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UNITED STATES SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1994
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM COMMISSION FILE NUMBER
TO 0-7871
BB&T FINANCIAL CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
NORTH CAROLINA 56-1056232
(I.R.S. EMPLOYER
(STATE OF INCORPORATION) IDENTIFICATION NO.)
223 WEST NASH STREET 27893
WILSON, NORTH CAROLINA (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE
OFFICES)
(919) 399-4291
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES X NO
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
COMMON STOCK, $2.50 PAR VALUE 36,271,016
(SHARES OUTSTANDING AS OF
JUNE 30, 1994)
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1
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BB&T FINANCIAL CORPORATION
TABLE OF CONTENTS
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PAGE
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PART I--FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets 3
Consolidated Statements of Income 4
Consolidated Statements of Shareholders' Equity 5
Consolidated Statements of Cash Flows 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 8-12
Supplemental Financial Information 13-18
PART II--OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 19
SIGNATURES 20
</TABLE>
2
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PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
BB&T FINANCIAL CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31, JUNE 30,
1994 1993 1993
------------ -------------------------
($ IN THOUSANDS, EXCEPT PER SHARE)
<S> <C> <C> <C>
ASSETS
Cash and due from banks............... $ 335,091 355,818 336,459
Interest-bearing bank balances........ 31,447 79,663 45,515
Federal funds sold.................... 31,260 35,050 23,850
Securities available for sale (at fair
value in 1994, fair
value in 1993 of $736,611, and
$617,411, respectively)............. 2,356,886 726,658 605,162
Securities held to maturity (fair
value of $110,875,
$1,722,284, and $1,640,991, respec-
tively)............................. 106,242 1,701,317 1,619,734
Loans................................. 6,692,768 6,688,332 6,008,951
Less allowance for loan losses........ 96,524 93,315 89,128
------------ ----------- -----------
Net loans........................... 6,596,244 6,595,017 5,919,823
Bank premises and equipment........... 150,662 147,666 122,812
Accrued interest receivable........... 69,856 63,607 65,169
Other assets.......................... 200,783 162,602 148,010
------------ ----------- -----------
Total assets........................ $ 9,878,471 9,867,398 8,886,534
============ =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Noninterest-bearing.................. $ 842,974 861,786 787,488
Interest-bearing..................... 6,579,499 6,704,154 6,109,053
------------ ----------- -----------
Total deposits...................... 7,422,473 7,565,940 6,896,541
Short-term borrowed funds............. 1,147,593 1,046,789 1,016,214
Long-term debt........................ 396,252 350,736 105,947
Other liabilities..................... 108,050 106,949 104,643
------------ ----------- -----------
Total liabilities................... 9,074,368 9,070,414 8,123,345
Shareholders' equity:
Common stock $2.50 par value,
100,000,000 shares authorized;
shares issued of 36,271,016,
36,398,619 and 36,112,596,
respectively......................... 90,678 90,997 90,281
Paid-in capital....................... 278,775 286,774 284,698
Retained earnings..................... 462,609 425,667 392,264
Less loan to employee stock ownership
plan................................. 4,419 4,419 4,054
Less unvested restricted stock........ 1,908 2,035 --
Net unrealized (losses) on securities
available for sale................... (21,632) -- --
------------ ----------- -----------
Total shareholders' equity.......... 804,103 796,984 763,189
------------ ----------- -----------
Total liabilities and shareholders'
equity............................. $ 9,878,471 9,867,398 8,886,534
============ =========== ===========
</TABLE>
3
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CONSOLIDATED STATEMENTS OF INCOME
BB&T FINANCIAL CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
--------------------- ---------------------
1994 1993 1994 1993
---------- ---------- ---------- ----------
($ IN THOUSANDS, EXCEPT PER SHARE)
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest on loans.................. $ 134,584 118,401 $ 262,116 230,686
Interest and dividends on securi-
ties:
Taxable.......................... 30,243 28,769 60,320 56,137
Tax exempt....................... 1,967 2,494 4,038 5,079
Interest on short-term investments. 552 354 1,374 717
---------- ---------- ---------- ----------
Total interest income............ 167,346 150,018 327,848 292,619
---------- ---------- ---------- ----------
INTEREST EXPENSE
Interest on deposits............... 55,102 54,045 109,167 107,185
Interest on short-term borrowed
funds............................. 11,701 5,635 20,660 9,758
Interest on long-term debt......... 5,550 1,698 9,745 3,990
---------- ---------- ---------- ----------
Total interest expense........... 72,353 61,378 139,572 120,933
---------- ---------- ---------- ----------
NET INTEREST INCOME................ 94,993 88,640 188,276 171,686
Provision for loan losses.......... 770 4,663 4,500 10,406
---------- ---------- ---------- ----------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES................... 94,223 83,977 183,776 161,280
---------- ---------- ---------- ----------
NONINTEREST INCOME
Service charges on deposit ac-
counts............................ 11,318 9,955 22,166 18,842
Other service charges, commissions
and fees.......................... 5,123 4,345 10,203 8,683
Mortgage banking income............ 2,935 2,808 8,221 7,040
Gains on sales of securities....... 378 147 1,125 1,262
Trust income....................... 3,008 2,683 5,860 5,111
Insurance commissions.............. 2,977 2,152 6,301 4,616
Other operating income............. 5,077 6,082 9,996 9,848
---------- ---------- ---------- ----------
Total noninterest income......... 30,816 28,172 63,872 55,402
---------- ---------- ---------- ----------
NONINTEREST EXPENSE
Salaries and wages................. 31,611 29,101 64,788 55,958
Other personnel expense............ 8,101 7,133 16,992 14,296
Net occupancy expense.............. 5,749 5,346 11,690 10,421
Furniture and equipment expense.... 6,958 6,457 13,663 12,467
Deposit insurance premiums......... 4,225 3,799 8,432 7,507
Other operating expense............ 25,480 21,982 48,211 41,599
---------- ---------- ---------- ----------
Total noninterest expense........ 82,124 73,818 163,776 142,248
---------- ---------- ---------- ----------
INCOME BEFORE INCOME TAXES......... 42,915 38,331 83,872 74,434
Income taxes....................... 14,616 11,941 28,493 23,495
---------- ---------- ---------- ----------
NET INCOME......................... $ 28,299 26,390 $ 55,379 50,939
========== ========== ========== ==========
NET INCOME PER SHARE
Primary............................ $ .77 .74 $ 1.52 1.47
Fully diluted...................... .77 .73 1.52 1.43
========== ========== ========== ==========
AVERAGE NUMBER OF SHARES AND
EQUIVALENT SHARES
Primary............................ 36,572,967 35,593,170 36,552,211 34,684,487
Fully diluted...................... 36,572,967 35,980,459 36,552,211 35,843,287
========== ========== ========== ==========
</TABLE>
4
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CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
BB&T FINANCIAL CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
NET UNREALIZED
COMMON LOAN TO UNVESTED GAINS (LOSSES) ON TOTAL
