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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
----------------
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended:
September 30, 1999
Commission file number : 1-10853
BB&T CORPORATION
(Exact name of registrant as specified in its charter)
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)
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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 [_]
At October 31, 1999, 318,538,910 shares of the registrant's common stock, $5
par value, were outstanding.
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This Form 10-Q has 34 pages. The Exhibit Index is included on Page 33.
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BB&T CORPORATION
FORM 10-Q
September 30, 1999
INDEX
Page No.
--------
Part I. FINANCIAL INFORMATION 2
Item 1. Financial Statements (Unaudited) 2
Consolidated Financial Statements 2
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 15
Analysis of Financial Condition 15
Market Risk Management 19
Capital Adequacy and Resources 22
Analysis of Results of Operations 23
Part II. OTHER INFORMATION 33
Item 1. Legal Proceedings 33
Item 6. Exhibits and Reports on Form 8-K 33
SIGNATURES 34
EXHIBIT 11 Calculation of Earnings Per Share 33
EXHIBIT 27 Financial Data Schedule--Included with
electronically-filed
document only.
1
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
BB&T CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands except per share data)
September 30, December 31,
1999 1998
------------- ------------
(unaudited) (audited)
Assets
Cash and due from banks $ 1,019,596 $ 1,061,581
Interest-bearing deposits with banks 11,600 17,678
Federal funds sold and securities purchased under
resale agreements or similar arrangements 491,284 116,458
Trading securities 72,750 60,422
Securities available for sale 10,636,096 9,154,352
Securities held to maturity (market value: $99,703
at September 30, 1999, and $368,655 at December
31, 1998) 98,262 360,783
Loans held for sale 268,276 1,056,841
Loans and leases, net of unearned income 27,095,010 24,433,260
Allowance for loan and lease losses (369,346) (344,708)
----------- -----------
Loans and leases, net 26,725,664 24,088,552
----------- -----------
Premises and equipment, net 523,231 496,158
Other assets 1,802,837 1,490,294
----------- -----------
Total assets $41,649,596 $37,903,119
=========== ===========
Liabilities and Shareholders' Equity
Noninterest-bearing deposits $ 3,683,292 $ 3,618,848
Savings and interest checking 1,695,274 2,002,801
Money rate savings 7,450,275 7,131,229
Other time deposits 12,513,911 11,871,757
Foreign deposits 361,994 638,676
----------- -----------
Total deposits 25,704,746 25,263,311
----------- -----------
Short-term borrowed funds 5,894,267 3,751,748
Long-term debt 6,321,643 5,300,536
Accounts payable and other liabilities 635,025 543,194
----------- -----------
Total liabilities 38,555,681 34,858,789
----------- -----------
Shareholders' equity:
Preferred stock, $5 par, 5,000,000 shares
authorized, none issued and outstanding -- --
Common stock, $5 par, 500,000,000 shares
authorized, 318,198,872 issued and outstanding at
September 30, 1999, and 316,590,552 at December
31, 1998 1,590,994 1,582,953
Additional paid-in capital 183,807 185,226
Retained earnings 1,467,166 1,213,179
Loan to employee stock ownership plan and unvested
restricted stock (12,074) (14)
Accumulated other nonshareholder changes in equity,
net of deferred income taxes of ($80,656) at
September 30, 1999 and $39,612 at December 31,
1998 (135,978) 62,986
----------- -----------
Total shareholders' equity 3,093,915 3,044,330
----------- -----------
Total liabilities and shareholders' equity $41,649,596 $37,903,119
=========== ===========
The accompanying notes are an integral part of these consolidated financial
statements.
2
BB&T CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(Dollars in thousands, except per share data)
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
------------------------ ------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
Interest Income
Interest and fees on loans
and leases $ 591,924 $ 545,385 $ 1,703,921 $ 1,597,215
Interest and dividends on
securities 169,303 141,628 481,966 429,961
Interest on short-term
investments 6,024 2,912 10,850 10,422
----------- ----------- ----------- -----------
Total interest income 767,251 689,925 2,196,737 2,037,598
----------- ----------- ----------- -----------
Interest Expense
Interest on deposits 231,915 223,672 671,930 665,646
Interest on short-term
borrowed funds 69,328 53,422 176,933 169,374
Interest on long-term debt 78,937 68,117 225,439 188,628
----------- ----------- ----------- -----------
Total interest expense 380,180 345,211 1,074,302 1,023,648
----------- ----------- ----------- -----------
Net Interest Income 387,071 344,714 1,122,435 1,013,950
Provision for loan and
lease losses 20,000 21,428 61,867 71,503
----------- ----------- ----------- -----------
Net Interest Income After
Provision for Loan and
Lease Losses 367,071 323,286 1,060,568 942,447
----------- ----------- ----------- -----------
Noninterest Income
Service charges on
deposits 49,924 44,721 146,700 132,228
Mortgage banking revenues 27,256 23,599 94,502 63,615
Investment banking &
brokerage fees 36,681 11,518 88,622 33,140
Trust revenue 14,351 11,460 40,960 30,012
Agency insurance
commissions 20,464 12,399 54,166 38,687
Other insurance
commissions 3,035 2,378 8,616 7,879
Other nondeposit fees and
commissions 25,610 22,842 75,148 62,862
Securities (losses) gains,
net (1,568) 2,277 (4,255) 6,442
Other noninterest income 11,710 13,278 35,339 36,995
----------- ----------- ----------- -----------
Total noninterest income 187,463 144,472 539,798 411,860
----------- ----------- ----------- -----------
Noninterest Expense
Personnel expense 174,586 136,741 487,743 398,007
Occupancy and equipment
expense 50,897 43,812 149,564 127,442
Amortization of
intangibles and mortgage
servicing rights 16,867 11,818 50,081 34,682
Other noninterest expense 104,551 77,205 268,142 219,815
----------- ----------- ----------- -----------
Total noninterest expense 346,901 269,576 955,530 779,946
----------- ----------- ----------- -----------
Earnings
Income before income taxes 207,633 198,182 644,836 574,361
Provision for income taxes 66,528 62,773 205,732 181,964
----------- ----------- ----------- -----------
Net income $ 141,105 $ 135,409 $ 439,104 $ 392,397
----------- ----------- ----------- -----------
Per Common Share
Net income:
Basic $ .45 $ .44 $ 1.39 $ 1.26
=========== =========== =========== ===========
Diluted $ .44 $ .43 $ 1.36 $ 1.23
=========== =========== =========== ===========
Cash dividends paid $ .20 $ .175 $ .55 $ .485
=========== =========== =========== ===========
Average Common Shares
Outstanding
Basic 316,676,288 310,522,891 316,321,063 312,446,889
=========== =========== =========== ===========
Diluted 322,094,400 316,482,193 322,253,823 318,814,080
=========== =========== =========== ===========
The accompanying notes are an integral part of these consolidated financial
statements.
3
BB&T CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
For the Nine Months Ended September 30, 1999 and 1998
(Unaudited)
(Dollars in thousands)
Accumulated
Other
Shares of Additional Retained Nonshareholder Total
Common Common Paid-In Earnings Changes in Shareholders'
Stock Stock Capital and Other* Equity Equity
----------- ---------- ---------- ---------- -------------- -------------
Balance, December 31,
1997, as restated 156,774,038 $ 783,870 $247,343 $1,609,125 $ 54,376 $2,694,714
Add (Deduct)
Nonshareholder changes
in equity:**
Net income -- -- -- 392,397 -- 392,397
Unrealized holding
gains (losses)
arising during the
period -- -- -- -- 50,744 50,744
Less: reclassification
adjustment, net of
tax of $2,548 -- -- -- -- (3,894) (3,894)
----------- ---------- -------- ---------- --------- ----------
Net unrealized gains
(losses) on securities -- -- -- -- 46,850 46,850
----------- ---------- -------- ---------- --------- ----------
Total nonshareholder
changes in equity -- -- -- 392,397 46,850 439,247
----------- ---------- -------- ---------- --------- ----------
Common stock issued 10,786,440 53,932 308,024 -- -- 361,956
Redemption of common
stock (5,485,280) (27,426) (272,491) -- -- (299,917)
2-for-1 stock split
effective August 3,
1998 155,003,513 775,019 (63,432) (711,587) -- --
Cash dividends declared
on common stock -- -- -- (155,561) -- (155,561)
Other -- -- -- (6,149) -- (6,149)
----------- ---------- -------- ---------- --------- ----------
Balance, September 30,
1998 317,078,711 $1,585,395 $219,444 $1,128,225 $ 101,226 $3,034,290
=========== ========== ======== ========== ========= ==========
Balance, December 31,
1998, as restated 316,590,552 $1,582,953 $185,226 $1,213,165 $ 62,986 $3,044,330
Add (Deduct)
Nonshareholder changes
in equity:**
Net income -- -- -- 439,104 -- 439,104
Unrealized holding
gains (losses)
arising during the
period -- -- -- -- (201,536) (201,536)
Less: reclassification
adjustment, net of
tax of ($1,683) -- -- -- -- 2,572 2,572
----------- ---------- -------- ---------- --------- ----------
Net unrealized gains
(losses) on securities -- -- -- -- (198,964) (198,964)
----------- ---------- -------- ---------- --------- ----------
Total nonshareholder
changes in equity -- -- -- 439,104 (198,964) 240,140
----------- ---------- -------- ---------- --------- ----------
Common stock issued 10,143,864 50,719 281,911 -- -- 332,630
Redemption of common
stock (8,535,544) (42,678) (283,330) -- -- (326,008)
Cash dividends declared
on common stock -- -- -- (185,117) -- (185,117)
Other -- -- -- (12,060) -- (12,060)
----------- ---------- -------- ---------- --------- ----------
Balance, September 30,
1999 318,198,872 $1,590,994 $183,807 $1,455,092 $(135,978) $3,093,915
=========== ========== ======== ========== ========= ==========
- - --------
* Other includes unearned income and unvested restricted stock.
** Comprehensive income as defined by SFAS No. 130.
The accompanying notes are an integral part of these consolidated financial
statements.
4
BB&T CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 1999 and 1998
(Unaudited)
(Dollars in thousands)
1999 1998
----------- -----------
Cash Flows From Operating Activities:
Net income.......................................... $ 439,104 $ 392,397
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan and lease losses................ 61,867 71,503
Depreciation of premises and equipment............. 62,102 51,660
Amortization of intangibles and mortgage servicing
rights............................................ 50,081 34,682
Accretion of negative goodwill..................... (4,682) (4,682)
Amortization of unearned stock compensation........ 2,690 339
Discount accretion and premium amortization on
securities, net................................... (660) 764
Net decrease in trading account securities......... (303) 1,505
Loss (gain) on sales of securities, net............ 4,255 (6,442)
Loss (gain) on sales of premises and equipment,
net............................................... (3,776) (14,226)
Proceeds from sales of loans held for sale......... 3,390,074 3,323,145
Purchases of loans held for sale................... (827,952) (1,282,475)
Origination of loans held for sale, net of
principal collected............................... (1,747,410) (2,191,928)
Decrease (increase) in:
Accrued interest receivable....................... (28,854) (19,105)
Other assets...................................... (78,241) (86,423)
Increase (decrease) in:
Accrued interest payable.......................... 46,471 22,012
Accounts payable and other liabilities............ 207,404 113,714
Other, net......................................... (24,289) (26,160)
----------- -----------
Net cash provided by operating activities........ 1,547,881 380,280
----------- -----------
Cash Flows From Investing Activities:
Proceeds from sales of securities available for
sale............................................... 546,633 1,154,077
Proceeds from maturities, calls and paydowns of
securities available for sale...................... 1,804,813 1,944,367
Purchases of securities available for sale.......... (3,941,337) (3,595,806)
Proceeds from maturities, calls and paydowns of
securities held to maturity........................ 33,853 108,530
Purchases of securities held to maturity............ (2,922) (55,557)
Leases made to customers............................ (93,096) (69,000)
Principal collected on leases....................... 53,819 48,192
Loan originations, net of principal collected....... (2,189,698) (970,466)
Purchases of loans.................................. (83,139) (104,079)
Net cash acquired in transactions accounted for
under the purchase method.......................... 311,975 94,743
Purchases and originations of mortgage servicing
rights............................................. (48,934) (56,766)
Proceeds from disposals of premises and equipment... 15,926 27,306
Purchases of premises and equipment................. (77,231) (105,765)
Proceeds from sales of foreclosed property.......... 22,878 20,501
Proceeds from sales of other real estate held for
development or sale................................ 7,755 14,680
Other, net.......................................... -- (668)
----------- -----------
Net cash used in investing activities............ (3,638,705) (1,545,711)
----------- -----------
Cash Flows From Financing Activities:
Net decrease in deposits............................ (133,640) (16,063)
Net increase in short-term borrowed funds........... 2,004,253 317,230
Proceeds from long-term debt........................ 1,808,888 2,566,291
Repayments of long-term debt........................ (799,677) (1,530,077)
Net proceeds from common stock issued............... 36,022 25,136
Redemption of common stock.......................... (326,008) (299,917)
Cash dividends paid on common stock................. (172,251) (145,548)
----------- -----------
Net cash provided by financing activities........ 2,417,587 917,052
----------- -----------
Net Increase (Decrease) in Cash and Cash
Equivalents........................................ 326,763 (248,379)
Cash and Cash Equivalents at Beginning of Period.... 1,195,717 1,350,717
----------- -----------
Cash and Cash Equivalents at End of Period.......... $ 1,522,480 $ 1,102,338
=========== ===========
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for:
Interest $ 1,030,469 $ 895,812
Income taxes 52,936 108,686
Noncash financing and investing activities:
Transfer of securities from held to maturity to
available for sale 231,529 88,396
Transfer of fixed assets to other real estate owned 3,940 17,774
Transfer of loans to foreclosed property 20,250 17,557
Transfer of other real estate owned to fixed assets 1,255 --
Securitization of mortgage loans -- 277,208
Tax benefit from exercise of stock options 14,787 --
The accompanying notes are an integral part of these consolidated financial
statements.
