EXHIBIT 99.2
SOUTHERN NATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION
(UNAUDITED)
(DOLLARS IN THOUSANDS)
JUNE 30, DECEMBER 31,
1994 1993
ASSETS
Cash and due from depository institutions...................................................... $ 266,117 $ 283,909
Interest-bearing bank balances................................................................. 12,760 64,954
Federal funds sold and securities purchased under resale agreements or similar arrangements.... -- 13,438
Securities available for sale.................................................................. 915,010 1,194,230
Loans held for sale............................................................................ 45,327 316,544
Investment securities.......................................................................... 1,712,234 1,356,102
Loans and leases, net of unearned income of $47,497 in 1994 and $30,926 in 1993................ 5,098,647 4,838,274
Less -- allowance for losses................................................................ (69,838) (69,503)
Net loans and leases...................................................................... 5,028,809 4,768,771
Premises and equipment, net.................................................................... 146,725 136,228
Other assets................................................................................... 109,380 140,294
Total assets................................................................................ $8,236,362 $8,274,470
LIABILITIES AND SHAREHOLDERS' EQUITY
Noninterest-bearing............................................................................ $ 772,598 $ 748,754
Interest-bearing............................................................................... 5,456,205 5,574,694
Total deposits.............................................................................. 6,228,803 6,323,448
Short-term borrowings.......................................................................... 1,131,961 756,343
Accounts payable and other liabilities......................................................... 65,045 150,138
Long-term debt................................................................................. 216,686 479,677
Total liabilities........................................................................... 7,642,495 7,709,606
Shareholders' equity:
Preferred stock, $5 par, 5,000,000 shares authorized, 770,000 issued
and outstanding in 1994 and 1993............................................................ 3,850 3,850
Common stock, $5 par, 120,000,000 shares authorized, 43,385,610 issued
and outstanding in 1994 and 42,961,214 in 1993.............................................. 216,928 214,806
Paid-in capital................................................................................ 153,205 151,186
Retained earnings.............................................................................. 236,756 199,383
Unearned compensation.......................................................................... (3,487) (4,361)
Net unrealized depreciation on securities...................................................... (13,385) --
Total shareholders' equity.................................................................. 593,867 564,864
Total liabilities and shareholders' equity.................................................. $8,236,362 $8,274,470
See accompanying notes to consolidated financial statements.
1
SOUTHERN NATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE PERIODS AS INDICATED
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
FOR THE THREE MONTHS ENDED FOR THE SIX MONTHS
JUNE 30, ENDED JUNE 30,
1994 1993 1994 1993
INTEREST INCOME
Interest and fees on loans and leases.............................. $ 100,852 $ 100,757 $ 198,181 $ 200,581
Interest and dividends on securities............................... 37,095 34,900 73,444 69,186
Interest on temporary investments.................................. 296 520 608 1,530
Total interest income............................................ 138,243 136,177 272,233 271,297
INTEREST EXPENSE
Interest on deposits............................................... 45,137 49,398 89,696 100,491
Interest on short-term borrowings.................................. 9,598 3,787 15,575 7,465
Interest on long-term debt......................................... 4,385 6,105 9,281 11,661
Total interest expense........................................... 59,120 59,290 114,552 119,617
NET INTEREST INCOME.................................................. 79,123 76,887 157,681 151,680
Provision for loan and lease losses................................ 1,532 4,291 2,703 7,953
NET INTEREST INCOME AFTER PROVISION FOR LOAN AND LEASE LOSSES........ 77,591 72,596 154,978 143,727
NONINTEREST INCOME
Service charges on deposit accounts................................ 9,169 9,261 17,805 17,905
Nondeposit fees and commissions.................................... 7,650 8,487 14,735 15,478
Securities gains, net.............................................. 239 9 954 14,027
Other income....................................................... 2,067 3,610 8,849 6,211
Total noninterest income......................................... 19,125 21,367 42,343 53,621
NONINTEREST EXPENSE
Personnel expense.................................................. 28,554 30,286 61,193 61,588
Occupancy and equipment expense.................................... 9,141 8,701 17,755 18,509
