<PAGE>
As filed with the Securities and Exchange
Commission on January 10, 1994
Registration No. 33-49749
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------
POST-EFFECTIVE AMENDMENT NO. 2
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------------
BB&T FINANCIAL CORPORATION
--------------------------
(Exact name of registrant as specified in its charter)
North Carolina 56-1056232
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
BB&T Financial Corporation
223 West Nash Street
Wilson, North Carolina 27893
919/399-4291
(Name, address, including zip code, and telephone
number, including area code, of registrant's
principal executive offices)
Scott E. Reed
Senior Executive Vice President and Treasurer
BB&T Financial Corporation
223 West Nash Street
Wilson, North Carolina 27893
919/399-4291
(Address, including zip code, and telephone
number, including area code,
of agent for service)
Please address a copy of all communications to:
L. Stevenson Parker, Esq. Gary R. Bronstein, Esq.
Beth S. DeSimone, Esq. James C. Stewart, Esq.
Arnold & Porter Housley, Goldberg & Kantarian, P.C.
1200 New Hampshire Avenue, N.W. Suite 700
Washington, D.C. 20036 1220 19th Street, N.W.
202/872-6986 Washington, D.C. 20036
202/822-9611
Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of
the Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box.
/ /
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box.
/x/
<PAGE>
SUBJECT TO COMPLETION, DATED JANUARY 10, 1994.
PROSPECTUS/PROXY STATEMENT
BB&T FINANCIAL CORPORATION
AN ESTIMATED 800,000 SHARES OF COMMON STOCK
BB&T Financial Corporation ("BB&T Financial") is hereby offering an
estimated 800,000 shares of its common stock, par value $2.50 per share ("BB&T
Financial Common Stock"), for sale in a Subscription Offering ("Subscription
Offering"), first to an Employee Stock Ownership Plan and Trust ("Home Savings
ESOP") to be established for the benefit of employees of Home Savings Bank of
Albemarle, S.S.B. ("Home Savings") and then to Eligible Member Subscribers
(account holders of Home Savings who had deposits aggregating $50 or more and
borrowers, each at the close of business on January 31, 1993 ("Eligibility
Record Date")) and Voting Members (all persons who held deposit accounts or
borrowings at Home Savings on February 9, 1994 ("Voting Record Date") and
continue to hold such deposit accounts or borrowings on the date of the
Special Meeting (as defined herein) ("Voting Members")) of Home Savings. See
"THE OFFERINGS--The Subscription Offering." Shares offered but not sold in the
Subscription Offering are hereby offered in a Community Offering ("Community
Offering") to (a) natural persons residing in Stanly, Anson, Cabarrus,
Davidson, Montgomery, Rowan, Mecklenburg and Union counties, North Carolina
("Community Offering Area"), (b) IRA, Keogh and similar retirement accounts
established by or for the benefit of natural persons residing in the Community
Offering Area and (c) corporations, partnerships and similar entities
headquartered in the Community Offering Area ("Community Offering Residents").
See "THE OFFERINGS--The Community Offering."
Home Savings is a North Carolina chartered mutual savings bank headquartered
in Albemarle, North Carolina, which has agreed to be acquired by BB&T
Financial in a "Conversion Merger" transaction, subject to approval of Home
Savings' members pursuant to an Agreement and Plan of Reorganization, dated as
of May 27, 1993 ("Reorganization Agreement"), and a Plan of Conversion adopted
by the Board of Directors of Home Savings on May 27, 1993 and amended on
December 13, 1993 and December 21, 1993 ("Plan of Conversion"). See "THE PLAN
OF CONVERSION AND THE REORGANIZATION AGREEMENT" in Annex I attached hereto.
This Prospectus/Proxy Statement, together with Annex I hereto, also
constitutes a Proxy Statement for the Voting Members of Home Savings at the
Special Meeting of Voting Members of Home Savings to be held at 5.30 p.m.
North Carolina time on March 1, 1994 ("Special Meeting") at the main office of
Home Savings, 155 West South Street, Albemarle, North Carolina. The purpose of
the Special Meeting is to consider and vote upon the Plan of Conversion.
Approval of the Plan of Conversion at the Special Meeting is a condition to
consummation of the Subscription Offering and the Community Offering
(together, the "Offerings"). See "THE OFFERINGS--Conditions to Completion of
the Offerings and Termination of the Offerings." Annex I herein contains
important information you should consider if you are a Voting Member. Annex I
is not part of the Prospectus for the shares offered hereby.