SHARES COMMON PAID-IN RETAINED EMPLOYEE STOCK RESTRICTED SECURITIES SHAREHOLDERS'
OUTSTANDING STOCK CAPITAL EARNINGS OWNERSHIP PLAN STOCK AVAILABLE FOR SALE EQUITY
----------- ------- ------- -------- -------------- ---------- ------------------ -------------
($ IN THOUSANDS, EXCEPT PER SHARE)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1,
1993.................. 26,311,915 $65,780 187,671 310,395 (2,938) -- -- 560,908
Equity at January 1,
1993 of pooled
companies acquired in
1993 and 1994......... 6,373,015 15,933 29,551 47,638 -- -- -- 93,122
---------- ------- ------- ------- ------ ------ ------- -------
Balance, January 1,
1993 as restated...... 32,684,930 81,713 217,222 358,033 (2,938) -- -- 654,030
Net income............. -- -- -- 50,939 -- -- -- 50,939
Cash dividends paid
($.50 per share)...... -- -- -- (14,832) -- -- -- (14,832)
Options exercised by
employees of pooled
companies prior to
merger................ 79,540 198 663 -- -- -- -- 861
Cash dividends paid by
pooled companies prior
to merger............. -- -- -- (1,876) -- -- -- (1,876)
Common stock issued:
Dividend reinvestment
plan................. 125,581 314 3,719 -- -- -- -- 4,033
Employee benefit and
stock option plans... 283,206 708 7,339 -- -- -- -- 8,047
Conversion of deben-
tures................ 1,916,084 4,790 28,521 -- -- -- -- 33,311
Acquisitions.......... 767,073 1,918 20,684 -- -- -- -- 22,602
Offerings............. 507,182 1,268 14,029 -- -- -- -- 15,297
Loan to employee stock
ownership plan........ -- -- -- -- (1,116) -- -- (1,116)
Redemption of common
stock................. (251,000) (628) (7,479) -- -- -- -- (8,107)
---------- ------- ------- ------- ------ ------ ------- -------
Balance, June 30,
1993................. 36,112,596 $90,281 284,698 392,264 (4,054) -- -- 763,189
========== ======= ======= ======= ====== ====== ======= =======
Balance, January 1,
1994.................. 32,476,387 $81,191 266,822 401,953 (4,419) (2,035) -- 743,512
Equity at January 1,
1994 of pooled company
acquired in 1994...... 3,922,232 9,806 19,952 23,714 -- -- -- 53,472
---------- ------- ------- ------- ------ ------ ------- -------
Balance, January 1,
1994 as restated...... 36,398,619 90,997 286,774 425,667 (4,419) (2,035) -- 796,984
Adjustment of
securities available
for sale to fair value
at
January 1............. -- -- -- -- -- -- 9,286 9,286
Net income............. -- -- -- 55,379 -- -- -- 55,379
Cash dividends paid
($.54 per share)...... -- -- -- (17,377) -- -- -- (17,377)
Common stock issued by
pooled company prior
to merger............. 14,409 36 393 -- -- -- -- 429
Cash dividends paid by
pooled company prior
to merger............. -- -- -- (1,060) -- -- -- (1,060)
Common stock issued:
Dividend reinvestment
plan................. 6,089 15 187 -- -- -- -- 202
Employee benefit and
stock option plans... 218,057 545 5,264 -- -- -- -- 5,809
Acquisitions.......... 73,842 185 (256) -- -- -- -- (71)
Unvested restricted
stock................. -- -- -- -- -- 127 -- 127
Redemption of common
stock................. (440,000) (1,100) (13,587) -- -- -- -- (14,687)
Change in net
unrealized gains
(losses) on securities
available for sale.... -- -- -- -- -- -- (30,918) (30,918)
---------- ------- ------- ------- ------ ------ ------- -------
Balance, June 30,
1994................. 36,271,016 $90,678 278,775 462,609 (4,419) (1,908) (21,632) 804,103
========== ======= ======= ======= ====== ====== ======= =======
</TABLE>
5
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CONSOLIDATED STATEMENTS OF CASH FLOWS
BB&T FINANCIAL CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-------------------
1994 1993
--------- --------
(THOUSANDS)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Interest received......................................... $ 324,511 288,745
Noninterest income received............................... 60,620 53,362
Interest paid............................................. (139,027) (125,510)
Noninterest expense paid.................................. (152,543) (131,038)
Income taxes paid......................................... (48,653) (27,467)
--------- --------
Net cash provided by operating activities............... 44,908 58,092
--------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales of securities available for sale...... 310,394 111,572
Proceeds from maturities or calls of securities........... 250,208 289,109
Purchase of securities.................................... (633,929) (552,475)
Net decrease in loans..................................... (12,497) (312,212)
Proceeds from sales of premises and equipment............. 2,846 458
Purchases of property and equipment....................... (14,416) (24,813)
Proceeds from sales of foreclosed properties.............. 7,021 13,659
Cash of companies acquired, net........................... -- 42,591
Purchase of officers' life insurance policies............. -- (30,000)
Other..................................................... (2,856) (10,794)
--------- --------
Net cash used in investing activities................... (93,229) (472,905)
--------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in demand deposits, interest checking and
savings accounts......................................... 22,427 19,665
Net increase (decrease) in certificates of deposit and
other time deposits...................................... (166,475) 29,622
Net increase in short-term borrowed funds................. 100,804 373,402
Net increase (decrease) in long-term debt................. 45,516 (4,188)
Proceeds from issuance of common stock.................... 6,440 27,199
Redemption of common stock................................ (14,687) (8,107)
Dividends paid............................................ (18,437) (16,708)
--------- --------
Net cash provided (used) by financing activities........ (24,412) 420,885
--------- --------
Net increase (decrease) in cash and cash equivalents...... (72,733) 6,072
Cash and cash equivalents on January 1.................... 470,531 399,752
--------- --------
Cash and cash equivalents on June 30...................... $ 397,798 405,824
========= ========
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING ACTIVITIES
Common stock issued:
Purchased company....................................... $ -- 22,298
Employee benefit plans.................................. -- 1,344
Conversion of debentures................................ -- 33,311
Loans transferred to foreclosed properties................ $ 8,563 10,392
========= ========
</TABLE>
6
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BB&T FINANCIAL CORPORATION AND SUBSIDIARIES
NOTE 1. MERGER
On June 30, 1994, BB&T completed the acquisition of L.S.B. Bancshares Inc.,
Lexington, South Carolina and its wholly-owned subsidiaries, The Lexington
State Bank and The Community Bank of South Carolina. The merger was
consummated through the issuance of 3,936,341 shares of BB&T common stock for
all of the common stock of L.S.B. The merger was accounted for as a pooling-
of-interests. All financial information has been restated to include the
operations of L.S.B. as if the transaction had been completed as of the
beginning of the earliest period reported. The contribution of L.S.B. to
consolidated total revenues, net interest income and net income for the three
months and six months ended June 30, 1994 and three months and six months
ended June 30, 1993 was as follows (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------------------
1994 1993 1994 1993
--------- ----------------- --------
<S> <C> <C> <C> <C>
BB&T
Total revenue............................ $ 184,710 164,711 364,763 321,400
Net interest income...................... 88,029 81,441 174,365 157,400
Net income............................... 26,704 24,707 52,432 47,559
L.S.B.