Federal deposit insurance expense.................................. 3,602 3,330 7,465 6,661
Foreclosed property expense........................................ 236 2,915 1,089 5,902
Other expense...................................................... 14,425 16,054 28,854 32,717
Total noninterest expense........................................ 55,958 61,286 116,356 125,377
EARNINGS
Income before income taxes......................................... 40,758 32,677 80,965 71,971
Provision for income taxes......................................... 13,874 10,049 28,034 24,103
Income before cumulative effect of changes in accounting
principles......................................................... 26,884 22,628 52,931 47,868
Less: cumulative effect of changes in accounting principles, net of
income taxes....................................................... -- -- -- 27,217
NET INCOME........................................................... 26,884 22,628 52,931 20,651
Preferred dividend requirements.................................... 1,299 1,299 2,598 2,598
Net income applicable to common shares............................. $ 25,585 $ 21,329 $ 50,333 $ 18,053
PER COMMON SHARE
Net income:
Primary
Income before cumulative effect................................ $ 0.59 $ 0.51 $ 1.15 $ 1.08
Less: cumulative effect, net of income taxes................... -- -- -- 0.65
Net income..................................................... $ 0.59 $ 0.51 $ 1.15 $ 0.43
Fully diluted
Income before cumulative effect................................ $ 0.56 $ 0.49 $ 1.10 $ 1.03
Less: cumulative effect, net of income taxes................... -- -- -- 0.60
Net income..................................................... $ 0.56 $ 0.49 $ 1.10 $ 0.43
Cash dividends paid.............................................. $ 0.17 $ 0.15 $ 0.34 $ 0.30
Average shares outstanding
Primary........................................................ 43,672,894 41,962,570 43,635,581 41,899,448
Fully diluted.................................................. 48,221,130 46,523,718 48,188,556 46,467,659
See accompanying notes to consolidated financial statements.
2
SOUTHERN NATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1994 AND 1993
(UNAUDITED)
(DOLLARS IN THOUSANDS)
1994 1993
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income........................................................................................ $ 52,931 $ 20,651
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan and lease losses............................................................ 2,703 7,953
Depreciation of premises and equipment......................................................... 6,292 8,041
Amortization of intangibles.................................................................... 832 1,326
Accretion of negative goodwill................................................................. (556) --
Amortization of unearned compensation.......................................................... 874 --
Discount accretion and premium amortization on securities...................................... 1,832 3,109
Gain on sales of securities, net............................................................... (954) (14,046)
Gain on sales of trading account securities.................................................... (537) (449)
Gain on sales of loans, net.................................................................... (1,225) (4,511)
Net (gain) loss on disposals of premises and equipment......................................... (1,243) 59
Net loss on foreclosed property and other real estate owned.................................... 335 6,352
Proceeds from sales of trading account securities, net of purchases............................ 537 449
Proceeds from sales of loans held for sale..................................................... 508,145 355,431
Origination of loans held for sale, net of principal collected................................. (241,006) (375,792)
Decrease (increase) in:
Accrued interest receivable.................................................................. (882) 394
Other assets................................................................................. 21,060 33,250
Increase (decrease) in:
Accrued interest payable..................................................................... 220 (671)
Accounts payable and other liabilities....................................................... (76,524) 29,204
Net cash provided by operating activities................................................. 272,834 70,750
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of available for sale securities........................................... 282,396 8,567
Proceeds from sales of held to maturity securities............................................. -- 287,975
Maturities of available for sale securities.................................................... 144,472 50
Maturities of held to maturity securities...................................................... 257,789 268,574
Purchases of available for sale securities..................................................... (160,433) --
Purchases of held to maturity securities....................................................... (618,928) (712,575)
Proceeds from sales of loans receivable and servicing rights................................... -- 27,540