The subscription rights being provided to the Home Savings ESOP, Eligible
Member Subscribers and Voting Members in the Subscription Offering
("Subscription Rights") are scheduled to expire, if not exercised, at 5:00
p.m., North Carolina time, on March 1, 1994 unless the Subscription Offering
is otherwise extended to a date which may not be later than
("Subscription Expiration Date"). The Community Offering will expire at 5:00
p.m., North Carolina time, on March 1, 1994. However, the Community Offering
may be extended and close at any date thereafter, but not later than
("Community Expiration Date"), assuming maximum extension of the Subscription
Expiration Date. The Offerings are being managed on a best efforts basis by
Trident Securities, Inc. ("Trident Securities") as sales agent. Trident
Securities is not purchasing any shares of BB&T Financial Common Stock in the
Offerings and has no obligation to purchase any such shares.
(Cover page continued on next page)
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION ("SEC"), ANY STATE SECURITIES COMMISSION, THE
ADMINISTRATOR OF THE SAVINGS INSTITUTIONS DIVISION OF THE NORTH CAROLINA
DEPARTMENT OF COMMERCE ("ADMINISTRATOR"), THE FEDERAL DEPOSIT INSURANCE
CORPORATION ("FDIC") OR ANY OTHER GOVERNMENTAL AGENCY, NOR HAS THE SEC,
ANY STATE SECURITIES COMMISSION, THE ADMINISTRATOR, THE FDIC OR ANY OTHER
GOVERNMENTAL AGENCY PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS/PROXY STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
THE SHARES OF BB&T FINANCIAL COMMON STOCK OFFERED HEREBY ARE NOT DEPOSITS AND
ARE NOT INSURED BY THE FDIC OR ANY OTHER GOVERNMENTAL AGENCY.
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<TABLE>
<CAPTION>
ESTIMATED ESTIMATED
GROSS ESTIMATED NET PROCEEDS
PROCEEDS EXPENSES(2) TO BB&T FINANCIAL
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<S> <C> <C> <C> <C>
Per Share... Estimated Minimum(1) $25.50 $ 1.53 $ 23.97
Estimated Maximum(1) $25.50 $ 1.23 $ 24.27
- -------------------------------------------------------------------------------
Total....... Estimated Minimum $17,340,000(3) $1,040,000 $16,300,000
Estimated Maximum $23,460,000(3) $1,135,000 $22,325,000
</TABLE>
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- -------------------------------------------------------------------------------
(1) Estimated Minimum Per Share Price and Estimated Maximum Per Share Price
are the 85% Price, assuming that the BB&T Market Price is $30.00 (in which
case the 95% Price would be $28.50). The 85% Price, the 95% Price and the
BB&T Market Price will be determined after the Offerings are concluded.
Completion of the Offerings is not conditioned on a minimum or maximum
price, and the price per share is only an estimate. See "THE OFFERINGS--
General--Purchase Price."
(2) Consists of estimated expenses which will be incurred by BB&T Financial in
connection with the Offerings, assuming all shares offered are sold in the
Subscription Offering at the 85% Price.
(3) Minimum and maximum gross proceeds are based on the minimum and maximum of
the Estimated Valuation Range, as defined below (see "THE OFFERINGS--
Appraised Value of Home Savings"), assuming that all shares offered hereby
are sold in the Subscription Offering at the 85% Price. Proceeds are
determined by dividing the Estimated Valuation Range, as defined below, by
the estimated BB&T Market Price ($30.00) and multiplying that result by
the 85% Price ($25.50) See "THE OFFERINGS--The Subscription Offering--
Number of Shares Offered." The actual number of shares and the BB&T Market
Price may vary. The Plan of Conversion does not require a minimum number
of shares to be sold in the Offerings in order to consummate the
Conversion Merger, and it is possible that substantially fewer shares
would be sold and that gross proceeds to BB&T Financial would be
substantially lower. The Administrator, however, may condition his final
approval of the Conversion Merger on a minimum number of shares being sold
in the Conversion Merger. It is possible that unsold shares would be sold
in a public offering. See "USE OF PROCEEDS."
TRIDENT SECURITIES, INC.