5
BB&T CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1999
(Unaudited)
A. Basis of Presentation
In the opinion of management, the accompanying unaudited consolidated
financial statements contain all adjustments necessary to present fairly the
consolidated balance sheets of BB&T Corporation and subsidiaries ("BB&T" or the
"Corporation") as of September 30, 1999 and December 31, 1998; the consolidated
statements of income for the three months and the nine months ended September
30, 1999 and 1998; the consolidated statements of changes in shareholders'
equity for the nine months ended September 30, 1999 and 1998; and the
consolidated statements of cash flows for the nine months ended September 30,
1999 and 1998.
The consolidated financial statements and notes are presented in accordance
with the instructions for Form 10-Q. The information contained in the footnotes
included in BB&T's latest annual report on Form 10-K, as restated in BB&T's
Current Report on Form 8-K filed on September 3, 1999, should be referred to in
connection with the reading of these unaudited interim consolidated financial
statements. Certain prior year amounts have been reclassified to conform to
statement presentations for 1999. The reclassifications had no effect on
shareholders' equity or net income.
On June 23, 1998, BB&T's Board of Directors approved a 2-for-1 split in the
Corporation's common stock effected in the form of a 100% stock dividend paid
August 3, 1998. Accordingly, all per share data and weighted average common
shares outstanding have been restated as appropriate to reflect the split.
Use of Estimates
The preparation of financial statements requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Forward-Looking Statements
This report contains forward-looking statements with respect to the financial
condition, results of operations and business of BB&T. These forward-looking
statements involve risks and uncertainties and are based on the beliefs and
assumptions of the management of BB&T, and on the information available to
management at the time that these disclosures were prepared. Factors that may
cause actual results to differ materially from those contemplated by such
forward-looking statements include, among others, the following possibilities:
(1) competitive pressures among depository and other financial institutions may
increase significantly; (2) changes in the interest rate environment may reduce
margins; (3) general economic conditions, either nationally or regionally, may
be less favorable than expected, resulting in, among other things, a
deterioration in credit quality and / or a reduced demand for credit; (4)
legislative or regulatory changes, including changes in accounting standards,
may adversely affect the businesses in which BB&T is engaged; (5) costs or
difficulties related to the integration of the businesses of BB&T and its
merger partners may be greater than expected; (6) expected cost savings
associated with pending mergers may not be fully realized or realized within
the expected time frame; (7) deposit attrition, customer loss or revenue loss
following pending mergers may be greater than expected; (8) the Year 2000 issue
may not be effectively
6
BB&T CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
corrected (see additional discussion following under Third Quarter 1999 Year
2000 Readiness Disclosure); (9) competitors may have greater financial
resources and develop products that enable such competitors to compete more
successfully than BB&T; and (10) adverse changes may occur in the securities
markets.
B. Nature of Operations
BB&T is a multi-bank holding company headquartered in Winston-Salem, North
Carolina. BB&T conducts its operations principally in North Carolina, South
Carolina, Virginia, Maryland, Georgia, West Virginia, Kentucky and the
metropolitan Washington, D.C. area through its commercial banking subsidiaries
and, to a lesser extent, through its other subsidiaries. BB&T's principal
banking subsidiaries, Branch Banking and Trust Company ("BB&T-NC"), Branch
Banking and Trust Company of South Carolina ("BB&T-SC") and Branch Banking and
Trust Company of Virginia ("BB&T-VA"), provide a wide range of traditional
banking services to individuals and commercial customers. Substantially all of
BB&T's loans are to businesses and individuals in the market areas described
above. Subsidiaries of the commercial banking subsidiaries offer lease
financing to commercial businesses and municipal governments, investment
services, (including discount brokerage services, annuities, mutual funds and
government and municipal bonds), life insurance, property and casualty
insurance on an agency basis and insurance premium financing. Other
subsidiaries of the Corporation provide a variety of financial services
including automobile lending, equipment financing, factoring, full-service
securities brokerage, investment banking and corporate finance services.
C. New Accounting Pronouncements
On January 1, 1998, BB&T adopted SFAS No. 130, "Reporting Comprehensive
Income," which establishes standards for reporting and displaying comprehensive
income and its components (revenues, expenses, gains and losses) in a full set
of general purpose financial statements. Comprehensive income is the
nonshareholder related change in equity (net assets) of a company during a
period from transactions and other events. The standard does not address issues
of recognition or measurement of comprehensive income; therefore, the
implementation of the statement did not have an impact on BB&T's consolidated
financial position or consolidated results of operations.
On January 1, 1998, BB&T adopted the provisions of SFAS No. 131, "Disclosures
about Segments of an Enterprise and Related Information," which established
standards for the way that business enterprises report information about
operating segments in annual financial statements and requires that those
enterprises report selected information about operating segments in interim
financial reports. It also establishes standards for related disclosures about
products and services, geographic areas and major customers. The standard did
not address issues of recognition or measurement; therefore, the implementation
of the statement did not have an impact on the consolidated financial position
or consolidated results of operations of BB&T.
On January 1, 1998, BB&T adopted the provisions of SFAS No. 132, "Employers'
Disclosures about Pensions and Other Postretirement Benefits," which revised
the disclosure requirements for pensions and other postretirement benefit
plans. SFAS No. 132 did not address issues of recognition or measurement and,
therefore, the implementation of the statement did not have a material impact
on the consolidated financial position or consolidated results of operations of
BB&T.
7
BB&T CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
On January 1, 1999, BB&T adopted the American Institute of Certified Public
Accountants' Statement of Position ("SOP") 98-1, "Accounting for Costs of
Computer Software Developed or Obtained for Internal Use." SOP 98-1 requires
capitalization of computer software costs that meet certain criteria. The
implementation of SOP 98-1 did not have a material effect on BB&T's
consolidated financial position or consolidated results of operations.
In June, 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which establishes accounting and reporting
standards requiring that every derivative instrument (including certain
derivative instruments embedded in other contracts) be recorded in the balance
sheet as either an asset or liability measured at its fair value. The Statement
requires that changes in a derivative's fair value be recognized currently in
earnings unless specific hedge accounting criteria are met. Special accounting
for qualifying hedges allows a derivative's gains and losses to offset related
results on the hedged item in the income statement, and requires that a company
must formally document, designate and assess the effectiveness of transactions
that receive hedge accounting. In June 1999, the FASB issued SFAS No. 137,
"Accounting for Derivative Instruments and Hedging Activities--Deferral of the
Effective Date of FASB Statement No. 133," which delays the original effective
date of SFAS No. 133 until fiscal years beginning after June 15, 2000.
Management has not yet quantified the impact of adopting SFAS No. 133, as
amended, and has not determined the timing of or method of adoption of the
statement. However, the implementation of the statement is not expected to have
a material effect on BB&T's consolidated financial position or consolidated
results of operations.
On January 1, 1999, BB&T adopted the American Institute of Certified Public
Accountants' SOP 98-5, "Accounting for Start-up Costs." SOP 98-5 provides
guidance on the financial reporting of start-up costs and organization costs,
requiring start-up costs to be expensed as incurred. The adoption of the
statement did not have a material impact on BB&T's consolidated financial
position or consolidated results of operations.
On January 1, 1999, BB&T adopted the provisions of SFAS No. 134, "Accounting
for Mortgage-Backed Securities Retained after the Securitization of Mortgage
Loans Held for Sale by a Mortgage Banking Enterprise." The statement amends
SFAS No. 65, "Accounting for Certain Mortgage Banking Activities." The
implementation of the statement did not have a material impact on BB&T's
consolidated financial position or consolidated results of operations.
D. Mergers and Acquisitions
Completed Mergers and Acquisitions
On March 1, 1998, BB&T completed its merger with Life Bancorp, Inc. ("Life")
of Norfolk, Virginia. This transaction was accounted for as a pooling of
interests, and, accordingly, the accompanying consolidated financial statements
have been restated to reflect the accounts of Life. In conjunction with the
merger, BB&T issued 11.6 million shares of common stock in exchange for all of
the outstanding shares of Life common stock.
On March 10, 1998, BB&T completed its acquisition of Regency Financial
Shares, Incorporated ("Regency") of Richmond, Virginia, in a transaction
accounted for as a pooling of interests. In conjunction with the merger, BB&T
issued 801,000 shares of common stock in exchange for all of the outstanding
shares of Regency.
8
BB&T CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
On June 18, 1998, BB&T completed the acquisition of Dealers' Credit Inc.
("DCI"), of Menomonee Falls, Wisconsin. DCI specializes in extending credit to
commercial, agricultural, municipal and consumer users for the purchase of lawn
care equipment. The acquisition was accounted for using the purchase method of
accounting and, therefore, the accompanying consolidated financial statements
include the operating results of DCI only since the date of acquisition. In
conjunction with the transaction, BB&T recorded $9.5 million of goodwill, which
is being amortized using the straight-line method over 15 years.
On June 30, 1998, BB&T completed its acquisition of W.E. Stanley & Company
Inc., and its affiliated companies, (collectively, "Stanley"), an actuarial and
benefits consulting and administration firm located in Greensboro, North
Carolina. In conjunction with the acquisition, which was accounted for as a
purchase, BB&T recorded $10.3 million of goodwill, which is being amortized
using the straight-line method over 15 years.
On July 1, 1998, BB&T completed its merger with Franklin Bancorporation Inc.
("Franklin") of Washington, D.C., in a stock transaction accounted for as a
pooling of interests. BB&T issued 4.9 million shares of common stock in
exchange for all of the Franklin common stock outstanding.
On July 7, 1998, BB&T completed a merger with Ballston Bancorp, Inc.
("Ballston") of Washington, D.C., in a transaction accounted for as a pooling
of interests. In conjunction with the merger, BB&T issued approximately 824,000
shares of common stock in exchange for all of the outstanding shares of
Ballston.
On September 30, 1998, BB&T completed its acquisition of Maryland Federal
Bancorp, Inc. ("Maryland Federal") of Hyattsville, Maryland, in a transaction
accounted for as a purchase. In conjunction with the merger, BB&T issued 8.7
million shares of BB&T common stock in exchange for all of the outstanding
shares of Maryland Federal common stock. BB&T recorded $158.8 million of
goodwill, which is being amortized using the straight-line method over a period
of 15 years.
On March 5, 1999, BB&T completed a merger with MainStreet Financial
Corporation ("MainStreet"), based in Martinsville, Virginia. The transaction
was accounted for as a pooling of interests. BB&T issued 16.8 million shares of
BB&T common stock in exchange for all of the outstanding shares of MainStreet
common stock.