Total revenue............................ $ 13,519 13,538 27,081 26,680
Net interest income...................... 6,964 7,199 13,911 14,286
Net income............................... 1,595 1,683 2,947 3,380
</TABLE>
NOTE 2. PENDING MERGER
At June 30, 1994, BB&T had an agreement to merge with Commerce Bank of
Virginia Beach, Virginia. The merger of Commerce will be accounted for as a
pooling-of-interests and approximately 4,000,000 shares of BB&T common stock
will be issued for all of the outstanding stock of Commerce. At the end of
June, Commerce had total assets of approximately $692 million and
shareholders' equity of approximately $47 million.
NOTE 3. SUBSEQUENT EVENT
On July 29, 1994, BB&T and Southern National Corporation (SNC) of Winston-
Salem, North Carolina entered a definitive agreement of merger providing for
the merger of the two companies. The merger will be accounted for as a
pooling-of-interests. To effect the merger, BB&T shareholders will receive
1.45 shares of common stock of the surviving company for each outstanding
share of BB&T common stock and SNC shareholders will receive 1.00 shares for
each outstanding share of SNC common stock. At June 30, SNC had total assets
of approximately $8.2 billion and total shareholders' equity of approximately
$594 million.
7
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
MANAGEMENT'S DISCUSSION AND ANALYSIS
The following discussion and analysis is intended to assist in understanding
BB&T's results of operations and changes in financial position for the six
months and second quarter ended June 30, 1994. This discussion and analysis
should be read in conjunction with the consolidated financial statements and
supplemental financial data contained herein.
On June 30, 1994, BB&T acquired L.S.B. Bancshares, Inc. of South Carolina in
a transaction accounted for as a pooling-of-interests. Accordingly, the
financial information contained herein has been restated to include the
operations of L.S.B. for all periods presented.
OVERVIEW
Net income for the six months ended June 30 totalled $55.4 million, compared
with $50.9 million in 1993, an increase of 8.7%. Fully diluted net income per
share for the period was $1.52, compared with $1.43 for the first half of 1993.
Consolidated net income for the second quarter totalled $28.3 million, $.77
per share, compared with $26.4 million, $.73 per share for the same quarter of
1993.
On an annualized basis, the return on average assets was 1.13% for the first
half of this year, compared with 1.25% for the same period of 1993. For the
second quarter, the ROA was 1.15%, compared with 1.25% in the same quarter last
year. The annualized returns on average shareholders' equity were 14.02% for
the first six months of 1994 and 14.28% for the second quarter, compared with
14.58% and 14.47%, respectively, in 1993.
NET INTEREST INCOME
Net interest income for the first six months totalled $188.3 million. This
represented an increase of $16.6 million or 9.7% over the $171.7 million
recorded for the first half of 1993. For the quarter ended June 30, net
interest income increased $6.4 million or 7.2%.
The period 1991-93 generally was characterized by steady and significant
declines in market rates of interest. Because reductions in the cost of funds
generally preceded declines in yields on earnings assets during that period,
interest rate spreads and margins improved throughout the period. There was a
reversal of this trend late in 1993 and there have been significant increases
in interest rates over the three most recent quarters. BB&T has experienced
compression in its net interest spreads and net interest margins, resulting in
a lower rate of growth in net interest income.
The yield on average earning assets declined from 7.88% for the first half of
1993 to 7.32% for the first two quarters of this year. There are two primary
reasons for the decline in yields on assets. First, although the prime rate of
interest has been higher in 1994, loans which were added to the portfolios in
the latter half of 1994 were priced at lower rates than those which were
rolling off. This was true for both consumer loans and mortgage loans. Also,
during that period, BB&T added a significant volume (increased average balance
of approximately $106 million for the first six months) of variable rate
mortgages, which have lower rates of interest for the first year.
The second factor leading to the lower yield on assets was the rollover in
the portfolios of investment securities. The average life of the portfolios of
securities at BB&T is relatively short (BB&T generally invests in U.S. Treasury
obligations with maturities of 2-5 years). Securities with yields of 6-8%
matured in the second half of 1993 and were replaced with securities with
yields of 4-5%. As a result, the average taxable
8
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equivalent yield on investment securities was 5.61% for the first six months of
this year, down from 6.71% for the comparable period last year.
The average cost of interest-bearing liabilities also declined during the
first half of this year from 3.65% to 3.47%. The decline of 18 basis points was
substantially less than the decline of 56 basis points in the average yield on
earning assets. The average cost of all categories of deposits was down in the
first six months of this year, with the average cost of deposits declining to
3.35% from 3.68%. However, the average cost of short-term borrowed funds
increased from 2.94% to 3.55% in the first six months of this year. Moreover,
although the average cost of long-term debt was 106 basis points lower than for
the first half of last year, the average cost of 5.28% was greater than the
average cost of either deposits or short-term borrowed funds. Further, the
average cost of short-term borrowed funds increased 61 basis points, and the
average balance of short-term borrowed funds was $1.17 billion for the first
half of this year, compared with $668 million for the same period last year.
BB&T uses various hedging instruments to manage its net interest income. The
primary instruments used are interest rate swaps, collars, floors and ceilings.
The hedging activities contributed $3.3 million to net interest income for the
first six months this year, compared with $9.8 million last year.
As a result of all of these factors, taxable equivalent net interest income
increased 9.1% for the first two quarters of 1994, while average earning assets
rose 20.2% and average interest-bearing liabilities were up 21.6%.
PROVISION AND ALLOWANCE FOR LOAN LOSSES
BB&T's subsidiaries maintain allowances for loan losses to absorb potential
future losses. Provisions for loan losses are charged against earnings to
maintain the allowances at appropriate levels.