THE DATE OF THIS PROSPECTUS/PROXY STATEMENT IS JANUARY , 1994.
<PAGE>
(Continued from previous page)
Subject to certain purchase limitations, Eligible Member Subscribers may
elect to purchase BB&T Financial Common Stock at a price (the "85% Price")
equal to 85% of the last sale price of a share of BB&T Financial Common Stock
quoted on the National Association of Securities Dealers Automated Quotation
System National Market System ("Nasdaq NMS") on the Community Expiration Date
("BB&T Market Price"). BB&T FINANCIAL COMMON STOCK PURCHASED AT THE 85% PRICE
WILL BE SUBJECT TO A FOUR-MONTH TRANSFER RESTRICTION AS DESCRIBED IN THE NEXT
PARAGRAPH. In addition, or alternatively, Eligible Member Subscribers may,
subject to purchase limitations, elect to purchase BB&T Financial Common Stock
at a price (the "95% Price") equal to 95% of the BB&T Market Price. In certain
circumstances, Eligible Member Subscribers also may purchase BB&T Financial
Common Stock at the BB&T Market Price in the Subscription Offering. BB&T
Financial Common Stock purchased at the 95% Price and the BB&T Market Price
will not be subject to any transfer restriction. See "THE OFFERINGS--General--
Purchase Price." On January , 1994, the last sale price of BB&T Financial
Common Stock quoted on the Nasdaq NMS was $ per share. If that price were
the BB&T Market Price, the 85% Price would be $ per share and the 95%
Price would be $ per share. Voting Members who are not also Eligible
Member Subscribers also are eligible to purchase shares (subject to certain
limitations) in the Subscription Offering at the BB&T Market Price with a
priority in the event of oversubscription in either of the Offerings over
persons subscribing for shares in the Community Offering.
Shares purchased by Eligible Member Subscribers in the Subscription Offering
at the 85% Price will be subject to the restriction that such shares may not
be sold or transferred, by sale, gift or otherwise, for a period of four
months following the date of this Prospectus/Proxy Statement, except in the
event of the death of the person who subscribed ("Subscriber") for the shares.
See "CERTAIN CONSIDERATIONS RELATING TO THE OFFERINGS--Four-Month Transfer
Restriction" and "THE OFFERINGS--The Subscription Offering--Four-Month
Transfer Restriction." Under regulations issued by the Administrator, no
person may transfer or enter into any agreement or understanding to transfer
the legal or beneficial ownership of Subscription Rights or the underlying
shares of BB&T Financial Common Stock to the account of any other person prior
to completion of the Conversion.
Subject to the availability of shares, BB&T Financial Common Stock is being
offered in the Community Offering at the 95% Price. See "THE OFFERINGS--
General--Purchase Price." No sale or transfer restriction will apply to shares
purchased in the Community Offering. Those persons who are both Eligible
Member Subscribers (or Voting Members) and Community Offering Residents may
elect to purchase shares of BB&T Financial Common Stock in either the
Subscription Offering or, subject to availability, the Community Offering or
both, but before making such an election, should review the information
contained in and referred to in "THE OFFERINGS--General--Participation in the
Offerings by Eligible Member Subscribers or Voting Members Who Also Are
Community Offering Residents" and "--Certain Federal Income Tax Consequences."
No sales commission will be paid by Subscribers for shares of BB&T Financial
Common Stock purchased in either the Subscription Offering or the Community
Offering.
Eligible Member Subscribers who purchase in the Subscription Offering at the
85% Price should recognize that there are risks associated with the
requirement that shares purchased in the Subscription Offering at the 85%
Price may not be transferred for four months after the date of this
Prospectus/Proxy Statement (other than upon the death of the Subscriber).
Among other things, such Subscribers will not be able to realize, through a
sale, any profit they may have in the shares until after that time. Moreover,
potential fluctuations in the market price of shares of BB&T Financial Common
Stock between the date of subscription and the date Subscribers are permitted
to sell shares purchased in the Offerings could be significant. THUS, THOSE
WHO PURCHASE SHARES IN THE SUBSCRIPTION OFFERING AT THE 85% PRICE MAY NOT BE
ABLE TO SELL THEIR SHARES AT A PRICE EQUAL TO OR GREATER THAN THE 85% PRICE.