On March 26, 1999, BB&T completed its acquisition of Scott & Stringfellow
Financial, Inc. ("Scott & Stringfellow"), an investment banking firm based in
Richmond, Virginia. The transaction was accounted for as a purchase. In
conjunction with the acquisition, BB&T issued 3.6 million shares of BB&T common
stock in exchange for all of the outstanding shares of Scott & Stringfellow
common stock. BB&T recorded goodwill totaling $72.8 million, which is being
amortized using the straight-line method over a period of 15 years.
On July 9, 1999, BB&T completed its merger with First Citizens Corporation
("First Citizens"), of Newnan, Georgia. The transaction was accounted for as a
pooling of interests. In conjunction with the acquisition, BB&T issued 3.2
million shares of BB&T common stock in exchange for all of the outstanding
shares of First Citizens common stock.
On July 14, 1999, BB&T completed its merger with Mason-Dixon Bancshares, Inc.
("Mason-Dixon") of Westminster, Maryland. The transaction was accounted for as
a pooling of interests. In conjunction with the merger, BB&T issued 6.6 million
shares of common stock in exchange for all of the outstanding common stock of
Mason-Dixon.
9
BB&T CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
On August 27, 1999, BB&T completed its acquisition of Matewan BancShares,
Inc. ("Matewan") of Williamson, West Virginia. The transaction was accounted
for as a purchase. In conjunction with the merger, BB&T issued 3.2 million
shares of common stock in exchange for all of the outstanding common and
preferred shares of Matewan. BB&T recorded goodwill totaling $86.4 million,
which is being amortized using the straight-line method over 15 years.
Under the provisions of SFAS No. 38, "Accounting for Preacquisition
Contingencies of Purchase Enterprises," BB&T typically provides an allocation
period, not to exceed one year, to identify and quantify the assets acquired
and liabilities assumed in business combinations accounted for as purchases.
Management currently does not anticipate any material adjustments to the
assigned values of the assets and liabilities of acquired companies.
Pending Mergers and Acquisitions
On April 28, 1999, BB&T announced plans to merge with First Liberty Financial
Corp. ("First Liberty") of Macon, Georgia. First Liberty's shareholders will
receive between .85 and .87 shares of BB&T common stock for each share of First
Liberty stock held. The transaction is expected to be completed in the fourth
quarter of 1999 and accounted for as a pooling of interests.
On July 28, 1999, BB&T announced plans to merge with Premier Bancshares, Inc.
("Premier") of Atlanta, Georgia. Premier's shareholders will receive .5155
shares of BB&T common stock for each share of Premier common stock held and a
number of shares of BB&T common stock with a market value totaling $60.00 (as
determined during a 5 day pricing period preceding the closing of the merger)
for each share of Premier preferred stock held. The transaction is expected to
be completed in the first quarter of 2000 and accounted for as a pooling of
interests.
10
BB&T CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
E. Calculation of Earnings Per Common Share
BB&T's basic and diluted earnings per common share amounts were calculated as
follows (amounts retroactively adjusted for the 2-for-1 stock split effective
August 3, 1998):
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
------------------------- -------------------------
1999 1998 1999 1998
------------ ------------ ------------ ------------
(Dollars in thousands, except per share)
Basic Earnings Per Share:
Weighted average number
of common shares
outstanding during the
period 316,676,288 310,522,891 316,321,063 312,446,889
------------ ------------ ------------ ------------
Net income $ 141,105 $ 135,409 $ 439,104 $ 392,397
------------ ------------ ------------ ------------
Basic earnings per share $ .45 $ .44 $ 1.39 $ 1.26
------------ ------------ ------------ ------------
Diluted Earnings Per
Share:
Weighted average number
of common shares
outstanding during the
period 316,676,288 310,522,891 316,321,063 312,446,889
Add-
Dilutive effect of
outstanding options (as
determined by
application of treasury
stock method) 5,418,112 5,959,302 5,932,760 6,367,191
------------ ------------ ------------ ------------
Weighted average number
of common shares, as
adjusted 322,094,400 316,482,193 322,253,823 318,814,080
------------ ------------ ------------ ------------
Net income $ 141,105 $ 135,409 $ 439,104 $ 392,397
------------ ------------ ------------ ------------
Diluted earnings per
share $ .44 $ .43 $ 1.36 $ 1.23
------------ ------------ ------------ ------------
11
BB&T CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
F. Segment Disclosures
BB&T's operations are divided into six reportable business segments: the
Banking Network, Mortgage Banking, Trust Services, Agency Insurance, Investment
Banking and Brokerage, and Treasury. These operating segments have been
identified based primarily on BB&T's existing organizational structure. The
segments require unique technology and marketing strategies and offer different
products and services. While BB&T is managed as an integrated organization,
individual executive managers are held accountable for the operations of the
business segments that report to them.
BB&T's strategies for revenue growth are focused on developing and expanding
client relationships through quality service delivery coupled with an effective
sales culture. The segment results presented herein are based on internal
management accounting policies that support these strategic objectives. Unlike
financial accounting, there is no comprehensive authoritative body of guidance
for management accounting equivalent to generally accepted accounting
principles. Therefore, the performance of the segments is not comparable with
BB&T's consolidated results or with similar information presented by any other
financial institution. Additionally, because of the interrelationships of the
various segments, the information presented is not necessarily indicative of
the segments' financial performance if they operated as independent entities.
BB&T's internal reporting system was significantly modified during 1998, and,
as a result, prior periods have not been reported because it is not practicable
to restate prior period results to conform to the current reporting methods.
Also, BB&T has completed various mergers and acquisitions accounted for as
poolings of interests, which present additional practical limitations to the
presentation of comparable prior period information.
Please refer to BB&T's Annual Report on Form 10-K, as restated in BB&T's
Current Report on Form 8-K, filed on September 3, 1999, for a description of
internal accounting policies and the basis of segmentation, including a
description of the segments presented in the accompanying table. There have
been no significant changes from the format presented in those documents.
The following tables disclose selected financial information for BB&T's
reportable business segments for the periods as indicated:
12
For the Nine Months Ended September 30, 1999
------------------------------------------------------------------------------------------------------------
Investment Other
Banking All Total Revenues
Banking Mortgage Trust Agency and Other Segment and
Network Banking Services Insurance Brokerage Treasury Segments(/1/) Results Expenses(/2/)
----------- ---------- -------- --------- ---------- ----------- ------------- ----------- -------------
(dollars in thousands)
Net interest
income (expense)
from external
customers $ 617,924 $ 317,979 $(25,067) $ 8,036 $ 4,722 $ 131,414 $ 170,702 $ 1,225,710 $ 57,386
Net intersegment
interest income
(expense) 198,371 (234,205) 30,361 -- -- (16,214) -- (21,687) (8,926)
----------- ---------- -------- -------- -------- ----------- ---------- ----------- ----------
Net interest
income 816,295 83,774 5,294 8,036 4,722 115,200 170,702 1,204,023 48,460
----------- ---------- -------- -------- -------- ----------- ---------- ----------- ----------
Provision for
loan and lease
losses 72,714 2,058 -- 2,745 -- 67 12,279 89,863 1,555
Noninterest
income from
external
customers 318,595 92,127 35,446 54,195 94,794 (591) 20,792 615,358 (1,095)
Intersegment
noninterest
income 44,378 4,011 482 -- -- 391 -- 49,262 448
Noninterest
expense 415,144 45,071 20,618 46,422 87,317 4,046 39,342 657,960 211,595
Intersegment
noninterest
expense 192,593 14,222 1,902 2,308 1,344 6,529 4,260 223,158 (48,545)
----------- ---------- -------- -------- -------- ----------- ---------- ----------- ----------
Income before
income taxes and
the charge for
capital 498,817 118,561 18,702 10,756 10,855 104,358 135,613 897,662 (116,792)
Provision for
income taxes 164,286 36,277 5,625 4,446 5,243 27,766 21,175 264,818 14,234
----------- ---------- -------- -------- -------- ----------- ---------- ----------- ----------
Net income
before capital
charge 334,531 82,284 13,077 6,310 5,612 76,592 114,438 632,844 (131,026)
Charge for
capital 100,917 9,117 1,094 -- -- 890 -- 112,018 1,017
----------- ---------- -------- -------- -------- ----------- ---------- ----------- ----------
Net income after
charge for
capital $ 233,614 $ 73,167 $ 11,983 $ 6,310 $ 5,612 $ 75,702 $ 114,438 $ 520,826 $ (132,043)
=========== ========== ======== ======== ======== =========== ========== =========== ==========
Identifiable
segment assets $21,348,514 $5,688,835 $ 12,361 $106,699 $601,525 $12,006,225 $2,741,083 $42,505,242 $2,702,465
=========== ========== ======== ======== ======== =========== ========== =========== ==========
Reconciling
Items & Consolidated
Eliminations Totals
------------------ ------------
Net interest
income (expense)
from external
customers $ (160,661)(/4/) $ 1,122,435
Net intersegment
interest income
(expense) 30,613(/3/) --
------------------ ------------
Net interest
income (130,048) 1,122,435
------------------ ------------
Provision for
loan and lease
losses (29,551)(/4/) 61,867
Noninterest
income from
external
customers (74,465)(/4/) 539,798
Intersegment
noninterest
income (49,710)(/3/) --
Noninterest
expense 85,975(/4/) 955,530
Intersegment
noninterest
expense (174,613)(/3/) --
------------------ ------------
Income before
income taxes and
the charge for
capital (136,034) 644,836
Provision for
income taxes (73,320)(/4/) 205,732
------------------ ------------
Net income
before capital
charge (62,714) 439,104
Charge for
capital (113,035)(/3/) --
------------------ ------------
Net income after
charge for
capital $ 50,321 $ 439,104
================== ============
Identifiable
segment assets $(3,558,111)(/4/) $41,649,596
================== ============
- - ----
(1) Financial data for segments below the quantitative thresholds requiring
disclosure are attributable to a number of smaller operating segments.
Those segments include a sub-prime auto lender, a factoring operation, a
commercial lawn care finance company, a home equity finance company and a
leasing company.
(2) Other revenues and expenses include amounts incurred by BB&T's support
functions not allocated to the various segments. Amounts include any
unallocated provision for loan and lease losses and unallocated general
corporate expenses, as well as costs associated with BB&T's Year 2000
compliance efforts.
(3) BB&T's reconciliation of total segment results to consolidated results
requires the elimination of the internal management accounting practices.
These adjustments include the elimination of the FTP credits and charges,
the elimination of intersegment capital credits and charges, the
elimination of the intersegment noninterest revenues and the elimination
of overhead expenses allocated to the various segments.
(4) To reflect elimination entries necessary to consolidate the segment data.