The provision for loan losses for the first six months of this year was $4.5
million, which was approximately $5.9 million or 56.8% below the $10.4 million
recorded in the first half of 1993. A provision of $770,000 was recorded in the
second quarter, compared with a provision of $4.7 million in the three months
ended June 30, 1993. The reduced charges against earnings for possible losses
were made possible by improvement in asset quality and the resultant lower
level of actual charge-offs.
On an annualized basis, net charge-offs as a percent of average loans
outstanding were .04% for the first six months of this year, compared with .13%
for the first half last year. For the second quarter, the ratio was .12% this
year, compared with .10% in the year earlier quarter. At the end of June,
nonperforming assets (nonaccrual and restructured loans and foreclosed
property) totalled $33.3 million or .34% of total assets. This compares with
nonperforming assets of $51.0 million (.57% of total assets) on June 30, 1993.
The allowance for loan losses of $96.5 million was 1.44% of loans outstanding
at the end of the quarter. This compares with an allowance of $89.1 million, or
1.48% of loans outstanding, a year earlier. The allowance was 4.77 times
nonperforming loans on June 30, up from 3.04 times nonperforming loans at the
end of the second quarter last year. In management's opinion, the allowance for
loan losses on June 30 was adequate.
NONINTEREST INCOME
Noninterest income for the first two quarters totalled $63.9 million, an
increase of 15.3% from last year. Major categories of noninterest income
include service charges on deposit accounts, mortgage banking income, trust
income, gains on sales of securities and insurance commissions. All categories
of noninterest income, other than gains on sales of securities, reported
increases for the first six months of this year.
Service charges on deposit accounts provide the largest amount of noninterest
income. Service charges on deposit accounts increased $3.3 million or 17.6% to
a total of $22.2 million for the first half of the year.
9
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For the second quarter, the increase over the comparable quarter of 1993 was
$1.4 million or 13.7%. The growth in service charges on deposit accounts was
derived from increased fee schedules and growth in the average balances of
noninterest-bearing deposits. Noninterest-bearing deposits including both
personal and business accounts, represent the largest sources of service
charges and commercial analysis fees. The average balance of noninterest-
bearing demand deposits for the first six months was approximately $97.9
million or 13.7% above the level of the first six months of 1993.
BB&T has developed a significant mortgage banking business, in recent years,
with an emphasis on the origination and servicing of single family mortgages.
This emphasis has been heightened and expanded by the acquisition of 14
thrifts during the period 1990-93. Income from mortgage banking activities
totalled $8.2 million for the first six months of the year, an increase of
16.8% over the total of $7.0 million in the first half of last year. For the
second quarter ended June 30, mortgage banking income totalled $2.9 million,
compared with $2.8 million a year ago, an increase of 4.5%. There was a heavy
volume of mortgage loan originations in 1993, as home mortgages were
refinanced to take advantage of lower interest rates. As a result, BB&T
recorded income from the origination and sale of mortgage loans totalling $4.6
million in the first half of 1993. The volume of originations has declined in
1994, although still historically higher than those experienced before 1993.
Because of the lower volume of originations and less favorable interest rate
movements, income from the origination and sale of mortgage loans declined to
$2.6 million in the first six months of this year. Mortgage loan servicing
fees were approximately $5.4 million for the first half of both 1994 and 1993.
Through its trust division, BB&T offers both corporate and personal trust
services. Trust revenues increased 14.7% for the first half of 1994 to a total
of $5.9 million. For the second quarter, trust revenues totalled $3.0 million,
compared with $2.7 million in the quarter ended June 30, 1993. Trust revenues
also included approximately $526,000 in mutual fund management fees for the
first half of this year.
BB&T operates a statewide network of insurance agencies. Insurance
commissions for the first six months totalled $6.3 million, an increase of
36.5% over the $4.6 million recorded in the first half of last year. In the
second quarter, insurance revenues totalled $3.0 million, compared with $2.2
million in the same quarter last year. BB&T purchased four agencies in 1993
and added one additional agency in the first half of 1994. BB&T now operates
21 insurance offices in North Carolina.
BB&T has offered investment brokerage services to its customers for many
years. Beginning in 1992, BB&T began to expand its capabilities in investment
sales and, in the fourth quarter of 1993, organized BB&T Investment Services,
Inc. as a subsidiary of the North Carolina bank. BB&T expects to establish a
second brokerage company as a subsidiary of its South Carolina bank in the
third quarter. BB&T earned approximately $1.4 million in brokerage fees in the
first half of this year, compared with $742,000 in the same period of 1993.
Other operating income totalled $10.0 million this year, compared with $9.8
million in last year's first half. The biggest component of other operating
income for the first six months was $2.4 million in amortized negative
goodwill. In recent years BB&T recorded negative goodwill, (which represents
the excess of net assets acquired over cost) in the acquisition of thrift
institutions which had operated as mutual associations. Other operating income
this year also includes $808,000 earned on life insurance policies on
officers' lives, compared with $653,000 in the first two quarters last year.
In the second quarter of 1993, BB&T recorded a gain of approximately $1.2
million from the sale of BB&T's interest in a credit card processing company.
NONINTEREST EXPENSE
Noninterest expense for the first half of this year totalled $163.8 million,
an increase of 15.1% over the $142.2 million recorded last year. For the
second quarter, noninterest expense increased 11.3% to a total of $82.1
10
<PAGE>
million from $73.8 million in the corresponding quarter last year. Personnel
costs, including salaries, wages and fringe benefits represent the largest
component of noninterest expense. Personnel costs totalled $81.8 million for
the first six months, an increase of $11.5 million or 16.4% over the $70.3
million in the first six months of 1993. For the second quarter, personnel cost
increased 9.6% from $36.2 million in 1993 to $39.7 million this year. For the
first half of 1994, salaries and wages increased 15.8% while other personnel
expense rose 18.9%. Aside from compensation paid to employees, the most
significant change was an increase of $746,000 or 50.1% in pension plan
expense. The cost of maintaining the pension plan was $2.2 million for the
first half of 1994.
The cost of maintaining facilities rose $2.5 million or 10.8% in the first
half of 1994. Net occupancy expense rose 12.2% to a total of $11.7 million,
while furniture and equipment expense rose 9.6% to a total of $13.7 million.
Over the past 18 months, BB&T added 43 branches in acquisitions accounted for
as purchases. BB&T also completed an addition to its operations center in
Wilson in the second quarter of this year. The addition doubled the size of the
operation facility. During the first half of this year BB&T completed its loan
platform automation project and upgraded and significantly expanded the
capabilities of its teller automation network. BB&T has closed six branches so
far in 1994 and at the end of June operated 284 branches in North and South
Carolina.
Deposit insurance premiums paid to the FDIC represent a significant cost for
financial institutions. Because of its strong performance and financial
strength, BB&T pays the lowest rate for deposit insurance. Nevertheless,
deposit insurance premiums increased 12.3% to a total of $8.4 million in the
first six months of this year, up from $7.5 million last year. The increase was
the result of growth in deposits, principally those added through acquisition.