Purchasers of shares at the 95% Price or at the BB&T Market Price also should
consider that, while such shares will not be subject to the four-month
transfer restriction, delays may occur between the date the Stock Order Form
is submitted and delivery of certificates for shares, and until such
certificates are received, such purchasers may not be able to sell their
shares. The 95% Price and the BB&T Market Price could be greater than the
market price for the BB&T Financial Common Stock on the dates Subscribers
receive certificates for shares. See "CERTAIN CONSIDERATIONS RELATING TO THE
OFFERINGS--The Purchase Price," "THE OFFERINGS--General--Purchase Price" and
"--Delivery of Stock Certificates" for additional discussion about these
factors and related considerations. Eligible Member Subscribers, Voting
Members and Community Offering Residents (collectively referred to herein as
"Eligible Subscribers") also should consider carefully the other information
set forth in "CERTAIN CONSIDERATIONS RELATING TO THE OFFERINGS." This
information relates to the discounts provided to Subscribers in the
Subscription Offering and Community Offering, certain federal income tax
considerations, certain proposed legislation relating to conversion mergers
and the potential effects of extensions of the Offerings.
Stock Order Forms for the Offerings are being provided with this
Prospectus/Proxy Statement for use by those Eligible Subscribers who wish to
subscribe for BB&T Financial Common Stock. Subscribers should send or deliver
the Stock Order Form, together with full payment for the BB&T Financial Common
Stock, in cash (if delivered by hand), by check or money order, or with
appropriate instructions authorizing withdrawal from a Home Savings deposit
account (but not a demand deposit account or Negotiable Order of Withdrawal
("NOW") account, on which a Subscriber must write a check) so that the Stock
Order Form and payment are received by the Subscription Expiration Date or the
Community Expiration Date, as applicable (currently expected to be 5:00 p.m.,
North Carolina time, on March 1, 1994). Home Savings reserves the right to
reject orders submitted by facsimile transmission or payment submitted by wire
transfer. NO PERSON IS REQUIRED TO SUBSCRIBE FOR SHARES IN THE SUBSCRIPTION
OFFERING OR THE COMMUNITY OFFERING. For additional information about how to
subscribe for shares in the Offerings, see "THE OFFERINGS--The Subscription
Offering--How to Subscribe" and "--The Community Offering--How to Subscribe."
(Cover page continued on next page)
<PAGE>
(Continued from previous page)
Eligible Subscribers who wish to subscribe for shares of BB&T Financial
Common Stock in either the Subscription Offering or the Community Offering must
specify a minimum purchase of $500 on their Stock Order Forms. The maximum
number of shares of BB&T Financial Common Stock for which each Eligible Member
Subscriber may subscribe at the 85% Price and/or the 95% Price is that number
of whole shares which when multiplied by the 85% Price, and/or the 95% Price,
as appropriate, does not exceed $150,000 (or $250,000 in the case of Eligible
Member Subscribers with a single deposit account with a balance of at least
$25,000 or with an additional account relationship--which may include a loan
account or an IRA, Keogh and other similar retirement account, if the Eligible
Member Subscriber is the beneficiary of such account, in either case at Home
Savings at the close of business on the Eligibility Record Date). An Eligible
Member Subscriber with a single deposit account of less than $25,000 at Home
Savings or only a loan account, each on the Eligibility Record Date may
purchase additional shares at the BB&T Market Price in the Subscription
Offering, provided that the aggregate purchase price of shares purchased at the
BB&T Market Price, the 85% Price and the 95% Price does not exceed $250,000.
Voting Members who are not Eligible Member Subscribers may purchase in the
Subscription Offering, at the BB&T Market Price (and without a four-month
transfer restriction), that number of shares of BB&T Financial Common Stock
which, when multiplied by the BB&T Market Price, would not exceed $250,000. The
maximum amount of BB&T Financial Common Stock for which any person may
subscribe in the Community Offering at the 95% Price is that number of shares
of BB&T Financial Common Stock, which together with any shares subscribed for
in the Subscription Offering, would have an aggregate purchase price equal to
$250,000. In addition, no person (other than the Home Savings ESOP), together
with any associate or group of persons acting in concert with such person, may
acquire, through the exercise of Subscription Rights in the Subscription
Offering and/or the Community Offering, beneficial ownership of more than 5% of
the outstanding BB&T Financial Common Stock in the aggregate (taking into
account shares that may be held by such person) at the opening of business on
the day following the Closing Date ("Outstanding BB&T Financial Common Stock").