13
For the Three Months Ended September 30, 1999
------------------------------------------------------------------------------------------------------------
Investment Other
Banking All Total Revenues
Banking Mortgage Trust Agency and Other Segment and
Network Banking Services Insurance Brokerage Treasury Segments(/1/) Results Expenses(/2/)
----------- ---------- -------- --------- ---------- ----------- ------------- ----------- -------------
(dollars in thousands)
Net interest
income (expense)
from external
customers $ 208,221 $ 103,682 $(8,491) $ 2,554 $ 2,209 $ 52,198 $ 59,972 $ 420,345 $ 12,628
Net intersegment
interest income
(expense) 63,947 (78,640) 10,490 -- -- (6,142) -- (10,345) 4,465
----------- ---------- ------- -------- -------- ----------- ---------- ----------- ----------
Net interest
income 272,168 25,042 1,999 2,554 2,209 46,056 59,972 410,000 17,093
----------- ---------- ------- -------- -------- ----------- ---------- ----------- ----------
Provision for
loan and lease
losses 26,906 658 -- 839 -- 22 4,042 32,467 548
Noninterest
income from
external
customers 104,534 26,719 12,398 20,698 39,047 (286) 7,175 210,285 (15,652)
Intersegment
noninterest
income 16,775 1,359 161 -- -- 121 -- 18,416 174
Noninterest
expense 142,633 14,648 6,181 17,409 38,075 1,428 13,566 233,940 79,575
Intersegment
noninterest
expense 71,999 4,875 642 769 448 2,517 1,222 82,472 (20,455)
----------- ---------- ------- -------- -------- ----------- ---------- ----------- ----------
Income before
income taxes and
the charge for
capital 151,939 32,939 7,735 4,235 2,733 41,924 48,317 289,822 (58,053)
Provision for
income taxes 35,207 3,955 1,491 1,984 1,704 5,366 7,827 57,534 43,960
----------- ---------- ------- -------- -------- ----------- ---------- ----------- ----------
Net income
before capital
charge 116,732 28,984 6,244 2,251 1,029 36,558 40,490 232,288 (102,013)
Charge for
capital 38,183 3,090 365 -- -- 276 -- 41,914 396
----------- ---------- ------- -------- -------- ----------- ---------- ----------- ----------
Net income after
charge for
capital $ 78,549 $ 25,894 $ 5,879 $ 2,251 $ 1,029 $ 36,282 $ 40,490 $ 190,374 $ (102,409)
=========== ========== ======= ======== ======== =========== ========== =========== ==========
Identifiable
segment assets $21,348,514 $5,688,835 $12,361 $106,699 $601,525 $12,006,225 $2,741,083 $42,505,242 $2,702,465
=========== ========== ======= ======== ======== =========== ========== =========== ==========
Reconciling
Items & Consolidated
Eliminations Totals
------------------ ------------
Net interest
income (expense)
from external
customers $ (45,902)(/4/) $ 387,071
Net intersegment
interest income
(expense) 5,880(/3/) --
------------------ ------------
Net interest
income (40,022) 387,071
------------------ ------------
Provision for
loan and lease
losses (13,015)(/4/) 20,000
Noninterest
income from
external
customers (7,170)(/4/) 187,463
Intersegment
noninterest
income (18,590)(/3/) --
Noninterest
expense 33,386(/4/) 346,901
Intersegment
noninterest
expense (62,017)(/3/) --
------------------ ------------
Income before
income taxes and
the charge for
capital (24,136) 207,633
Provision for
income taxes (34,966)(/4/) 66,528
------------------ ------------
Net income
before capital
charge 10,830 141,105
Charge for
capital (42,310)(/3/) --
------------------ ------------
Net income after
charge for
capital $ 53,140 $ 141,105
================== ============
Identifiable
segment assets $(3,558,111)(/4/) $41,649,596
================== ============
- - ----
(1) Financial data for segments below the quantitative thresholds requiring
disclosure are attributable to a number of smaller operating segments.
Those segments include a sub-prime auto lender, a factoring operation, a
commercial lawn care finance company, a home equity finance company and a
leasing company.
(2) Other revenues and expenses include amounts incurred by BB&T's support
functions not allocated to the various segments. Amounts include any
unallocated provision for loan and lease losses and unallocated general
corporate expenses, as well as costs associated with BB&T's Year 2000
compliance efforts.
(3) BB&T's reconciliation of total segment results to consolidated results
requires the elimination of the internal management accounting practices.
These adjustments include the elimination of the FTP credits and charges,
the elimination of intersegment capital credits and charges, the
elimination of the intersegment noninterest revenues and the elimination
of overhead expenses allocated to the various segments.
(4) To reflect elimination entries necessary to consolidate the segment data.
14
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
ANALYSIS OF FINANCIAL CONDITION
BB&T's total assets at September 30, 1999, were $41.6 billion, a $3.7 billion
increase from the balance at December 31, 1998. The balance sheet categories
that accounted for most of the increase were loans and leases, including loans
held for sale, which grew $1.9 billion, securities available for sale, which
increased $1.5 billion, Federal funds sold and securities purchased under
resale agreements or similar arrangements, which increased $374.8 million, and
other assets, which grew $312.5 million compared to year-end 1998. These
increases were partially offset by declines in cash and due from banks, which
decreased $42.0 million and securities held to maturity, which decreased $262.5
million.
Total deposits at September 30, 1999, increased $441.4 million, while short-
term borrowed funds increased $2.1 billion and long-term debt increased $1.0
billion during the first nine months of 1999. Total shareholders' equity
increased $49.6 million during the same time frame.
The factors causing the fluctuations in these balance sheet categories are
further discussed in the following sections.
Loans and Leases
BB&T's overall loan growth has been robust during 1999, and that growth
continued during the third quarter, with end of period loans, excluding loans
held for sale, increasing 14.6% on an annualized basis since the end of 1998.
Average loans increased 11.3% in the third quarter and 10.6% in the nine months
of 1999 compared to the same period in 1998. The overall growth in loans thus
far in 1999 was reduced by a significant decline in loans held for sale. At
September 30, 1999, end of period loans held for sale totaled $268.3 million,
down $788.6 million, or 74.6%, from the balance at December 31, 1998. Loans
held for sale are subject to significant fluctuations from quarter to quarter
based on the volume of mortgage loan production. Excluding the impact of the
decrease in loans held for sale, average annualized loan growth from December
31, 1998, to September 30, 1999, would have been 12.0%.
BB&T continues to focus lending efforts on commercial and consumer loans,
which generally have greater profit margins than mortgage loans. BB&T's
acquisition strategy in recent years has resulted in mergers with a number of
thrift institutions, which created a concentration of mortgage loans in the
portfolio. Through securitizations and sales of fixed rate mortgage loans, the
mix of the loan portfolio has changed in the current year compared to 1998.
Average mortgage loans decreased 7.0% in the third quarter and 3.4% in the
nine-month period of 1999 compared to the same periods in 1998. Average
commercial loans, including leasing, increased 18.9% in this year's third
quarter compared to the third quarter of 1998 and 17.7% for the nine month
period ending September 30, 1999 compared to 1998. Average consumer loans,
which includes sales finance, revolving credit and direct retail, increased
15.3% in the third quarter of 1999 compared to the same period in 1998, and
11.8% comparing the first nine months of 1999 and the same period of 1998.
The 1999 loan growth rates include the effects of loans that were acquired
through purchase accounting transactions and the securitization of $465.3
million of loans during 1998. BB&T acquired $1.0 billion in loans during 1998
through the purchases of DCI, Stanley and Maryland Federal. During 1999, loans
acquired through the purchase of Matewan totaled $414.6 million. Excluding the
impact of these purchase accounting transactions and the loan securitizations,
average "internal" loan
15
growth for the three months ended September 30, 1999, was 8.4% compared to the
third quarter of 1998. By category, excluding these purchase accounting
transactions and loan securitizations, average mortgage loans decreased 11.7%,
commercial loans grew 18.1%, revolving credit increased 9.7% and direct retail
loans were up 5.4% in the third quarter of 1999 compared to 1998.
The change in mix of loans to a higher percentage of commercial and consumer
loans and the continued growth of the overall loan portfolio boosted interest
income in the third quarter despite a decline in the average yield earned on
loans. The average annualized yields on commercial, consumer and mortgage loans
for the first nine months of 1999 were 8.78%, 9.86%, and 7.53%, respectively,
resulting in an average yield on the total loan portfolio of 8.79%. This
reflects a decrease of 33 basis points from the 9.12% earned on total average
loans during the first nine months of 1998. The decline in yields results due
to a lower average prime rate during 1999 compared to 1998, as well as
generally lower rates prevalent in the debt securities markets. During the
first nine months of 1998, the average prime rate, on which most loan pricing
is based, was 8.33%. During the first nine months of 1999, the prime rate has
averaged 8.00%.
Securities
Securities available for sale, which totaled $10.6 billion at September 30,
1999, increased $1.5 billion from December 31, 1998. Securities available for
sale had net unrealized losses, net of deferred income taxes, of $136.0 million
at September 30, 1999, compared to net unrealized gains of $63.0 million at
December 31, 1998. Securities held to maturity totaled $98.3 million, down
$262.5 million from year-end 1998. The annualized average fully taxable
equivalent ("FTE") yield on the total securities portfolio for the third
quarter of 1999 was 6.64%, down 13 basis points from the net yield earned in
the third quarter of 1998. The decrease in the yield on securities results from
the generally lower interest rate environment during 1999 compared to 1998, as
described earlier.
Other Interest-Earnings Assets
Federal funds sold and securities purchased under resale agreements or
similar arrangements increased $374.8 million during the first nine months of
1999, compared to December 31, 1998. These balances are subject to large
fluctuations based on the availability of funds. The average yield on other
interest-earning assets for the first nine months of 1999 was 4.81%, down from
5.63% earned during the first nine months of 1998. The decrease in the yield on
other interest earning assets results from the generally lower interest rate
environment during 1999 compared to 1998, as described earlier.
Other Assets
BB&T's other noninterest-earning assets, excluding premises and equipment,
increased $312.5 million from December 31, 1998, to September 30, 1999. The
increase results primarily from higher goodwill, which increased $186.5 million
during the first nine months of the year because of the acquisition of Scott &
Stringfellow and a number of insurance agencies. In addition, capitalized
mortgage servicing rights increased $43.2 million over the same time frame.
Deposits
Total end of period deposits increased $441.4 million from December 31, 1998
to September 30, 1999. Average deposits for the first nine months of 1999
increased 9.4% compared to the same period in 1998. Average certificates of
deposit and other time deposits grew $779.7 million, or 6.4%. Average money
rate savings accounts, including investor deposit accounts, grew $1.3 billion,
or 22.1%. Noninterest-bearing deposits increased $358.0 million, or 11.3%.
Savings and interest checking decreased $220.1 million, or 10.2%.
16
The growth in average deposits primarily results from purchase accounting
transactions and from the ongoing promotion of BB&T's "Investor Deposit
Account," which is a money rate savings account that provides greater
flexibility than traditional certificate accounts and is more cost effective
than certificates of deposit. BB&T acquired $813.3 million of deposits on
September 30, 1998, through the purchase of Maryland Federal. On August 27,
1999, BB&T acquired $575.1 million in deposits through the purchase of Matewan.
On average, investor deposit accounts for the first nine months of 1999 totaled
$3.2 billion, compared to a prior year average of $2.3 billion, an increase of
40.1%. Investor deposit accounts compose 12.5% of total average deposits at
September 30, 1999.
The annualized average cost for total interest-bearing deposits during the
first nine months of 1999 was 4.07%, down 34 basis points from the comparable
period of 1998.
Short-term Borrowed Funds
As a result of asset growth rates significantly higher than deposit growth
rates in recent years, cost-effective alternative funding sources, such as
Federal Home Loan Bank ("FHLB") advances, master notes, purchases of Federal
funds and sales of securities under repurchase agreements have been
increasingly utilized to support balance sheet growth.
During the first nine months of 1999, end of period short-term borrowed funds
totaled $5.9 billion, an increase of $2.1 billion, or 57.1%, compared to year-
end 1998. On average, short-term borrowed funds totaled $4.9 billion, which
reflects an increase of $693.4 million, or 16.3%, compared to 1998. The overall
increase in average short-term borrowed funds was composed of an increase in
short-term bank notes and master notes, offset by declines in Federal funds
purchased, securities sold under repurchase agreements and short-term FHLB
advances. The average annualized rate paid on short-term borrowed funds was
4.78% for the first nine months of 1999, down from 5.32% for the same period in
1998.
Long-term Debt
Long-term debt consists primarily of FHLB advances, medium term bank notes
and corporate subordinated debt. These borrowings are currently being utilized
because they are relatively cost-effective funding sources and provide BB&T
with the flexibility to structure borrowings in a manner that aids in the
management of interest rate risk and liquidity. Long-term debt totaled $6.3
billion at September 30, 1999, an increase of $1.0 billion, or 19.3%, from the
balance at December 31, 1998. On average, long-term debt totaled $5.6 billion,
an increase of $1.3 billion, or 29.2%, for the first nine months of 1999
compared to the first nine months of 1998. Long-term debt has been utilized for
a variety of funding needs, including the repurchase of shares of BB&T's common
stock in conjunction with certain acquisitions.
Asset Quality
BB&T's asset quality has remained excellent compared to historic levels of
nonperforming assets and net charge-offs and to published industry averages.
Nonperforming assets, composed of foreclosed real estate and repossessions,
nonaccrual loans and restructured loans, totaled $115.9 million at September
30, 1999, compared to $128.0 million at December 31, 1998. Nonperforming
assets, as a percentage of loan-related assets, were .42% at September 30,
1999, compared to .50% at December 31, 1998. Loans 90 days or more past due and
still accruing interest totaled $49.2 million compared to a year-end 1998
balance of $54.3 million. The decrease in nonperforming assets includes the
effect of nonperforming assets purchased through the acquisition of Matewan
totaling $8.0 million. Excluding these nonperforming assets, BB&T's problem
assets would have decreased $20.1 million, or 15.7%.