Other operating expense totalled $48.2 million in 1994, compared with $41.6
million in the six months ended June 30, 1993. This represents an increase of
$6.6 million or 15.9%. The largest increase was $1.4 million in the
amortization of goodwill. BB&T recorded goodwill of approximately $28 million
in a purchase acquisition in the fourth quarter of 1993. Goodwill amortization
totalled $1.8 million for the first six months. Other operating expense
includes items such as postage, telephone expense, advertising, professional
services, supplies, loans and lease expense, and deposit related expense,
including the cost of checks.
FINANCIAL POSITION
Growth has been relatively slow at BB&T over the past year. This has been
particularly true for the first two quarters of 1994. Between June 30, 1993 and
June 30, 1994, total assets grew approximately $992 million or 11.2%.
Approximately $700 million of the growth during that 12 month period resulted
from the acquisition of thrifts accounted for as purchases. For the year ended
June 30, 1994, loans increased $684 million or 11.4%, while deposits rose $526
million or 7.6%.
While the growth has not been strong at BB&T, the balance sheet continues to
be financially solid with an emphasis on earnings capacity, good liquidity and
a strong capital position. Earning assets continue to represent approximately
93.3% of total assets. Investment securities, including both those available
for sale and those held to maturity, have remained steady at approximately 25%
of total assets, while loans represent approximately 68% of total assets.
BB&T continues to be very liquid, although short-term borrowed funds did
increase to $1.15 billion at the end of June, compared with $1.02 billion a
year earlier. At the end of the quarter, short-term borrowed funds included
approximately $80 million of securities sold under agreements to repurchase and
$173 million of master notes of BB&T Corporation. Repos and master notes
represent core funding to BB&T in that substantially all the balances represent
investable funds of customers in the cash management program. The loan to
deposit ratio of BB&T did increase to 90.2% at the end of June, compared with
87.1% a year earlier and 88.4% at the end of 1993. However, BB&T considers its
core funding to be deposits, securities sold under agreements to repurchase,
master notes and long-term debt. The ratio of loans to core funding at the end
of June was 82.9%, compared with 83.2% on June 30, 1993. In addition to the
liquidity provided by
11
<PAGE>
core funding, BB&T's portfolio of approximately $2.5 billion in investment
securities (which had an average maturity of one year seven months at the end
of June and are comprised primarily of obligations of the U.S. Treasury and
other investment grade securities) is a source of liquidity. BB&T's strong
credit ratings also provide liquidity. Although federal funds purchased
totalled $892 million on June 30, BB&T had unused federal funds lines in excess
of $2.5 billion at that time and also unused lines of credit totalling $55
million. Finally, the retention of earnings provides liquidity. BB&T has
maintained a return on equity in the range of 14-15% for several years and a
dividend payout ratio of 30-35%. As a result, BB&T has been able to maintain a
rate of internal capital generation in the range of 9-10%.
BB&T has maintained and enhanced its traditionally strong equity and capital
positions in recent years. The ratio of equity to assets at the end of June was
8.14%, compared with 8.59% a year earlier. Equity has been generated from
acquisitions and the issuance of new shares, as well as the retentional funds
generated from operations.
Regulators use other ratios to measure the capital adequacy of financial
institutions. The principal measures are the risk-based capital ratios. BB&T
had a Tier 1 capital ratio of 12.26% and a total capital ratio of 13.52% on
June 30. These ratios compare with 12.93% and 14.92%, respectively at the end
of the second quarter last year. The minimum required Tier 1 capital ratio is
4% and the required total capital ratio is 8%. Regulators also use a leverage
ratio to evaluate the capital adequacy of banks. The leverage ratio measures
the relationship of tangible equity to tangible assets. The leverage ratio of
BB&T was 7.96% on June 30 compared with 9.12% a year earlier. The required
regulatory minimum is 3%.
DERIVATIVES
BB&T uses hedging instruments to manage interest rate sensitivity and net
interest income. These instruments, commonly referred to as derivatives,
primarily consist of interest rate swaps, collars, floors and ceilings. BB&T
does not trade or speculate in derivatives, but uses them only as part of its
asset/liability management strategy.
Derivative contracts are written in amounts referred to as notional amounts.
Notional amounts do not represent amounts to be exchanged between parties and
are not a measure of financial risk, but only provide the basis for calculating
interest payments between the counterparties. On June 30, 1994, BB&T had
outstanding derivative contracts with notional amounts totalling approximately
$2 billion.
The derivatives used at BB&T provide for the exchange of interest payments
between counterparties--either variable for fixed or fixed for variable. Thus,
the credit risk arises when amounts receivable from a counterparty exceed those
payable. The risk of loss with any counterparty is limited to a small fraction
of the notional amount. BB&T deals only with national market makers with strong
credit ratings in its derivative activities. BB&T further controls the risk of
loss by subjecting counterparties to credit reviews and approvals similar to
those used in making loans and other extensions of credit.
On July 29, 1994, BB&T and Southern National Corporation (SNC) of Winston-
Salem, North Carolina agreed to merge the two companies. The merger will be
effected through the issuance of 1.45 shares of common stock of the surviving
corporation for each outstanding share of BB&T common stock and 1.00 shares of
common stock of the surviving corporation for each outstanding share of SNC
common stock. The merger will be accounted for as a pooling-of-interests. At
the end of June, SNC had total assets of approximately $8.2 billion and total
shareholders' equity of approximately $594 million. The combined corporation
will be named Southern National Corporation, while the combined subsidiary
banks will be named Branch Banking and Trust Company and operate using the BB&T
logo. The new corporation would become the 35th largest bank holding company in
the United States and the sixth largest bank holding company in the
Southeastern United States. Based on the FDIC Deposit Survey of June 30, 1993,
(the latest date for which information is available), the combined bank would
have the largest deposit share in North Carolina and the third largest deposit
share in South Carolina.
On June 30, BB&T also had pending a merger with Commerce Bank of Virginia
Beach, Virginia, a $692 million commercial bank. BB&T will effect that merger
by issuing approximately 4,000,000 shares of its common stock for all of the
outstanding shares of Commerce.