Each Subscriber will receive, subject to these limitations, as many whole
shares of BB&T Financial Common Stock as can be purchased at the 85% Price, the
95% Price and/or the BB&T Market Price, as applicable, with the amount of funds
submitted by the Subscriber, subject to reduction in the event of
oversubscription. No fractional shares will be issued, and Home Savings will
refund to Subscribers any funds received in lieu of the issuance of fractional
shares. See "THE OFFERINGS--The Subscription Offering--Maximum and Minimum
Purchase Limitations" and "--The Community Offering--Maximum and Minimum
Purchase Limitations."
All amounts received for the purchase of shares in the Subscription Offering
(other than by designation for withdrawal from an eligible deposit account)
will be placed in a special segregated Home Savings account for the Offerings.
Interest will be paid on funds received at Home Savings' passbook rate,
currently % per annum, from the date payment is received, and funds in
deposit accounts for which withdrawal is authorized will continue to accrue
interest at the account rate, until the date on which the Offerings either are
consummated or terminated. See "THE OFFERINGS--The Subscription Offering--
Method of Payment" and "--The Community Offering--Method of Payment." If the
Offerings are terminated, all funds received from Subscribers, together with
accrued interest, if any, will be promptly remitted to such Subscribers, and
any funds authorized by Subscribers for withdrawal from Home Savings deposit
accounts for the payment for shares of BB&T Financial Common Stock (pursuant to
the procedures described herein) will be released. See "THE OFFERINGS--The
Subscription Offering Refunds" and "--The Community Offering--Refunds."
The number of shares of BB&T Financial Common Stock being offered in the
Offerings, as reflected above, is based on an estimate. The actual number of
shares of BB&T Financial Common Stock to be offered in the Subscription
Offering will be determined by dividing the appraised value of Home Savings, as
determined by an independent appraiser ("Appraised Value"), as updated, by the
BB&T Market Price. The Appraised Value was determined, as of December 14, 1993,
to be $24 million, and will be updated promptly following the expiration of the
Offerings. The number of shares to be offered in the Community Offering will
equal the number of shares actually offered in the Subscription Offering, minus
the number of shares actually purchased in the Subscription Offering. The total
number of shares of BB&T Financial Common Stock to be offered, currently
estimated to be 800,000, may increase or decrease without a resolicitation of
Subscribers as a result of changes in the Appraised Value and/or changes in the
market price of BB&T Financial Common Stock. However, if the final Appraised
Value is lower than $20.4 million or higher than $27.6 million ("Estimated
Valuation Range"), approval of the Administrator will be required in order to
complete the Offerings. Such approval may, but would not necessarily, be
conditioned upon a resolicitation of Subscribers. In such case, the
subscription of any Subscriber who does not respond to the resolicitation may
be automatically rescinded. The Plan of Conversion does not require a minimum
number of shares to be sold in the Offerings in order to consummate the
transactions contemplated by the Plan of Conversion. The Administrator,
however, may condition his final approval of the Conversion and the Acquisition
on a minimum number of shares being sold in the Offerings. It is possible
unsold shares would be sold in a public offering. See "THE OFFERINGS--The
Subscription Offering--Appraised Value of Home Savings" and "USE OF PROCEEDS."
The Offerings are being conducted pursuant to the Plan of Conversion and the
Reorganization Agreement, which provide for the conversion ("Conversion") of
Home Savings from a North Carolina chartered mutual savings bank to a North
Carolina chartered stock savings bank and the simultaneous acquisition
("Acquisition") by BB&T Financial of all of the stock of Home Savings issued in
the Conversion for cash in an amount equal to the Appraised Value of Home
Savings less expenses incurred in the Conversion and the Acquisition (but in no
event less than the current net worth of Home Savings). The Plan of Conversion
further provides that some time after the Conversion and the Acquisition, Home
Savings will be merged or otherwise combined ("Merger") with BB&T Financial's
lead commercial bank subsidiary, Branch Banking and Trust Company ("BB&T"). The
Conversion, the Acquisition and the Merger are collectively referred to herein
as the "Conversion Merger." Completion of the Conversion Merger and the
Offerings is subject to the receipt of approval of Home Savings' Voting Members
at the Special Meeting, certain regulatory approvals, the satisfaction or
waiver of certain other conditions and the rights of BB&T Financial and Home
Savings to terminate the Conversion Merger in certain circumstances. See "THE
OFFERINGS--Conditions to Completion of the Offerings and Termination of the
Offerings."