Leases made to customers....................................................................... (20,339) (19,265)
Principal collected on leases.................................................................. 19,733 17,593
Loan originations, net of principal collected.................................................. (257,034) (183,398)
Net cash acquired in transactions accounted for under the purchase method of accounting........ 229 6,833
Proceeds from disposals of premises and equipment.............................................. 3,013 1,474
Purchases of premises and equipment............................................................ (18,935) (17,408)
Proceeds from sales of foreclosed property..................................................... 8,140 15,339
Proceeds from sales of other real estate owned................................................. 8,727 4,196
Net cash used in investing activities........................................................ (351,170) (294,505)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (decrease) increase in deposits............................................................ (94,645) 57,316
Net increase in short-term borrowings.......................................................... 366,654 10,232
Proceeds from long-term debt................................................................... 443 179,368
Repayment of long-term debt.................................................................... (263,434) (119,585)
Net proceeds from common stock issued.......................................................... 1,455 1,822
Cash dividends paid on common and preferred stock.............................................. (15,561) (11,256)
Net cash (used in) provided by financing activities.......................................... (5,088) 117,897
NET DECREASE IN CASH AND CASH EQUIVALENTS........................................................... (83,424) (105,858)
CASH AND CASH EQUIVALENTS AT JANUARY 1.............................................................. 362,301 378,087
CASH AND CASH EQUIVALENTS AT JUNE 30................................................................ $ 278,877 $ 272,229
See accompanying notes to consolidated financial statements.
3
SOUTHERN NATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1994
(UNAUDITED)
A. In the opinion of management, the accompanying unaudited consolidated
financial statements contain all adjustments (consisting of only normal
recurring adjustments) necessary to present fairly the financial position of
Southern National Corporation and subsidiaries ("Southern National") as of
June 30, 1994, the results of operations for the three months and six months
ended June 30, 1994 and 1993, and cash flows for the six months ended June
30, 1994 and 1993.
The consolidated financial statements and notes are presented in accordance
with the instructions for Form 10-Q, and, therefore, do not necessarily
include all disclosures required under generally accepted accounting
principles. The information contained in the footnotes included in Southern
National's latest annual report on Form 10-K should also be referred to in
connection with the reading of these unaudited interim consolidated financial
statements.
Certain amounts for prior years have been reclassified to conform with
statement presentations for 1994. The reclassifications have no effect on
shareholders' equity or net income as previously reported.
B. As of January 1, 1994, Southern National adopted Statement of Financial
Accounting Standards ("SFAS") No. 115, "Accounting for Certain Investments in
Debt and Equity Securities." SFAS 115 addresses the accounting and reporting
for investments in equity securities that have readily determinable fair
values and for all investments in debt securities. These investments are to
be classified in three categories: held to maturity, trading and available
for sale. Securities classified as available for sale are carried at
estimated fair value, with unrealized holding gains and losses, net of tax,
reported as a separate component of stockholders' equity.
C. Cash and cash equivalents include cash and due from depository institutions,
interest-bearing bank balances and federal funds sold and securities
purchased under resale agreements or similar arrangements. Generally, both
cash and cash equivalents are considered to have maturities of three months
or less. Transfer of loans to other real estate owned, a non-cash investing
activity, amounted to $5,036,000 and $5,977,000 for the six months ended June
30, 1994 and 1993, respectively. Transfer of securities from the held to
maturity category to the available for sale category, a non-cash investing
activity, totaled $5,934,000 during the six months ended June 30, 1994.
Transfer of securities from the available for sale category to the held to
maturity category, a noncash investing activity, totaled $2,216,000 for the
six months ended June 30, 1994.
D. On January 28, 1994, Southern National completed its acquisition of The First
Savings Bank, FSB ("The First") by the issuance of 8,052,860 shares of
Southern National common stock, or 0.855 share of Southern National common
stock in exchange for each share of The First's common stock outstanding.
Options to purchase shares of The First's common stock were converted into
options to purchase Southern National common stock at the same rate.