12
<PAGE>
TABLE 1
QUARTERLY EARNINGS SUMMARY
<TABLE>
<CAPTION>
TWELVE MONTHS 1994 1993
ENDED --------------- -----------------------
JUNE 30, SECOND FIRST FOURTH THIRD SECOND
1994 QUARTER QUARTER QUARTER QUARTER QUARTER
------------- ------- ------- ------- ------- -------
($ IN THOUSANDS, EXCEPT PER SHARE)
<S> <C> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
Interest income, taxable
equivalent.............. $655,551 171,125 164,244 162,030 158,152 154,002
Interest expense......... 267,000 72,353 67,219 64,693 62,735 61,378
-------- ------- ------- ------- ------- -------
Net interest income, tax-
able equivalent......... 388,551 98,772 97,025 97,337 95,417 92,624
Taxable equivalent ad-
justment................ 15,172 3,779 3,742 3,814 3,837 3,984
-------- ------- ------- ------- ------- -------
Net interest income...... 373,379 94,993 93,283 93,523 91,580 88,640
Provision for loan loss-
es...................... 13,142 770 3,730 4,279 4,363 4,663
-------- ------- ------- ------- ------- -------
Net interest income after
provision for loan loss-
es...................... 360,237 94,223 89,553 89,244 87,217 83,977
Noninterest income:
Service charges on de-
posit accounts........ 44,088 11,318 10,848 11,260 10,662 9,955
Commissions and fees... 59,104 15,768 16,128 14,390 12,818 11,040
Gains on sales of secu-
rities................ 1,583 378 747 244 214 147
Other operating income. 23,222 3,352 5,333 7,560 6,977 7,030
Noninterest expense:
Personnel.............. 159,170 39,712 42,068 39,170 38,220 36,234
Premises and equipment. 51,809 12,707 12,646 13,798 12,658 11,803
Other.................. 112,123 29,705 26,938 28,675 26,805 25,781
-------- ------- ------- ------- ------- -------
Income before income tax-
es...................... 165,132 42,915 40,957 41,055 40,205 38,331
Income taxes............. 55,680 14,616 13,877 14,004 13,183 11,941
-------- ------- ------- ------- ------- -------
Net income............. $109,452 28,299 27,080 27,051 27,022 26,390
======== ======= ======= ======= ======= =======
PER SHARE DATA
Net income:
Primary................ $ 3.00 .77 .74 .74 .74 .74
Fully diluted.......... 2.99 .77 .74 .74 .74 .73
Cash dividends........... 1.06 .27 .27 .27 .25 .25
Book value............... 22.17 22.17 22.01 21.90 21.49 21.13
Closing market price..... 31.25 31.25 29.13 33.25 33.88 34.38
</TABLE>
TABLE 2
PROFITABILITY MEASURES
<TABLE>
<CAPTION>
1994 1993
--------------- -----------------------
SECOND FIRST FOURTH THIRD SECOND
QUARTER QUARTER QUARTER QUARTER QUARTER
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Return on average assets................ 1.15% 1.12 1.14 1.20 1.25
Return on average equity................ 14.28 13.76 13.69 14.05 14.47
Net interest margin..................... 4.28 4.27 4.38 4.53 4.68
Yield to break even..................... 2.26 2.30 2.36 2.44 2.54
</TABLE>
13
<PAGE>
TABLE 3
COMPOSITION OF LOAN PORTFOLIO
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
-------------------- ------------
1994 1993 1993
---------- --------- ------------
(THOUSANDS)
<S> <C> <C> <C>
Commercial real estate--nonowner occupied.... $ 859,053 811,957 855,049
Residential real estate--construction,
acquisition and development................. 414,768 375,885 403,923
Commercial real estate--owner occupied....... 979,999 836,267 910,602
Residential real estate--permanent........... 2,107,259 1,872,676 2,238,588
Commercial................................... 994,273 929,713 985,324
Consumer..................................... 677,458 571,855 663,641
Home equity lines............................ 411,360 401,419 408,801
Credit card and related plans................ 135,001 126,791 144,319
Other........................................ 117,050 90,959 87,633
---------- --------- ---------
$6,696,221 6,017,522 6,697,880
========== ========= =========
</TABLE>
TABLE 4
REAL ESTATE LOANS--RISK CATEGORIES--JUNE 30, 1994
<TABLE>
<CAPTION>
NONPERFORMING LOANS
----------------------
ACQUISITION
AND % OF
PERMANENT CONSTRUCTION DEVELOPMENT TOTAL AMOUNT LOAN TYPE
--------- ------------ ----------- ---------- ---------- -----------
(THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
COMMERCIAL--NONOWNER OCCUPIED:
Multi-family................ $278,168 25,601 10,248 314,017 1,022 .33%
Hotels/motels............... 82,514 5,625 -- 88,139 1,272 1.44
Shopping centers/malls...... 73,617 3,118 12,509 89,244 -- --
Office buildings............ 207,485 25,958 6,834 240,277 897 .37
Warehouse/distribution/light
industrial................. 57,921 5,460 13,090 76,471 443 .58
Acquisition only............ -- -- 50,905 50,905 2,750 5.40
-------- ------- ------- ---------- ---------- --------
Total commercial--nonowner
occupied................. 699,705 65,762 93,586 859,053 6,384 .74
-------- ------- ------- ---------- ---------- --------
RESIDENTIAL--CONSTRUCTION,
ACQUISITION, AND DEVELOPMENT. -- 126,550 216,012 342,562 1,145 .33
-------- ------- ------- ---------- ---------- --------
Total real estate......... $699,705 192,312 309,598 1,201,615 7,529 .63%
======== ======= ======= ========== ========== ========
TOTAL LOANS................... $6,696,221 20,223 .30%
TOTAL REAL ESTATE/TOTAL LOANS. 17.94% 37.23
</TABLE>
14
<PAGE>
TABLE 5
ANALYSIS OF ALLOWANCE FOR LOAN LOSSES
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED YEAR ENDED
JUNE 30, JUNE 30, DECEMBER 31,
------------------------------------- ------------
1994 1993 1994 1993 1993
--------- ----------------- -------- ------------
(THOUSANDS)
<S> <C> <C> <C> <C> <C>
Balance, beginning of peri-
od......................... $ 97,697 84,660 93,315 77,889 77,889
Provision for loan losses... 770 4,663 4,500 10,406 19,048
Allowances of purchased com-
panies..................... -- 1,277 -- 4,525 10,560
--------- -------- -------- -------- -------
98,467 90,600 97,815 92,820 107,497
Loans charged off........... 3,695 2,970 5,529 6,192 20,187
Recoveries.................. 1,752 1,498 4,238 2,500 6,005
--------- -------- -------- -------- -------
Net loans charged off..... 1,943 1,472 1,291 3,692 14,182
--------- -------- -------- -------- -------
Balance, end of period...... $ 96,524 89,128 96,524 89,128 93,315
========= ======== ======== ======== =======
Net charge-offs (annualized)
to average loans outstand-