3
<PAGE>
[A MAP WILL SHOW THE STATES OF NORTH CAROLINA AND SOUTH CAROLINA
AND BB&T BRANCH LOCATIONS]
4
<PAGE>
AVAILABLE INFORMATION
This Prospectus/Proxy Statement omits certain of the information contained in
a registration statement ("Registration Statement") covering the shares offered
hereby, which is on file with the SEC. BB&T Financial is subject to the
informational requirements of the Securities Exchange Act of 1934, as amended
("Exchange Act"), and in accordance therewith files reports and other
information with the SEC. Information as of particular dates concerning BB&T
Financial's executive officers and directors, their remuneration, options
granted to them, the amount of BB&T Financial Common Stock owned by BB&T
Financial's directors and the principal holders of securities of BB&T Financial
is disclosed in proxy statements distributed to the shareholders of BB&T
Financial and filed with the SEC. Reports, proxy statements and other
information filed by BB&T Financial or concerning BB&T Financial can be
inspected and copied at the public reference facilities maintained by the SEC
at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549,
and at its regional offices at Northwestern Atrium Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661-2511 and 14th Floor, 75 Park Place,
New York, New York 10007. Copies of such materials also can be obtained from
the SEC's Public Reference Section, 450 Fifth Street, N.W., Washington, D.C.
20549 at prescribed rates.
Information contained in this Prospectus/Proxy Statement regarding Home
Savings and its subsidiary has been furnished by Home Savings and information
herein regarding BB&T Financial and its subsidiaries has been furnished by BB&T
Financial. Annex I hereto is not part of the Registration Statement or
Prospectus used to solicit purchases in the Offerings and is provided solely
for the solicitation of proxies by management of Home Savings from Voting
Members for use at the Special Meeting.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed with the SEC by BB&T Financial are
hereby incorporated by reference:
(i) BB&T Financial's Annual Report on Form 10-K for the year ended
December 31, 1992;
(ii) BB&T Financial's Quarterly Reports on Form 10-Q for the quarters
ended March 31, 1993, June 30, 1993 and September 30, 1993;
(iii) BB&T Financial's Amendment to Application or Report on Form 8 dated
January 15, 1993, BB&T Financial's Amendment to Application or Report on
Form 8 dated February 1, 1993 and BB&T Financial's Amendment to Application
or Report on Form 8 dated March 30, 1993 (Amendment Nos. 2, 3 and 4,
respectively, to BB&T Financial's Current Report on Form 8-K dated December
14, 1992);
(iv) BB&T Financial's Current Reports on Form 8-K dated August 6, 1993
(filed August 9, 1993), October 29, 1993, December 10, 1993 and January 10,
1994.
All reports subsequently filed by BB&T Financial pursuant to Section 13(a)
and 13(c) of the Exchange Act prior to the consummation of the Conversion
Merger, any definitive proxy or information statements filed pursuant to
Section 14 of the Exchange Act in connection with any subsequent shareholders'
meeting and any reports filed pursuant to Section 15 of the Exchange Act prior
to completion or termination of the Subscription Offering and the Community
Offering, are deemed to be incorporated by reference in this Prospectus/Proxy
Statement and are deemed to be a part hereof from the date of filing of such
documents. Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for the purposes of this Prospectus/Proxy Statement to the extent that a
statement contained herein or in any subsequently filed document which also is
or is deemed to be incorporated herein modifies or supersedes such statement.
Any statement so modified or superseded shall not be deemed to constitute a
part of this Prospectus/Proxy Statement, except as so modified or superseded.
BB&T Financial will provide without charge to each person to whom a copy of
this Prospectus/Proxy Statement is delivered, upon the written or oral request
of any such person, a copy of any or all of the documents herein incorporated
by reference (other than exhibits to such documents unless such exhibits are
specifically incorporated therein by reference). Written requests should be
directed to the Secretary of BB&T Financial Corporation, 223 West Nash Street,
Wilson, North Carolina 27893. Requests also may be directed to the Conversion
Information Center, 155 West South Street, Albemarle, North Carolina 28002
(telephone no. (704) ).