17
BB&T's net charge-offs totaled $46.6 million and amounted to .24% of average
loans and leases, on an annualized basis, in the first nine months of 1999,
compared to $52.6 million, or .30% of average loans and leases, in the
corresponding period in 1998. The decrease in net charge-offs as a percentage
of average loans and leases results from improved overall asset quality.
The allowance for loan and lease losses was $369.3 million, or 1.35% of loans
and leases, at September 30, 1999, compared to $344.7 million, or 1.35% of
loans and leases, at December 31, 1998.
The provision for loan and lease losses for the third quarter of 1999 was
$20.0 million, compared to $21.4 million in the third quarter of 1998. For the
nine months ended September 30, 1999, the provision totaled $61.9 million, a
decrease of $9.6 million, or 13.5%, compared to the first nine months of 1998.
The lower provisions were principally the result of lower net charge-offs
during 1999 and positive trends in nonaccrual loans and leases and other
nonperforming assets.
18
Asset quality statistics relevant to the last five calendar quarters are
presented in the accompanying table.
ASSET QUALITY ANALYSIS
(Dollars in thousands)
As of / For the Quarter Ended
------------------------------------------------
9/30/99 6/30/99 3/31/99 12/31/98 9/30/98
-------- -------- -------- -------- --------
Allowance For Loan & Lease
Losses
Beginning balance $359,102 $353,014 $344,708 $341,331 $322,309
Allowance for acquired
loans 7,473 169 1,722 -- 15,542
Provision for loan and
lease losses 20,000 21,603 20,264 24,302 21,428
Net charge-offs (17,229) (15,684) (13,680) (20,925) (17,948)
-------- -------- -------- -------- --------
Ending balance $369,346 $359,102 $353,014 $344,708 $341,331
======== ======== ======== ======== ========
Risk Assets
Nonaccrual loans and leases $ 88,628 $ 83,592 $ 94,232 $ 97,321 $ 99,155
Foreclosed real estate 15,752 15,163 20,326 17,780 22,073
Other foreclosed property 10,190 8,487 10,551 11,548 11,669
Restructured loans 1,378 1,560 1,340 1,348 1,356
-------- -------- -------- -------- --------
Nonperforming assets $115,948 $108,802 $126,449 $127,997 $134,253
======== ======== ======== ======== ========
Loans 90 days or more past
due and still accruing $ 49,186 $ 45,021 $ 41,791 $ 54,299 $ 51,643
======== ======== ======== ======== ========
Asset Quality Ratios
Nonaccrual and restructured
loans and leases as a
percentage of total loans
and leases .33% .32% .37% .39% .40%
Nonperforming assets as a
percentage of:
Total assets .28 .27 .32 .34 .36
Loans and leases plus
foreclosed property .42 .41 .49 .50 .54
Net charge-offs as a
percentage of average loans
and leases .26 .24 .22 .33 .30
Allowance for loan and lease
losses as a percentage of
loans and leases 1.35 1.36 1.36 1.35 1.37
Ratio of allowance for loan
and lease losses to:
Net charge-offs 5.40x 5.71x 6.36x 4.15x 4.79x
Nonaccrual and restructured
loans and leases 4.10 4.22 3.69 3.49 3.40
- - --------
All items referring to loans and leases include loans held for sale and are net
of unearned income.
Applicable ratios are annualized.
MARKET RISK MANAGEMENT
As a financial intermediary, BB&T's market risk exposure is principally
interest rate risk. A primary objective in interest rate risk management is to
minimize the effect that changes in interest rates on interest-sensitive assets
and interest-sensitive liabilities have on net interest income. Management uses
active balance sheet management as an efficient and cost-effective means of
controlling interest rate risk. This is accomplished through strategic pricing
of asset and liability accounts. The expected result of this process is the
development of appropriate maturity and repricing opportunities in those
accounts to produce consistent earnings during changing interest rate
environments. The Asset / Liability Management Committee ("ALCO") monitors
loan, investment and liability portfolios to ensure comprehensive management of
interest rate risk.
19
The asset/liability management process is designed to achieve relatively
stable net interest margins and assure liquidity by coordinating the volumes,
maturities or repricing opportunities of earning assets, deposits and borrowed
funds. It is the responsibility of the ALCO to determine and achieve the most
appropriate volume and mix of earning assets and interest-bearing liabilities,
as well as ensure an adequate level of liquidity and capital, within the
context of corporate performance goals. The ALCO also sets policy guidelines
and establishes long-term strategies with respect to interest rate risk
exposure and liquidity. The ALCO meets regularly to review BB&T's interest rate
risk and liquidity positions in relation to present and prospective market and
business conditions, and adopts funding and balance sheet management strategies
that are intended to ensure that the potential impact on earnings and liquidity
as a result of fluctuations in interest rates is within acceptable standards.
The majority of assets and liabilities of financial institutions are monetary
in nature and, therefore, differ greatly from most commercial and industrial
companies that have significant investments in fixed assets or inventories.
Fluctuations in interest rates and the efforts of the Board of Governors of the
Federal Reserve System ("FRB") to regulate money and credit conditions have a
greater effect on a financial institution's profitability than do the effects
of higher costs for goods and services. Through its balance sheet management
function, BB&T is positioned to respond to changing interest rates and
inflationary trends.
Management uses Interest Sensitivity Simulation Analysis ("Simulation") to
measure the sensitivity of earnings to changes in interest rates. Simulation
takes into account the current contractual agreements that BB&T has made with
its customers on deposits, borrowings, loans, investments and any commitments
to enter into those transactions. Management monitors BB&T's interest
sensitivity by means of a computer model that incorporates current volumes and
rates, maturities, repricing opportunities and anticipated growth of asset and
liability portfolios. The model calculates an earnings estimate based on
current and projected portfolio balances and interest rates. This level of
detail is needed to simulate the effect that changes in interest rates and
portfolio balances will have on the earnings of BB&T. This method is subject to
the accuracy of the assumptions that underlie the process, but it provides a
better illustration of true earnings potential than other analyses such as
static or dynamic gap.
The asset/liability management process involves various analyses. Management
determines the most likely outlook for the economy and interest rates by
analyzing environmental factors including regulatory changes, monetary and
fiscal policies and the overall state of the economy. BB&T's current and
prospective liquidity position, current balance sheet volumes and projected
growth, accessibility of funds for short-term needs and capital maintenance are
all considered, given the current environmental situation. This data is
combined with various interest rate scenarios to provide management with
information necessary to analyze interest sensitivity and to aid in the
development of strategies to reach performance goals.
The following table represents the interest sensitivity position of BB&T as
of September 30, 1999. This position can be modified by management within a
relatively short time period if necessary through the use of various
techniques, including securitizing assets, changing funding and investment
strategies and utilizing derivative financial instruments. Key assumptions in
the preparation of the table include prepayment speeds of mortgage-related
assets; cash flows and maturities of derivative financial instruments; changes
in market conditions, loan and deposit volumes and pricing; customer
preferences; and capital plans. This tabular data does not reflect the impact
of any changes in the credit quality of BB&T's assets. To attempt to quantify
the potential change in net interest income, given a change in interest rates,
various interest rate scenarios are applied to projected balances of assets and
liabilities incorporating the projected effect of maturities and repricing
opportunities. The resulting change in net interest income reflects the level
of sensitivity that net interest income has in relation to changing interest
rate.
20
Interest Sensitivity Simulation Analysis
Annualized
Interest Hypothetical
Rate Percentage
Scenario Change in
-------- Prime Net Interest
Linear Rate Income
------ ----- ------------
+3.00% 11.25% -3.29%
+1.50 9.75 -2.47
-1.50 6.75 .08
-3.00 5.25 -.02
Management has established parameters for asset/liability management which
prescribe a maximum impact on net interest income of 3% for a 150 basis point
parallel change in interest rates over three months from the most likely
interest rate scenario, and a maximum of 6% for a 300 basis point change over
12 months. It is management's ongoing objective to effectively manage the
impact of changes in interest rates and minimize the resulting effect on
earnings as evidenced by the preceding table. At September 30, 1999, the
sensitivity of BB&T's net interest income to changes in interest rates was
within management's targets, as illustrated in the accompanying table.
Derivatives and Off-Balance Sheet Financial Instruments
BB&T utilizes a variety of derivative financial instruments to manage various
financial risks. These instruments include financial forward and futures
contracts, options written and purchased, interest rate caps and floors and
interest rate swaps. Management accounts for these financial instruments as
hedges when the following conditions are met: (1) the specific assets,
liabilities, firm commitments or anticipated transactions (or an identifiable
group of essentially similar items) to be hedged expose BB&T to interest rate
risk or price risk; (2) the financial instrument reduces that exposure; (3) the
financial instrument is designated as a hedge at inception; and (4) at the
inception of the hedge and throughout the hedge period, there is a high
correlation of changes in the fair value or the net interest income associated
with the financial instrument and the hedged items.
BB&T's derivative contracts are typically 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 risks, but only provide the
basis for calculating payments between the counterparties. On September 30,
1999, BB&T had outstanding interest rate swaps, caps, floors and collars with
notional amounts totaling $1.3 billion. The estimated fair value of open
contracts used for risk management purposes reflected net unrealized gains of
$7.9 million at September 30, 1999.
BB&T uses derivative contracts to hedge specified assets or groups of assets,
liabilities or groups of liabilities, forward commitments and anticipated
transactions. BB&T's derivatives are primarily used to hedge commercial loans,
adjustable rate mortgage loans, commercial swaps, retail certificates of
deposit and fixed rate debt.
The net interest payable or receivable on interest rate swaps and floors that
are designated as hedges is accrued and recognized as an adjustment to the
interest income or expense of the related asset or liability. For interest rate
forwards, futures and options qualifying as a hedge, gains and losses are
deferred and are recognized in income as an adjustment of yield. Gains and
losses from early terminations of derivatives are deferred and amortized as
yield adjustments over the shorter of the remaining term of the hedged asset or
liability or the remaining term of the derivative instrument. Upon disposition
or settlement of the asset or liability being hedged, deferral accounting is
discontinued and any gains or losses are recognized in income. Derivative
financial instruments that fail to qualify as a hedge are carried at fair value
with gains and losses recognized in current earnings.
21
A derivative is a financial instrument that derives its cash flows, and
therefore its value, from an underlying instrument, index or reference rate.
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 derivatives 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 interest
rate swaps, caps and floors to which BB&T is a party settle monthly, quarterly
or semiannually. Accordingly, the amount of off-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 these
netting agreements, BB&T had a minimal amount of off-balance sheet credit
exposure at September 30, 1999.
SFAS No. 119, "Disclosures About Derivative Financial Instruments and Fair
Value of Financial Instruments," requires, among other things, certain
quantitative and qualitative disclosures with regard to the amounts, nature and
terms of derivative financial instruments. The following tables set forth
certain information concerning BB&T's interest rate swaps, caps, floors and
collars at September 30, 1999:
Interest Rate Swaps, Caps, Floors and Collars
September 30, 1999
(Dollars in thousands)
Notional Receive Pay Unrealized
Type Amount Rate Rate Gains (Losses)
- - ---- ----------- ----------- ------------ --------------
Receive fixed swaps $ 795,000 6.35% 5.45% $ 4,220
Pay fixed swaps 492,687 5.28 5.30 3,669
Caps, floors & collars 47,250 -- -- --
---------- ----------- ---------- -----------
Total $1,334,937 5.94% 5.39% $ 7,889
========== =========== ========== ===========
Receive Pay Fixed Caps, Floors
Year-to-date Activity Fixed Swaps Swaps & Collars Total
- - --------------------- ----------- ----------- ------------ --------------
Balance, December 31,
1998 $1,286,200 $ 1,242,146 $1,297,250 $ 3,825,596
Additions 40,000 381,896 -- 421,896
Maturities/amortizations (531,200) (1,049,948) (550,000) (2,131,148)
Terminations -- (81,407) (700,000) (781,407)
---------- ----------- ---------- -----------
Balance, September 30,
1999 $ 795,000 $ 492,687 $ 47,250 $ 1,334,937
========== =========== ========== ===========
One Year One to Five After Five
Maturity Schedule* or Less Years Years Total
- - ------------------ ----------- ----------- ------------ --------------
Receive fixed swaps $ 235,000 $ 270,000 $ 290,000 $ 795,000
Pay fixed swaps 19,351 445,689 27,647 492,687
Caps, floors & collars -- 47,250 -- 47,250
---------- ----------- ---------- -----------
Total $ 254,351 $ 762,939 $ 317,647 $ 1,334,937
========== =========== ========== ===========
- - --------
* Maturities are based on full contract extensions.
