
awards of restricted stock to compensate those individuals for a portion of the
tax liability associated with the awards granted. The cash bonus would equal
53.9% of the market price of the restricted stock awarded at the date of grant,
payable as the tax
(LOGO OF PEAT MARWICK APPEARS HERE)
Board of Directors
January 3, 1994
Page 5
liability is incurred. If the individual elects not to incur all of the tax
liability in the year the restricted stock is awarded, 20% of the cash bonus
will be paid in each year as the stock vests. The grants of restricted stock
and related cash awards are referred to herein as the "Restricted Stock Plan."
In addition to the foregoing statement of facts, the following representations
have been made:
(a) The fair market value of the deposits in the stock savings bank plus
interests in the liquidation account and subscription rights to
acquire BB&T Financial stock to be received in the Conversion will be
approximately equal to the fair market value of the deposits and
proprietary interests in the mutual savings bank surrendered in the
Conversion.
(b) There is no plan or intention for the depositors of Home Savings to
sell, exchange or otherwise dispose of any of the deposits received in
the Conversion.
(c) Immediately following the Conversion, the depositors of Home Savings on
the eligibility record date will own all of the outstanding interests
in the liquidation account, and will own such interests solely by
reason of their ownership of deposits at the mutual savings bank
(including the rights to liquidation proceeds). As a matter of law,
additional interests in the liquidation account may not be issued
following the Conversion.
(d) Immediately following the Conversion/Acquisition, Home Savings will
possess the same assets and liabilities that it held immediately prior
to the transaction, except for the addition of cash paid by BB&T
Financial for the shares of Home Savings issued in the
Conversion/Acquisition.
(e) Except for Home Savings' agreement to sell all of its stock to BB&T
Financial in the Conversion/Acquisition, at the time of the
Conversion/Acquisition, Home Savings will not have outstanding any
warrants, options, convertible securities, or any other type of right
pursuant to which any person could acquire stock in Home Savings.
(f) Home Savings has no plan or intention to reacquire any of the stock
issued to BB&T Financial in the Acquisition.
(g) Except for the Bank Merger, Home Savings has no plan or intention to
sell or otherwise dispose of any of the assets of
Board of Directors
January 3, 1994
Page 6
the mutual savings bank, except in the ordinary course of business.
(h) The liabilities to be assumed by the stock savings bank, plus the
liabilities, if any, to which the transferred assets are subject, were
incurred by Home Savings in the ordinary course of its business and are
associated with the assets transferred.
(i) Immediately following the Conversion/Acquisition, BB&T Financial will
continue the historic business of Home Savings or will use a significant
portion of Home Savings' historic business assets in a business.
(j) The depositors of Home Savings will pay their expenses, if any,
incurred in connection with the Conversion.
(k) Home Savings is not under the jurisdiction of a court in a Title 11 or
similar case within the meaning of Section 368(a) (3) (A) of the Internal
Revenue Code.
(l) No depositor of Home Savings who is eligible to receive an interest
in the liquidation account will be excluded from participating in the
liquidation account.
(m) BB&T Financial will pay all of the expenses of the Conversion/
Acquisition, except for expenses of the depositors of Home Savings.
(n) BB&T Financial has no plan or intention to redeem or otherwise
acquire any of the Conversion Stock to be issued pursuant to the
Conversion/Acquisition.
(o) At the time of the Conversion, the fair market value of the assets
of the mutual savings bank (on a going-concern basis) to be transferred
to the stock savings bank will equal or exceed the liabilities to be
assumed by the stock savings bank plus the liabilities to which such
assets are subject. Immediately prior to the Conversion, Home Savings
will have a positive net worth.
(p) None of the shares of the Conversion Stock to be issued to or
purchased by depositors who are also employees of Home Savings will be
issued or acquired at a discount from the price offered to any other
depositor or as compensation. Compensation to be paid to depositors who
are also employees of Home Savings will be commensurate with amounts paid
to third parties bargaining at arm's length for similar services.
Board of Directors
January 3, 1994
Page 7
(q) Except for the Bank Merger, BB&T Financial has no plan or intention to
sell or otherwise dispose of the stock of Home Savings received by it in
the Conversion/Acquisition and there is no plan or intention for Home
Savings to liquidate or merge into another corporation following the
Conversion/Acquisition.
(r) BB&T Financial and Home Savings are corporations within the meaning of
Section 7701(a)(3) of the Code.
(s) No cash or property will be given to depositors of Home Savings or
others in lieu of non-transferable subscription rights or an interest in
the liquidation account of Home Savings.
Opinion
FEDERAL INCOME TAX CONSEQUENCES
- -------------------------------
Based solely on the above facts and representations, it is our opinion that:
(1) The proposed conversion of Home Savings from a North Carolina-chartered
mutual savings bank to a North Carolina-chartered stock savings bank will
constitute a reorganization within the meaning of Section 368(a) of the
Code, and no gain or loss will be recognized by Home Savings as a result
of the Conversion. Rev. Rul. 80-105, 1980-1 C.B. 78. The mutual savings
bank and the stock savings bank will each be a "party to the
reorganization" within the meaning of Section 368(b) of the Code.