On January 31, 1994, Southern National completed its acquisition of Regency
Bancshares Inc. ("Regency") by the issuance of 2,437,498 shares of Southern
National common stock, or 1.8117 shares of Southern National common stock in
exchange for each share of Regency's common stock outstanding. Options to
purchase shares of Regency's common stock were converted into options to
purchase Southern National common stock at the same rate.
On February 24, 1994, Southern National completed its acquisition of Home
Federal Savings Bank ("Home") by the issuance of 824,601 shares of Southern
National common stock, or 2.576878 shares of Southern National common stock
in exchange for each share of Home's common stock outstanding. Options to
purchase shares of Home's common stock were converted into options to
purchase Southern National common stock at the same rate.
The acquisitions above were accounted for under the pooling-of-interests
method of accounting. Accordingly, all financial information presented herein
has been restated to include the accounts of The First, Regency and Home.
On June 1, 1994, Southern National completed its acquisition of McLean, Brady
& McLean Agency, Inc. by the issuance of 38,823 shares of Southern National
common stock and cash of $86,967. The acquisition was accounted for under the
purchase method of accounting, and therefore, the financial information
contained herein includes data relevant to the acquiree since the date of
acquisition.
4
On June 6, 1994, Southern National completed its acquisition of Leasing
Associates, Inc. by the issuance of 97,876 shares of Southern National common
stock. The acquisition was accounted for under the purchase method of
accounting, and therefore, the financial information contained herein
includes data relevant to the acquiree since the date of acquisition.
E. The "cumulative effect of changes in accounting principles, net of income
taxes," of $27,217,000 for the six month period ended June 30, 1993, is
comprised of the impact of the adoption of SFAS 106, "Accounting for
Postretirement Benefits Other Than Pensions," and SFAS 109, "Accounting for
Income Taxes," by Southern National, Regency, Home and The First, as well as
the effect of the adoption by The First of SFAS 72, "Accounting for Certain
Acquisitions of Banking or Thrift Institutions." Accordingly, cumulative
catch-up adjustments have been reflected in the first calendar quarter of
1993. A recap follows:
INCREASE
(DECREASE) IN
NET INCOME
(IN
THOUSANDS)
SFAS 106........................................ $ (8,463)
Less: taxes..................................... 2,897
SFAS 72......................................... (28,019)
SFAS 109........................................ 6,368
$ (27,217)
The First, Regency and Home had fiscal years ending June 30. However, in
connection with the restatement of the 1993 financial statements, the June 30
fiscal year-ends have been converted to a calendar year format comparable to
Southern National's presentation.
F. On August 1, 1994, Southern National and BB&T Financial Corporation ("BB&T")
jointly announced the signing of a definitive agreement to merge. The
transaction will be accounted for as a pooling-of-interests in which BB&T
shareholders will receive 1.45 shares of common stock of the resulting
company for each share of BB&T common stock held. Southern National
shareholders will receive one share of common stock of the resulting company
for each share of Southern National common stock. The market transaction has
an indicated total value of $2.2 billion based on July 29, 1994, closing
prices of the stock of both institutions. The merger, if approved, is
expected to be completed by the end of the second quarter of 1995. Selected
pro forma information for the separate and combined institutions are as
follows:
SOUTHERN
AS OF / FOR THE SIX MONTHS ENDED JUNE 30, 1994: BB&T NATIONAL COMBINED(1)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE
DATA)
Securities............................................ $ 2,680,825 $2,627,244 $ 5,308,069
Loans................................................. 7,101,201 5,098,647 12,199,848
Total assets.......................................... 10,570,538 8,236,362 18,806,900
Total deposits........................................ 8,058,865 6,228,803 14,287,668
Shareholders' equity.................................. 850,697 593,867 1,444,564
Net income............................................ 58,981 52,931 111,912
Per share results:
Primary............................................... 1.52 1.15 1.13
Fully diluted......................................... 1.52 1.10 1.11
(1) The combined selected pro forma financial information above does not
reflect the impact of any other pending acquisition or the anticipated
cost savings which will be attained through the merger.
5