ing........................ .12% .10 .04 .13 .24
Allowance for loan losses to
loans outstanding at end of
period..................... 1.44 1.48 1.44 1.48 1.40
Allowance for loan losses to
nonperforming loans........ 4.77x 3.04 4.77 3.04 2.76
</TABLE>
TABLE 6
NONPERFORMING ASSETS AND PAST DUE LOANS
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
--------------- ------------
1994 1993 1993
------- ------ ------------
(THOUSANDS)
<S> <C> <C> <C>
Nonaccrual loans................................... $20,016 27,759 32,447
Restructured loans................................. 207 1,512 1,303
Foreclosed property................................ 13,055 21,682 14,074
------- ------ ------
Total nonperforming assets....................... $33,278 50,953 47,824
======= ====== ======
Total nonperforming assets to:
Loans and foreclosed property.................... .50% .84 .71
Total assets..................................... .34 .57 .48
======= ====== ======
Accruing loans past due 90 days.................... $23,469 18,589 19,222
======= ====== ======
</TABLE>
15
<PAGE>
TABLE 7
AVERAGE BALANCE SHEETS
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30,
---------------------------------------------------------------
1994 1993
------------------------------- -------------------------------
AVERAGE INCOME/ AVERAGE AVERAGE INCOME/ AVERAGE
BALANCE EXPENSE YIELD/RATE BALANCE EXPENSE YIELD/RATE
---------- -------- ---------- ---------- -------- ----------
(THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Loans...................... $6,619,968 135,165 8.19% $5,766,696 119,040 8.28%
Securities:
U. S. Government and oth-
er....................... 2,451,863 32,263 5.28 1,972,461 30,624 6.23
State and municipal....... 128,928 3,145 9.78 148,346 3,984 10.77
---------- -------- ---------- --------
Total securities........ 2,580,791 35,408 5.50 2,120,807 34,608 6.55
Interest-bearing bank bal-
ances..................... 30,628 315 4.13 22,167 168 3.04
Federal funds sold......... 23,691 237 4.01 31,364 186 2.38
---------- -------- ---------- --------
Total earning assets.... 9,255,078 171,125 7.42 7,941,034 154,002 7.78
---------- -------- ---------- --------
Allowance for loan losses.. (98,116) (87,055)
Net unrealized (losses) on
securities available for
sale...................... (20,418) --
Cash and due from banks,
noninterest-bearing....... 315,041 296,965
Bank premises and equip-
ment...................... 150,043 116,380
Other assets............... 265,624 207,740
---------- ----------
Total assets............ $9,867,252 $8,475,064
========== ==========
LIABILITIES AND
SHAREHOLDERS' EQUITY
Interest-bearing deposits:
Savings................... $ 871,579 5,469 2.52% $ 573,975 4,017 2.81%
Interest checking......... 1,089,448 5,516 2.03 917,825 4,897 2.14
Money rate savings........ 781,169 4,902 2.52 820,525 5,185 2.53
Certificates of deposit
and other time deposits.. 3,786,683 39,215 4.15 3,675,796 39,946 4.36
---------- -------- ---------- --------
Total interest-bearing
deposits............... 6,528,879 55,102 3.39 5,988,121 54,045 3.62
Short-term borrowed funds.. 1,201,211 11,701 3.91 768,145 5,635 2.94
Long-term debt............. 395,278 5,550 5.63 116,916 1,698 5.83
---------- -------- ---------- --------
Total interest-bearing
liabilities............ 8,125,368 72,353 3.57 6,873,182 61,378 3.58
---------- -------- ---------- --------
Demand deposits, noninter-
est-bearing............... 828,705 759,718
Other liabilities.......... 118,175 110,564
Shareholders' equity....... 795,004 731,600
---------- ----------
Total liabilities and
shareholders' equity... $9,867,252 $8,475,064
========== ==========
Interest income and rate
earned.................... $171,125 7.42% $154,002 7.78%
Interest expense and rate
paid...................... 72,353 3.57 61,378 3.58
Interest rate spread....... 3.85 4.20
NET INTEREST INCOME AND NET
YIELD ON AVERAGE INTEREST-
EARNING ASSETS............ $ 98,772 4.28% $ 92,624 4.68%
======== ========
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
-----------------------------------------------------------------
1994 1993
--------------------------------- -------------------------------
AVERAGE INCOME/ AVERAGE AVERAGE INCOME/ AVERAGE
BALANCE EXPENSE YIELD/RATE BALANCE EXPENSE YIELD/RATE
---------- -------- ---------- ---------- -------- ----------
(THOUSANDS)
<S> <C> <C> <C> <C> <C>
$6,613,741 263,290 8.03% $5,599,310 231,957 8.35%
2,411,608 64,269 5.37 1,883,019 59,609 6.38
131,243 6,436 9.89 151,254 8,063 10.75
---------- -------- ---------- --------
2,542,851 70,705 5.61 2,034,273 67,672 6.71
49,307 867 3.55 21,943 370 3.40
29,548 507 3.46 28,849 347 2.43
---------- -------- ---------- --------
9,235,447 335,369 7.32 7,684,375 300,346 7.88
---------- -------- ---------- --------
(96,679) (84,986)
(5,951) --
319,555 292,177
149,346 112,412
244,921 204,376
---------- ----------
$9,846,639 $8,208,354
========== ==========
$ 874,239 11,075 2.55% $ 545,233 7,723 2.86%
1,091,352 10,963 2.03 902,039 9,703 2.17
785,510 9,414 2.42 812,324 10,500 2.61
3,817,360 77,715 4.11 3,617,526 79,258 4.42
---------- -------- ---------- --------
6,568,461 109,167 3.35 5,877,122 107,184 3.68
1,174,666 20,660 3.55 668,316 9,758 2.94
371,993 9,745 5.28 126,975 3,990 6.34
---------- -------- ---------- --------
8,115,120 139,572 3.47 6,672,413 120,932 3.65
---------- -------- ---------- --------
813,337 715,432
121,481 116,112
796,701 704,397
---------- ----------
$9,846,639 $8,208,354
========== ==========
$335,369 7.32% $300,346 7.88%
139,572 3.47 120,932 3.65
3.85 4.23
$195,797 4.28% $179,414 4.71%
======== ========
</TABLE>
17
<PAGE>
TABLE 8
NONINTEREST INCOME AND EXPENSE
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
-------------------------------------- --------------------------------------------
PERCENT OF
AVERAGE PERCENT OF
PERCENT ASSETS PERCENT AVERAGE ASSETS
INCREASE ----------- INCREASE ---------------
1994 1993 (DECREASE) 1994 1993 1994 1993 (DECREASE) 1994 1993
------- ------ ---------- ----- ----- -------- ------- ---------- ------- -------
(THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NONINTEREST INCOME
Service charges on
deposit accounts....... $11,318 9,955 13.7 % .46 .47 $ 22,166 18,842 17.6 % .45 .46
Other service charges,