CAPITAL ADEQUACY AND RESOURCES
The maintenance of appropriate levels of capital is a management priority and
is closely monitored. BB&T's principal capital planning goals are to provide an
adequate return to shareholders while retaining a sufficient base to support
future growth and comply with all regulatory standards.
22
Total shareholders' equity was $3.1 billion at September 30, 1999 and $3.0
billion at December 31, 1998. BB&T's book value per common share at September
30, 1999, was $9.72 compared to $9.62 at December 31, 1998.
The minimum required ratios of Tier 1 capital (total shareholders' equity
excluding unrealized gains or losses on securities available for sale, net of
taxes, and nonqualifying intangible assets) and total capital (Tier 1 capital,
a qualifying portion of the allowance for loan and lease losses and qualifying
subordinated debt) to risk-weighted assets are defined by Federal Bank
Regulatory guidelines. An 8.00% minimum of total capital to risk-weighted
assets is required with one half of the minimum consisting of Tier 1 capital
under regulatory guidelines. The Tier 1 leverage ratio, established by Federal
Bank Regulatory guidelines, measures Tier 1 capital to average total assets
less nonqualifying intangibles. The regulatory minimum for the Tier 1 leverage
ratio is 3.00% to 5.00% depending upon Federal bank regulatory agency
evaluation of an organization's overall safety and soundness. BB&T's capital
adequacy ratios for the last five quarters are presented in the accompanying
table:
CAPITAL ADEQUACY RATIOS
1999 1998
----------------------- ---------------
Third Second First Fourth Third
Quarter Quarter Quarter Quarter Quarter
------- ------- ------- ------- -------
Risk-based capital ratios:
Tier 1 capital 9.4% 9.5% 9.8% 10.5% 10.7%
Total capital 13.4 13.5 14.2 15.0 15.4
Leverage ratio 6.6 6.6 6.9 7.1 7.4
ANALYSIS OF RESULTS OF OPERATIONS
Net income for the third quarter of 1999 totaled $141.1 million, an increase
of 4.2% over the $135.4 million earned during the third quarter of 1998. On a
diluted per share basis, earnings for the three months ended September 30, 1999
were $.44, compared to $.43 for the same period in 1998, an increase of 2.3%.
BB&T's operating results for the third quarter of 1999 produced an annualized
return on average assets of 1.36% and an annualized return on average
shareholders' equity of 18.60% compared to prior year ratios of 1.51% and
19.61%, respectively.
For the first nine months of 1999, net income totaled $439.1 million, an
increase of 11.9% compared to the $392.4 million earned in the first nine
months of 1998. On a diluted per share basis, BB&T earned $1.36 in the nine
months, compared to $1.23 last year, an increase of 10.6%.
BB&T's earnings for the third quarters of 1999 and 1998 were adversely
affected by costs principally associated with consummating mergers and
acquisitions. During the third quarter of 1999, BB&T incurred $19.7 million in
after-tax merger-related charges primarily associated with completing the
Mason-Dixon and First Citizens mergers. These charges included professional
fees, as well as costs in connection with the reduction of staffing levels,
early retirement packages and other personnel-related expenses, and a loss on
the sale of securities. BB&T also incurred after-tax charges totaling $10.4
million during the first quarter of 1999 associated with the acquisition of
MainStreet. During 1998, BB&T recorded after-tax merger-related charges
associated with the Life Bancorp merger of $4.9 million in the third quarter
and $11.0 million for the nine months.
Excluding the impact of these merger-related charges on 1999 and 1998
operating results, BB&T would have had net income for the third quarter of 1999
totaling $160.8 million, an increase of 14.6% over the $140.3 million earned
during the third quarter of 1998. On a diluted per share basis, earnings for
the three months ended September 30, 1999, excluding merger charges, were $.50,
compared to
23
$.44 for the same period in 1998, an increase of 13.6%. BB&T's recurring
operating results for the third quarter of 1999 produced an annualized return
on average assets of 1.55% and an annualized return on average shareholders'
equity of 21.20% compared to prior year ratios of 1.57% and 20.33%,
respectively.
For the first nine months of 1999, excluding merger-related charges, BB&T
would have had net income totaling $469.2 million, an increase of 16.3%,
compared to the $403.3 million earned in the first nine months of 1998. On a
diluted per share basis, earnings for the first nine months of 1999, excluding
these charges, were $1.46, compared to $1.27 earned last year, an increase of
15.0%. Earnings before nonrecurring expenses for the first nine months of 1999
produced an annualized return on average assets of 1.58% and a return on
average equity of 20.56%, compared to prior year ratios of 1.53% and 19.62%,
respectively.
BB&T's growth in earnings, excluding merger-related charges, resulted from
four principal factors. First, BB&T's noninterest income continues to grow at a
very strong pace, increasing 30.7% for the three months ended September 30,
1999, compared to the same period in 1998, and 31.4% for the nine months ended
September 30, 1999, compared to the first nine months of 1998. The components
of noninterest income that are producing this growth are further described in
the following sections. Second, as discussed above, BB&T has experienced solid
growth in loans and securities during the third quarter, as well as a more
profitable mix of loans during the quarter, which resulted in a 13.3% increase
in net interest income on an FTE basis in the third quarter of 1999, compared
to the third quarter of 1998. For the first nine months of 1999, net interest
income FTE has increased 11.5% compared to the same period in 1998. Third, BB&T
has continued to effectively manage the growth of noninterest expenses.
Excluding the effect of acquisitions accounted for by the purchase method of
accounting, recurring noninterest expense increased 5.2% in the third quarter
of 1999 and 6.4% for the nine months of 1999 compared to the same periods in
1998. Fourth, improved overall asset quality and lower credit losses have
allowed BB&T to record lower provisions for loan losses during 1999.
Net Interest Income and Net Interest Margin
Net interest income on an FTE basis was $410.2 million for the third quarter
of 1999 compared to $362.0 million for the same period in 1998, a 13.3%
increase. For the first nine months of 1999, net interest income FTE totaled
$1.2 billion, compared to $1.1 billion in 1998, an increase of 11.5%. For the
three months ended September 30, 1999, average interest-earning assets
increased $5.2 billion, or 15.8%, to $38.4 billion over the third quarter of
1998, while average interest-bearing liabilities increased by $4.9 billion.
During the same time period, the net interest margin decreased from 4.35% in
the third quarter of 1998 to 4.25% in the current quarter. The 10 basis point
decrease in margin was primarily the result of lower yields on loans,
securities and other interest earning assets.
The following tables set forth the major components of net interest income
and the related yields for the third quarter of 1999 compared to the third
quarter of 1998, and the nine months ended September 30, 1999 and 1998, and the
variances between the periods caused by changes in interest rates versus
changes in volumes.
24
Net Interest Income and Rate / Volume Analysis
For the Nine Months Ended September 30, 1999 and 1998
Average Balances Yield / Rate Income / Expense Change due to
----------------------- -------------- --------------------- Increase ------------------
Fully Taxable Equivalent 1999 1998 1999 1998 1999 1998 (Decrease) Rate Volume
- - - (Dollars in thousands) ----------- ----------- ------ ------ ---------- ---------- ---------- -------- --------
Assets
Securities (1):
U.S. Treasury,
government and other
(5) $10,034,562 $ 8,693,318 6.55% 6.72% $ 492,795 $ 438,292 $ 54,503 $(11,586) $ 66,089
States and political
subdivisions 587,425 321,493 7.71 8.38 33,981 20,210 13,771 (1,725) 15,496
----------- ----------- ------ ------ ---------- ---------- -------- -------- --------
Total securities (5) 10,621,987 9,014,811 6.61 6.78 526,776 458,502 68,274 (13,311) 81,585
Other earning assets (2) 301,339 248,730 4.81 5.63 10,850 10,466 384 (1,640) 2,024
Loans and leases, net of
unearned income
(1)(3)(4)(5) 26,215,957 23,709,201 8.79 9.12 1,723,658 1,618,986 104,672 (61,797) 166,469
----------- ----------- ------ ------ ---------- ---------- -------- -------- --------
Total earning assets 37,139,283 32,972,742 8.13 8.46 2,261,284 2,087,954 173,330 (76,748) 250,078
----------- ----------- ------ ------ ---------- ---------- -------- -------- --------
Non-earning assets 2,623,522 2,259,309
----------- -----------
Total assets $39,762,805 $35,232,051
=========== ===========
Liabilities and
Shareholders' Equity
Interest-bearing
deposits:
Savings and interest-
checking $ 1,945,098 $ 2,165,177 1.63 2.00 23,641 32,422 (8,781) (5,703) (3,078)
Money rate savings 7,120,349 5,830,544 2.84 3.06 151,459 133,539 17,920 (10,029) 27,949
Time deposits 12,980,953 12,201,225 5.12 5.48 496,830 499,685 (2,855) (33,755) 30,900
----------- ----------- ------ ------ ---------- ---------- -------- -------- --------
Total interest-bearing
deposits 22,046,400 20,196,946 4.07 4.41 671,930 665,646 6,284 (49,487) 55,771
Short-term borrowed
funds 4,949,126 4,255,752 4.78 5.32 176,933 169,374 7,559 (18,308) 25,867
Long-term debt 5,564,299 4,306,519 5.41 5.85 225,439 188,628 36,811 (14,993) 51,804
----------- ----------- ------ ------ ---------- ---------- -------- -------- --------
Total interest-bearing
liabilities 32,559,825 28,759,217 4.41 4.76 1,074,302 1,023,648 50,654 (82,788) 133,442
----------- ----------- ------ ------ ---------- ---------- -------- -------- --------
Noninterest-bearing
deposits 3,533,623 3,175,672
Other liabilities 618,984 548,277
Shareholders' equity 3,050,373 2,748,885
----------- -----------
Total liabilities and
shareholders' equity $39,762,805 $35,232,051
=========== ===========
Average interest rate
spread 3.72 3.70
Net yield on earning
assets 4.27% 4.31% $1,186,982 $1,064,306 $122,676 $ 6,040 $116,636
====== ====== ========== ========== ======== ======== ========
Taxable equivalent
adjustment $ 64,547 $ 50,356
========== ==========
- - ----
(1) Yields related to securities and to loans and leases exempt from income
taxes are stated on a taxable equivalent basis assuming tax rates in
effect for the periods presented.
(2) Includes Federal funds sold and securities purchased under resale
agreements or similar arrangements.
(3) Loan fees, which are not material for any of the periods shown, have been
included for rate calculation purposes.
(4) Nonaccrual loans have been included in the average balances. Only the
interest collected on such loans is included as income.
(5) Includes assets which were held for sale or available for sale at
amortized cost and trading securities at estimated fair value.