(2) No gain or loss will be recognized by Home Savings upon the receipt of
money from BB&T Financial in exchange for shares of common stock of Home
Savings. In addition, no gain or loss will be recognized by BB&T Financial
upon the receipt of money in exchange for its common stock. Section
1032(a).
(3) Home Savings will not recognize any gain or loss with respect to its assets
as a result of the Conversion; the basis of Home Savings in its assets will
not change as a result of the Conversion and the holding period of the
assets will include the period during which such assets were held by Home
Savings prior to the Conversion.
Board of Directors
January 3, 1994
Page 8
(4) No gain or loss will be recognized by a depositor of Home Savings upon the
deemed issuance to him or her of deposit accounts in the stock savings
bank in exchange for, and in the same amount as, his or her deposit
accounts in the mutual savings bank.
(5) Gain, if any, will be recognized by an Eligible Member Subscriber upon
the exchange of his or her membership interest in the mutual savings
bank for subscription rights and an interest in the liquidation account.
Any gain resulting therefrom will be recognized, but only in an amount
not in excess of the fair market value of the subscription rights and the
interests in the liquidation account. However, the interests in the
liquidation account will have nominal, if any, fair market value.
Section 1001; Paulsen v. Commissioner, 469 U.S. 131 (1985).
------- ------------
(6) A Voting Member will be in receipt of taxable income upon the receipt of
nontransferable subscription rights to the extent of the fair market
value, if any, of the subscription rights received.
(7) A depositor will be in receipt of taxable income in the amount of the
Bonus Interest paid to the depositor, at the time such amount is paid or
made available.
(8) A depositor's basis in his or her deposit accounts will not change as a
result of the Conversion. An Eligible Member Subscriber will have a basis
of zero in his or her interest in the liquidation account, increased by
the amount of gain, if any, recognized on receipt of such interest.
Finally, an Eligible Member Subscriber or Voting Member will have a basis
in any subscription rights received equal to zero, increased by the
amount of income or gain, if any, recognized on receipt of such rights.
(9) No taxable income will be recognized by an Eligible Member Subscriber or
Voting Member as a result of the exercise of his or her subscription
rights. Rev. Rul. 56-572, 1956-2 C.B. 182.
(10) An Eligible Member Subscriber or Voting Member will be entitled to claim,
for the year in which any subscription rights expire unexercised, a loss
in an amount equal to his or her basis in such rights. Such loss will be a
capital loss provided the common stock of BB&T Financial that would have
been acquired upon the exercise of such subscription rights would have
(LOGO OF KPMG PEAT MARWICK APPEARS HERE)
Board of Directors
January 3, 1994
Page 9
constituted a capital asset in the hands of the Eligible Member Subscriber
or Voting Member.
(11) No income, gain or loss will be recognized by the purchasers of BB&T
Financial stock pursuant to the Community Offering. A purchaser of
Conversion Stock will have a basis in such stock equal to the purchase
price of such stock, increased (in the case of stock acquired pursuant to
the Subscription Offering) by the basis, if any, of the subscription
rights exercised. Section 1012.
(12) The holding period for BB&T Financial stock acquired pursuant to the
Subscription Offering will commence on the date the subscription rights
are exercised. Section 1223 (6). The holding period for BB&T Financial
stock acquired pursuant to the Community Offering will commence on the
date following the date on which such stock is purchased. Rev. Rul.
70-598, 1970-2 C.B. 168, Rev. Rul. 66-97, 1966-1, C.B. 190.
(13) The tax attributes enumerated in Section 381(c), including any earnings
and profits or a deficit of earnings and profits, will be taken into
account by Home Savings following the Conversion. Section 381.
(14) The Conversion/Acquisition will not require the bad debt reserves of Home
Savings to be restored to gross income (Section 381(c)(4), Treas. Reg.
Sec. 1.381 (c)(4)-1 (a) (1) (ii)), nor will it affect deductions for
additions to reserves for bad debts under Section 593 or distributions to
shareholders under Section 593(a). Because the Conversion will be a
transaction to which Section 381 applies, Section 593(a) will not apply.
NORTH CAROLINA INCOME TAX CONSEQUENCES
- --------------------------------------
It is our opinion that the State of North Carolina will, for North Carolina
income tax purposes, treat the Conversion/Acquisition in an identical manner as
it is treated by the Internal Revenue Service for federal income tax purposes.
N.C.G.S. 105-130.2, 105-130.3, 105-130.5, 105-134.1, 105-134.2, 105-134.5,
105-134.6, 105-134.7 and 105-228.23.
THE BANK MERGER
- ---------------
Nothing in the foregoing opinion is to be construed either explicitly or
implicitly as opining on the federal or North Carolina income tax consequences
of the Bank Merger.
(LOGO OF KPMG PEAT MARWICK APPEARS HERE)
Board of Directors
January 3, 1994
Page 10
THE RESTRICTED STOCK PLAN
- -------------------------
Nothing in the foregoing opinion is to be construed either explicitly or
implicitly as opining on the federal or North Carolina income tax consequences
of the Restricted Stock Plan.
Sincerely,
KPMG Peat Marwick
Sheldon M. Fox, Partner
SMF:jr