commissions and fees... 5,123 4,345 17.9 .21 .20 10,203 8,683 17.5 .21 .21
Mortgage banking income. 2,935 2,808 4.5 .12 .13 8,221 7,040 16.8 .17 .17
Gains on sales of secu-
rities................. 378 147 157.1 .02 .01 1,125 1,262 (10.9) .02 .03
Trust income............ 3,008 2,683 12.1 .12 .13 5,860 5,111 14.7 .12 .13
Insurance commissions... 2,977 2,152 38.3 .12 .10 6,301 4,616 36.5 .13 .12
Other operating income.. 5,077 6,082 (16.5) .20 .29 9,996 9,848 1.5 .21 .24
------- ------ ----- ----- ----- -------- ------- ----- ------- -------
$30,816 28,172 9.4 % 1.25 1.33 $ 63,872 55,402 15.3 % 1.31 1.36
======= ====== ===== ===== ===== ======== ======= ===== ======= =======
NONINTEREST EXPENSE
Salaries and wages...... $31,611 29,101 8.6 % 1.29 1.38 $ 64,788 55,958 15.8 % 1.32 1.37
Other personnel expense. 8,101 7,133 13.6 .33 .34 16,992 14,296 18.9 .35 .35
Net occupancy expense... 5,749 5,346 7.5 .23 .25 11,690 10,421 12.2 .24 .26
Furniture and equipment
expense................ 6,958 6,457 7.8 .28 .30 13,663 12,467 9.6 .28 .31
Deposit insurance
premiums............... 4,225 3,799 11.2 .17 .18 8,432 7,507 12.3 .17 .18
Other operating expense. 25,480 21,982 15.9 1.04 1.04 48,211 41,599 15.9 .99 1.02
------- ------ ----- ----- ----- -------- ------- ----- ------- -------
$82,124 73,818 11.3 % 3.34 3.49 $163,776 142,248 15.1 % 3.35 3.49
======= ====== ===== ===== ===== ======== ======= ===== ======= =======
EFFICIENCY RATIO........ 63.56% 61.18 63.35% 60.91
======= ====== ======== =======
</TABLE>
TABLE 9
SELECTED RATIOS
<TABLE>
<CAPTION>
1994 1993
---------------- -----------------------
SECOND FIRST FOURTH THIRD SECOND
QUARTER QUARTER QUARTER QUARTER QUARTER
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
CAPITAL ADEQUACY
Average equity to average assets....... 8.06% 8.13 8.33 8.58 8.63
Equity to assets at period end......... 8.14 7.99 8.08 8.55 8.59
Risk-based capital ratios:
Tier 1 capital....................... 12.26 12.11 11.94 12.80 12.93
Total capital........................ 13.52 13.41 13.73 14.77 14.92
Tier 1 leverage ratio.................. 7.96 7.79 8.05 8.52 9.12
LIQUIDITY
Average loans to:
Average deposits..................... 89.97% 89.21 89.44 88.93 85.46
Average deposits and short-term bor-
rowed funds......................... 77.35 77.24 78.13 77.97 76.73
STOCK PERFORMANCE
Market price (period end).............. $31.25 29.13 33.25 33.88 34.38
Price/earnings ratio (based on quarter
end stock price and trailing 12 months
fully diluted earnings per share)..... 10.45x 9.87 11.43 12.74 13.38
Price/book ratio (period end).......... 1.41 1.32 1.52 1.58 1.63
</TABLE>
18
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THE
REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED THEREUNTO DULY AUTHORIZED.
BB&T Financial Corporation
(Registrant)
By: /s/ Scott E. Reed
---------------------------------
Scott E. Reed
Senior Executive Vice President
and Chief Financial Officer
Date: August 15, 1994
20
<PAGE>
PAGE
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit Reference
- - --------------------------------------------------------------------------------
<C> <S> <C>
(4)(a) Definitive Form of Certificate for common
stock, $2.50 par value, of Registrant Exhibit "B"/1/
(10)(a) Form of Branch Banking and Trust Company
Long Term Incentive Plan Exhibit (19)/2/
(10)(b) Form of Branch Banking and Trust Company
Executive Incentive Compensation Plan Exhibit (10)(b)/3/
(10)(c) Form of BB&T Financial Corporation Non-
Employee Director Stock Option Plan Exhibit (10)(c)/4/
(11) Statement re Computation of Per Share
Earnings Filed Herewith
</TABLE>
(1). Incorporated by reference to the identified exhibit under Registrant's
Form 10-Q, File No. 2-50199, filed October 14, 1979.
(2). Incorporated by reference to the identified exhibit under Registrant's
Form 10-Q, File No. 0-7871, filed May 14, 1991.
(3). Incorporated by reference to the identified exhibit under Registrant's
Form 10-K, File No. 0-7871, filed February 22, 1985.
(4). Incorporated by reference to the identified exhibit under Registrant's
Form 10-K, File No. 0-7871, filed March 16, 1992.
(b). Reports on Form 8-K
There were no reports on Form 8-K filed during the quarter ended June 30,
1994.
<PAGE>
PAGE
Exhibit 11
BB&T FINANCIAL CORPORATION AND SUBSIDIARIES
COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
----------------------------- -----------------------------
($ in thousands, except share and per share) 1994 1993 1994 1993
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Primary
Net income $28,299 26,390 $55,379 50,939
============================= =============================
Shares
Weighted average number of common shares
outstanding 36,162,800 35,052,336 36,120,517 34,132,844
Add shares assuming exercise of options reduced by the
number of shares which could have been purchased
with the proceeds from exercise of such options 410,167 540,834 431,694 551,643
----------------------------- -----------------------------
Primary weighted average number of common shares
and equivalent share 36,572,967 35,593,170 36,552,211 34,684,487
============================= =============================
Primary income per common share and equivalent share $ .77 .74 $ 1.52 1.47
============================= =============================
Assuming full dilution
Net income $28,299 26,390 $55,379 50,939
Add after tax interest expense and amortization of issue
costs applicable to convertible debenture -- -- -- 386
----------------------------- -----------------------------
Net income as adjusted $28,299 26,390 $55,379 51,325
============================= =============================
Shares
Weighted average number of common shares
outstanding 36,162,800 35,052,336 36,120,517 34,132,844
Add shares assuming exercise of options reduced by the
number of shares which could have been purchased
with the proceeds from exercise of such options 410,167 581,068 431,694 583,871
Add shares assuming conversion of convertible
debentures -- 347,055 -- 1,126,572
Fully diluted weighted average number of shares 36,572,967 35,980,459 36,552,211 35,843,287
============================= =============================
Fully diluted income per share $ .77 .73 $ 1.52 1.43
============================= =============================
</TABLE>