25
Net Interest Income and Rate / Volume Analysis
For the Three Months Ended September 30, 1999 and 1998
Yield /
Average Balances Rate Income / Expense Change due to
Fully Taxable Equivalent ------------------------- ---------- ----------------- Increase ------------------
- - - (Dollars in thousands) 1999 1998 1999 1998 1999 1998 (Decrease) Rate Volume
- - ------------------------ ------------ ------------ ---- ---- -------- -------- ---------- -------- --------
Assets
Securities (1):
U.S. Treasury,
government and other
(5) $ 10,534,406 $ 8,614,597 6.59% 6.73% $173,423 $144,961 $28,462 $ (3,231) $ 31,693
States and political
subdivisions 644,780 322,242 7.69 8.12 12,393 6,543 5,850 (370) 6,220
------------ ------------ ---- ---- -------- -------- ------- -------- --------
Total securities (5) 11,179,186 8,936,839 6.64 6.77 185,816 151,504 34,312 (3,601) 37,913
Other earning assets (2) 494,597 209,742 4.83 5.52 6,024 2,920 3,104 (407) 3,511
Loans and leases, net of
unearned income
(1)(3)(4)(5) 26,774,925 24,054,547 8.88 9.13 598,515 552,777 45,738 (15,403) 61,141
------------ ------------ ---- ---- -------- -------- ------- -------- --------
Total earning assets 38,448,708 33,201,128 8.18 8.47 790,355 707,201 83,154 (19,411) 102,565
------------ ------------ ---- ---- -------- -------- ------- -------- --------
Non-earning assets 2,593,800 2,278,190
------------ ------------
Total assets $ 41,042,508 $ 35,479,318
============ ============
Liabilities and
Shareholders' Equity
Interest-bearing
deposits:
Savings and interest
checking $ 1,824,742 $ 2,063,123 1.61 1.97 7,387 10,237 (2,850) (1,751) (1,099)
Money rate savings 7,306,720 6,058,183 2.92 3.19 53,731 48,668 5,063 (4,365) 9,428
Time deposits 13,278,453 12,077,938 5.10 5.41 170,797 164,767 6,030 (9,753) 15,783
------------ ------------ ---- ---- -------- -------- ------- -------- --------
Total interest-bearing
deposits 22,409,915 20,199,244 4.11 4.39 231,915 223,672 8,243 (15,869) 24,112
Short-term borrowed
funds 5,553,712 3,984,815 4.95 5.32 69,328 53,422 15,906 (3,894) 19,800
Long-term debt 5,808,303 4,712,504 5.41 5.76 78,937 68,117 10,820 (4,266) 15,086
------------ ------------ ---- ---- -------- -------- ------- -------- --------
Total interest-bearing
liabilities 33,771,930 28,896,563 4.47 4.74 380,180 345,211 34,969 (24,029) 58,998
------------ ------------ ---- ---- -------- -------- ------- -------- --------
Noninterest-bearing
deposits 3,621,681 3,280,275
Other liabilities 639,200 563,517
Shareholders' equity 3,009,697 2,738,963
------------ ------------
Total liabilities and
shareholders' equity $ 41,042,508 $ 35,479,318
============ ============
Average interest rate
spread 3.71 3.73
Net yield on earning
assets 4.25% 4.35% $410,175 $361,990 $48,185 $ 4,618 $ 43,567
==== ==== ======== ======== ======= ======== ========
Taxable equivalent
adjustment $ 23,104 $ 17,276
======== ========
- - ----
(1) Yields related to securities and to loans and leases exempt from income
taxes are stated on a taxable equivalent basis assuming tax rates in
effect for the periods presented.
(2) Includes Federal funds sold and securities purchased under resale
agreements or similar arrangements.
(3) Loan fees, which are not material for any of the periods shown, have been
included for rate calculation purposes.
(4) Nonaccrual loans have been included in the average balances. Only the
interest collected on such loans is included as income.
(5) Includes assets which were held for sale or available for sale at
amortized cost and trading securities at estimated fair value.
26
Noninterest Income
Noninterest income for the three months ended September 30, 1999, was $187.5
million compared to $144.5 million for the same period in 1998, an increase of
29.8%. Excluding the impact of purchase accounting acquisitions, BB&T's
noninterest income would have increased 10.5% in the third quarter of 1999
compared to 1998. For the nine months ended September 30, 1999, noninterest
income totaled $539.8 million, an increase of $127.9 million, or 31.1%,
compared to the first nine months of 1998. Excluding transactions accounted for
as purchases, noninterest income would have increased 16.3% for the first nine
months of 1999 compared to 1998.
BB&T experienced growth in all significant areas of noninterest income.
Service charges on deposits, mortgage banking revenues, investment banking and
brokerage fees, agency insurance commissions and other fees and commissions all
showed strong gains during the period compared to corresponding prior year
earnings. The percentage of total revenues (tax-equivalent net interest income
plus noninterest income excluding securities gains or losses) derived from
noninterest income, was 31.5% for the three months ended September 30, 1999, up
from 28.2% for the third quarter of 1998. For the nine months, the percentage
of total revenues derived from noninterest income was 31.4%, compared to 27.6%
for the first nine months of 1998.
Service charges on deposits totaled $49.9 million for the third quarter of
1999, an increase of $5.2 million, or 11.6%, compared to the third quarter of
1998. The primary factor contributing to this growth was an increase in the
number of accounts subject to service charges through internal growth and
accounts obtained through acquisitions. The largest components of the growth
within service charges on deposits included account analysis fees on commercial
transaction accounts, service charges on commercial and personal accounts and
overdraft charges on commercial accounts. For the nine months ended September
30, 1999, service charges on deposits increased $14.5 million, or 10.9%,
compared to 1998.
Trust income totaled $14.4 million for the current quarter, an increase of
$2.9 million, or 25.2%, for the three months ended September 30, 1999, compared
to the same period a year ago. A significant portion of the growth in trust
income resulted from growth in trust assets acquired through the acquisitions
of MainStreet and W.E. Stanley at the end of the third quarter of 1998. Also,
assets under management have increased to $10.4 billion, an increase of
approximately 20.9% from the third quarter of 1998. The remaining increase
reflects internal growth, driven principally by increased general trust
services income, higher estate fees and higher mutual fund fees. For the nine
months ended September 30, 1999, trust income increased $10.9 million, or
36.5%.
Investment banking and brokerage fees totaled $36.7 million during the third
quarter of 1999, an increase of $25.2 million compared to the third quarter of
1998. This significant increase was primarily the result of the acquisition of
Scott & Stringfellow on March 26, 1999. Scott & Stringfellow was accounted for
as a purchase; therefore, its operating results were only included in BB&T's
accounts in periods following the acquisition. For the nine months ended
September 30, 1999, investment banking and brokerage fees increased $55.5
million, or 167.4%, also principally due to the acquisition of Scott &
Stringfellow.
Agency insurance commissions totaled $20.5 million for the third quarter, an
increase of $8.1 million, or 65.1%, compared to the same three-month period of
1998. This resulted primarily from the purchase of additional agencies during
the quarter. In addition, BB&T has enjoyed growth in property and casualty
insurance commissions and contingent insurance commissions. BB&T has the
largest independent insurance agency system in the Carolinas, and the third
largest bank-owned insurance agency network in the country. Over the past
several quarters, the network has expanded both the types of products offered
and the number of agencies in the network. For the nine months ended September
30, 1999, agency insurance commissions increased $15.5 million, or 40.0%.
27
Income from mortgage banking activities totaled $27.3 million for the third
quarter of 1999, an increase of $3.7 million, or 15.5%, compared to the same
period in 1998. For the nine months ended September 30, 1999, mortgage banking
income totaled $94.5 million, an increase of $30.9 million, or 48.6%, compared
to 1998. The higher levels of mortgage banking revenues realized in the first
nine months of 1999 resulted from higher volumes of mortgage loans originated
in late 1998 and sold during 1999. Mortgage banking results for the nine months
also benefited from higher mortgage loan servicing fee income and underwriting
fee income, as well as gains on mortgage loans sold. Also, BB&T recaptured a
portion of valuation allowances established in 1998 related to capitalized
mortgage servicing rights. This recapture resulted from rising interest rates
during 1999, which slowed prepayment speeds on mortgage loans and increased the
value of the servicing portfolio. The increase in third quarter mortgage
banking revenue resulted from increased servicing fees, reflecting higher
values of loans serviced, and the recapture of a portion of the valuation
allowance on mortgage servicing rights. The rising interest rate environment in
the third quarter of 1999, while beneficial to the value of servicing rights,
resulted in slowing loan originations and a decrease in the related origination
fees and marketing gains compared to 1998.
Other nondeposit fees and commissions totaled $25.6 million, an increase of
$2.8 million, or 12.1%, for the three months ended September 30, 1999. The
components generating the increase in nondeposit fees and commissions were
revenues from merchant discounts, bankcard-related fees, higher overlimit fees
and increased international income. For the nine months ended September 30,
1999, other nondeposit fees and commissions increased $12.2 million, or 19.4%.
Other income decreased $1.6 million during the third quarter, or 11.8%, and
decreased $1.6 million, or 4.3%, compared to the first nine months of 1998.
Noninterest Expense
Noninterest expenses totaled $346.9 million for the third quarter of 1999
compared to $269.6 million for the same period a year ago, an increase of
28.7%. For the nine months, noninterest expenses totaled $955.5 million, an
increase of 22.5% compared to the first nine months of 1998. Noninterest
expense for the third quarter of 1999 includes $27.3 million of nonrecurring
expenses associated with the acquisition of Mason-Dixon and First Citizens,
while the first three months of 1998 include $6.5 million of costs resulting
from the merger with Franklin. Excluding these merger costs from both years,
noninterest expenses increased $56.6 million, or 21.5%, for the third quarter
and $146.8 million, or 19.2%, for the nine months ended September 30, 1999,
compared to the same periods in 1998. Excluding the effects of business
combinations accounted for as purchases that have been completed since
September 30, 1998, and the aforementioned merger-related expenses, noninterest
expenses for the third quarter and nine months of 1999 would have increased
5.2% and 6.4%, respectively, from the comparable periods in 1998. BB&T's
efficiency ratio, which measures the percentage of recurring expenses to total
net revenues on an FTE basis, was 53.1% for the third quarter of 1999 and 52.6%
for the first nine months of 1999, compared to 52.1% and 52.0%, respectively,
in 1998.
Personnel expense, the largest component of noninterest expense, was $174.6
million for the third quarter of 1999 compared to $136.7 million for the same
period in 1998, an increase of $37.8 million, or 27.7%. The amounts include
merger-related charges of $3.3 million in the third quarter of 1999 and $3.5
million in the third quarter of 1998. Excluding the merger-related charges,
personnel expense would have increased $38.0 million, or 28.5%. This growth
results from annual salary adjustments, which typically begin in April, higher
incentive compensation costs and the effect of acquisitions accounted for as
purchases completed since September 30, 1998, which include Maryland Federal,
Scott & Stringfellow, Matewan and numerous insurance agencies. For the nine
months ended September 30, 1999, personnel expense totaled $487.7 million, an
increase of $89.7 million, or
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22.6%. Excluding the impact of acquisitions completed after September 30, 1998
that were accounted for as purchases, personnel expense would have increased
$22.6 million, or 5.8%.
Occupancy and equipment expense for the three months ended September 30,
1999, totaled $50.9 million, an increase of $7.1 million, or 16.2%, compared to
1998. This increase was principally due to acquisitions accounted for as
purchases, costs associated with the maintenance of computer equipment and
other furniture and equipment costs. For the nine months ended September 30,
1999, occupancy and equipment expense increased $22.1 million, or 17.4%.
Excluding the impact of acquisitions completed after September 30, 1998 that
were accounted for as purchases net occupancy and equipment expense would have
increased $9.7 million, or 7.6%, during the first nine months of 1999.
The amortization of intangible assets and mortgage servicing rights totaled
$16.9 million for the three months ended September 30, 1999, a $5.0 million, or
42.7% increase from the amount incurred in the third quarter of 1998. This
increase was the result of a $4.9 million increase in amortization of goodwill
due to acquisitions consummated using purchase accounting. Total goodwill and
other intangibles, including mortgage servicing rights, have increased from
$517.0 million at September 30, 1998, to $746.3 million at September 30, 1999.
For the nine months ended September 30, 1999, the amortization of intangible
assets and mortgage servicing rights increased $15.4 million, or 44.4%.
Other noninterest expenses for the third quarter of 1999 totaled $104.6
million, an increase of $27.3 million, or 35.4%, compared to 1998. These
amounts include merger-related costs of $23.0 million in the third quarter of
1999 and $2.1 million in the third quarter of 1998. Excluding these costs,
other noninterest expenses would have increased $6.5 million, or 8.6%. The
remaining increase was primarily due to purchase accounting acquisitions and
higher expenses at Scott & Stringfellow and Regional Acceptance, BB&T's sub-
prime auto lending subsidiary. For the nine months ended September 30, 1999,
other noninterest expenses, excluding nonrecurring charges, increased $26.3
million, or 12.4%, compared to the first nine months of 1998.
Provision for Income Taxes
The provision for income taxes totaled $66.5 million for the third quarter of
1999, an increase of $3.8 million, or 6.0%, compared to the third quarter of
1998. For the nine months ended September 30, 1999, the provision for income
taxes totaled $205.7 million, an increase of $23.8 million, or 13.1%, compared
to the first nine months of 1998. The effective tax rates on pretax income were
32.0% and 31.7% for the three months ended September 30, 1999 and 1998,
respectively, and were 31.9% and 31.7% for the nine months ended September 30,
1999 and 1998, respectively. Excluding the tax benefits associated with the
merger-related charges discussed above, the provision for income taxes would
have been $75.5 million during the third quarter, an increase of $11.1 million,
or 17.3%, compared to the third quarter of 1998. For the nine months, the
provision for income taxes, excluding merger-related charges, would have been
$220.2 million, an increase of $34.8 million, or 18.8%, compared to 1998.
PROFITABILITY MEASURES
1999 1998
----------------------- ---------------
Third Second First Fourth Third
Quarter Quarter Quarter Quarter Quarter
------- ------- ------- ------- -------
Return on average assets 1.36% 1.56% 1.51% 1.42% 1.51%
Return on average equity 18.60 20.27 18.86 17.49 19.61
Net interest margin 4.25 4.28 4.27 4.27 4.35
Fee income ratio (taxable equivalent)* 31.5 32.3 30.3 27.8 28.2
Efficiency ratio (taxable equivalent)* 53.1 53.2 51.2 53.2 52.1
- - --------
* Excludes securities gains (losses), foreclosed property expense and
nonrecurring items.
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Third Quarter 1999 Year 2000 Readiness Disclosure
The Year 2000 issue is pervasive and presents both technical and business
risks affecting most, if not all, of BB&T's business activities. The "Year 2000
Issue" is a general term used to describe the various problems that may result
from the improper processing of dates and date-sensitive calculations by
computers and equipment with embedded microchips as the Year 2000 approaches.
These problems generally arise because most of the world's computer hardware
and software has historically used only two digits to identify the applicable
year. Any computer programs that have date-sensitive software may recognize a
date using "00" as the year 1900 rather than the year 2000. These problems may
also arise from other sources as well, such as the use of special codes and
conventions in software that make use of the date field. If not corrected, this
could result in system errors or failures causing disruptions of normal
business operations.
BB&T began planning its Year 2000 strategy in 1996. Management determined
that it would be required to modify or replace significant portions of BB&T's
information technology platform and other systems in order for them to be Year
2000 ready. Computer systems that have the ability to process dates before,
during and after January 1, 2000, without malfunction are considered to be
"Year 2000 Ready." In early 1997, BB&T formed a Year 2000 Program Office, which
operates as a joint effort between BB&T and outside service providers. The
mission of the Program Office is to address Year 2000 issues affecting BB&T's
various systems. The program office management committee meets regularly to
review and document the progress of the Year 2000 project.
Year 2000 Project
BB&T's Year 2000 strategy is divided into five major phases: inventory,
assessment, remediation, testing and change / clean management ("Year 2000
Project"). During the inventory and assessment phases, BB&T identified all
specific systems that required modification or replacement and assessed the
steps necessary to remediate the Year 2000 Issue. In the remediation phase, the
systems requiring remediation were replaced, modified or retired, as
appropriate. The testing phase included internal and external testing with
third parties to ensure that the remediated systems will accurately process
dates and date data before, on and after January 1, 2000. Finally, the change /
clean management phase includes placing the remediated systems back into
production and the implementation of processes and procedures to monitor and to
protect remediated systems from alterations that might affect Year 2000
readiness.
In order to carry out the Year 2000 project, BB&T divided its internal and
external systems into three major categories: core business systems,
distributed business systems and non-information technology systems. The core
business systems are those systems that run on BB&T's mainframe. The
distributed systems are those systems that do not run on the mainframe. The
non-information technology systems are those systems that have embedded
microchips or microprocessors controlling the function of equipment; such as
elevators, fire and security systems, etc. These three categories are further
broken down into mission-critical and non-mission-critical systems. BB&T
prioritized its systems for remediation based on their overall importance to
the operations of BB&T. Mission-critical systems are those systems that are
critical to the operations of BB&T and / or vital to the business continuity of
BB&T. While the Year 2000 Project addressed all internal and external systems
used by BB&T to conduct its business, the highest priority was given to
mission-critical systems.
State of Readiness
BB&T's current state of readiness as of November 10, 1999, is as follows:
Core business systems--mission-critical and non-mission critical: All phases
have been completed and the change / clean management phase has been
implemented. BB&T has placed 100% of remediated core business systems back into
production.
30
Distributed business systems--mission-critical and non-mission-critical: All
phases have been completed and the change / clean management phase has been
implemented. BB&T has placed 100% of remediated distributed business systems
back into production.
Non-information technology systems--mission-critical: Embedded technology
controls certain building security and operations, such as power management,
elevators and security systems. All facilities, including buildings, equipment
and other infrastructure using embedded technology have been evaluated and
confirmed as Year 2000 ready.
BB&T's Year 2000 readiness plans and status have been reviewed during
compliance audits by various state and Federal regulators. These reviews have
not resulted in any significant findings of deficiency by regulators, to date,
BB&T has met all federal regulatory deadlines during the Year 2000 Project.
Risks
The failure to correct a mission-critical Year 2000 problem could result in
an interruption in, or a failure of, certain normal business activities and
operations. Such failures could materially and adversely affect BB&T's
financial condition or results of operations. Management believes that the
modifications to existing systems and, in certain circumstances, conversions to
new systems, will minimize the effects on BB&T of the Year 2000 issue.
Third Party Assessments
BB&T relies on numerous third parties and conducts formal communications on
an ongoing basis with these third parties to determine the extent to which BB&T
may be vulnerable to their failure to remediate their own Year 2000 issues.
These third parties include providers of core and distributed systems-related
products and services; external agents, which include government agencies and
other agents requiring systems interfaces; infrastructure-related third
parties, including utilities and telecommunications providers, landlords and
miscellaneous suppliers; and capital markets partners, which includes any third
parties requiring financial settlement. During the fourth quarter of 1998 and
early in 1999, BB&T mailed in excess of 2,500 surveys to these third parties in
order to assess the status of their Year 2000 Readiness. These surveys included
227 third parties considered mission-critical to BB&T's operations. Information
has been obtained from 99% of these mission-critical third parties. Risk
assessments have been completed on the mission-critical third parties, and
appropriate measures to minimize risk to the extent possible have been
undertaken with those vendors that have been determined to represent high
levels of risk to BB&T. Among those that have responded, management has
determined that less than 1% represent a high risk to BB&T. For these third
parties, appropriate contingency plans have been developed and are constantly
being monitored and revised accordingly. However, BB&T has no viable
alternative for certain suppliers, such as utilities and telecommunications
providers. Also, as with all financial institutions, BB&T places a high degree
of reliance on the systems of other institutions, including governmental
agencies, to settle transactions.
BB&T also relies on clients to make preparations for the Year 2000 to protect
their business operations from interruptions that could threaten their ability
to honor their financial commitments. During 1998, BB&T developed and
implemented revised underwriting policies to address Year 2000 issues for our
large commercial clients and new commercial clients. Adherence to these
policies is required for credits in excess of $1 million and encouraged for
other significant clients. BB&T distributed in excess of 4,000 questionnaires
to clients in order to assess the state of their Year 2000 Readiness. Lenders
were required to follow up with their clients to ensure the accuracy of the
responses to the questionnaires. Based on the results of these questionnaires,
clients were assigned a Year 2000 "risk grade", which is considered in the
calculation of the allowance for loan and lease
31
losses. Among these lending relationships, BB&T rated approximately 3.4% of the
commercial loan portfolio as representing a high risk to BB&T, and the
remaining clients were determined to represent low risk to BB&T. For clients
that were judged to represent significant risks to BB&T, appropriate
contingency plans have been developed. These risk assessments are updated
quarterly for larger clients and potential new clients.
BB&T has also assessed potential Year 2000 risks associated with its
fiduciary activities. When making investment decisions or recommendations, BB&T
considers Year 2000 issues and may take certain steps to investigate Year 2000
readiness in assessing assets held in trust.
Despite these efforts, because of the general uncertainty inherent in the
Year 2000 issue, there can be no assurance that the systems of other
organizations upon which BB&T's operations rely will be timely converted, or
that a failure to convert by another company, or a conversion that is
incompatible with BB&T's systems, would not have a materially adverse effect on
BB&T. In view of the uncertainties surrounding the impact of the Year 2000
issue, management considers BB&T's most reasonably likely worst case scenario
to be the loss of basic infrastructure services, such as utilities and
telecommunications.
Contingency Business and Event Planning
During 1998 and 1999, management took action to enhance existing business
resumption plans to address potential Year 2000 disruptions. Each line of
business had significant involvement in the preparation of supplemental Year
2000 contingency/event plans designed to address specific business functions.
BB&T completed its Year 2000 contingency/event planning as of September 30,
1999. All of the plans have been tested and additional testing of mission-
critical plans will be conducted as the Year 2000 approaches. The plans will be
amended as needed as BB&T continues to obtain information relating to its own
systems and the systems of its significant third parties.
In addition to its contingency planning efforts, BB&T is designing and
implementing a Corporate Command Center to monitor, coordinate and report on
enterprise-wide Year 2000 activities. The Command Center will be the central
communications point for branches, business offices and management, and will
coordinate any corrective actions or activation of contingency plans should
Year 2000 disruptions occur.
Costs
The projected total incremental cost of the Year 2000 project is estimated at
approximately $30 million and is being funded through operating cash flows. As
of September 30, 1999, a cumulative total of approximately $27.5 million had
been spent on the assessment of and efforts in connection with the Year 2000
project, of which $5.3 million represented internal personnel and other costs.
Information about BB&T's Year 2000 Project, other than historical
information, should be considered forward looking in nature and subject to
various risks, uncertainties and assumptions. The costs of the project and the
date on which BB&T plans to complete Year 2000 modifications are based on
management's best estimates, which were derived utilizing numerous assumptions
of future events including the continued availability of certain resources,
third party modification plans and other factors. However, there can be no
assurance that these estimates will be achieved and actual results could differ
materially from those plans. Specific factors that might cause such material
differences include, but are not limited to, the availability and cost of
personnel trained in this area, the ability to locate and correct all relevant
computer codes, the inability to control third party vendor and customer
modification plans, the ability of BB&T to implement suitable contingency
plans, Congressional legislation, regulatory action and similar uncertainties.
32
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The nature of the business of BB&T's banking subsidiaries ordinarily results
in a certain amount of litigation. The subsidiaries of BB&T are involved in
various legal proceedings, all of which are considered incidental to the normal
conduct of business. Management believes that the liabilities arising from
these proceedings will not have a materially adverse effect on the consolidated
financial position or consolidated results of operations of BB&T.
Item 6. Exhibits and Reports on Form 8-K
(a)Exhibit 11--"Computation of Earnings Per Share" is included herein as Note
E.
Exhibit 27--"Financial Data Schedule" is included in the electronically-filed
document as required.
(b)Current Reports on Form 8-K during the Third Quarter
On July 14, 1999, BB&T filed a Current Report on Form 8-K under Item 5 to
report the results of operations for the second quarter of 1999. On July 29,
1999, BB&T filed a Current Report on Form 8-K under Item 5 to announce that
BB&T had entered into a definitive agreement to acquire Premier Bancshares,
Inc., of Atlanta, Georgia. On September 3, 1999, BB&T filed a Current Report on
Form 8-K under Item 5 to restate BB&T Annual Report on Form 10-K for the
accounts of Mason-Dixon Bancshares, Inc., of Westminster, Maryland, and First
Citizens Corporation, of Newnan, Georgia. On October 12, 1999, BB&T filed a
Current Report on Form 8-K under Item 5 to report the results of operations for
the third quarter of 1999.
33
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 CORPORATION
(Registrant)
/s/ Scott E. Reed
Date: November, 10, 1999 By:__________________________________
Scott E. Reed, Senior Executive
Vice President and Chief Financial
Officer
Date: November 10, 1999 /s/ Sherry A. Kellett
By:__________________________________
Sherry A. Kellett, Senior
Executive Vice President and
Controller (Principal Accounting
Officer)
34