5
<PAGE>
SUMMARY
The following is a summary of certain information relating to the offering by
BB&T Financial of shares of BB&T Financial Common Stock in the Subscription
Offering and the Community Offering and to the solicitation of proxies by
management of Home Savings for use in connection with the vote on the Plan of
Conversion at the Special Meeting. This summary does not purport to be complete
and is qualified in its entirety by the more detailed information appearing
elsewhere or incorporated by reference in this Prospectus/Proxy Statement.
Information contained in this Prospectus/Proxy Statement regarding Home
Savings has been furnished by Home Savings and information regarding BB&T
Financial and its subsidiaries has been furnished by BB&T Financial.
A glossary of defined terms is included as Annex III to this Prospectus/Proxy
Statement.
THE SPECIAL MEETING
Completion of the Conversion Merger and the Offerings is subject to the
approval of the Voting Members of Home Savings (who are those who held deposit
accounts or borrowings or were obligated on a loan from Home Savings as of
February 9, 1994 and continue to hold such accounts or borrowings or be
obligated on such loan through the date of the Special Meeting) at the Special
Meeting, scheduled to be held on March 1, 1994. Voting Members are not required
to vote to be eligible to participate in the Offerings and Voting Members are
not required to purchase shares to be eligible to vote.
Annex I hereto contains information concerning the Special Meeting and Home
Savings, including a description of Home Savings' reasons for the Conversion
Merger and benefits to be provided by BB&T Financial to the directors, officers
and employees of Home Savings. Annex I hereto is not part of the Registration
Statement or the Prospectus used to solicit purchases in the Offerings and is
provided solely for the solicitation of proxies by management of Home Savings
from Voting Members for use at the Special Meeting.
BB&T FINANCIAL CORPORATION
BB&T Financial, a North Carolina corporation headquartered in Wilson, North
Carolina, is a bank holding company registered under the Bank Holding Company
Act of 1956, as amended ("BHCA"). At September 30, 1993, BB&T Financial's total
consolidated assets were approximately $8.09 billion, total deposits were
approximately $6.1 billion and total consolidated shareholders' equity was
approximately $698.4 million.
BB&T Financial owns and operates two commercial bank subsidiaries: (i) BB&T,
a North Carolina chartered commercial bank headquartered in Wilson, North
Carolina, which had assets of approximately $7.62 billion, deposit liabilities
of approximately $5.81 billion and shareholders' equity of approximately $662.1
million at September 30, 1993; and (ii) through BB&T Financial Corporation of
South Carolina (which is a wholly owned subsidiary of BB&T Financial), Branch
Banking and Trust Company of South Carolina ("BB&T-SC"), a South Carolina
chartered commercial bank headquartered in Greenville, South Carolina, which
had assets of approximately $501.0 million, deposit liabilities of
approximately $449.2 million and shareholders' equity of approximately $42.3
million at September 30, 1993. The deposits of BB&T and BB&T-SC are insured by
the FDIC. BB&T Financial also owns and operates Mutual Savings Bank of
Rockingham County, Inc., S.S.B., Reidsville, North Carolina ("Mutual Savings"),
Citizens Savings Bank, S.S.B., Inc., Newton, North Carolina ("Citizens of
Newton"), Old Stone Bank of North Carolina, A Federal Savings Bank, High Point,
North Carolina ("Old Stone") and Citizens Savings Bank S.S.B., Inc.,
Mooresville, North Carolina ("Citizens of Mooresville"). Citizens of Newton,
Mutual Savings and Citizens of Mooresville are North Carolina chartered savings
banks. Old Stone is a federally chartered savings bank. Together, these
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four institutions had assets of $957 million and deposit liabilities of $849
million at September 30, 1993. These institutions are expected to be merged or
otherwise consolidated into BB&T in the future.
In the last three years, BB&T Financial has acquired fourteen savings
institutions with aggregate assets of billion. Seven of the institutions
acquired were mutual institutions acquired in "conversion merger" transactions,
and the other seven institutions were stock institutions. All but four of these
fourteen institutions (Citizens of Newton, Mutual Savings, Citizens of
Mooresville and Old Stone) have been merged into BB&T. BB&T Financial also has
acquired several branches of a fifteenth savings institution having $185
million in deposits.
BB&T Financial has pending as of the date of this Prospectus/Proxy Statement
the acquisition, through conversion mergers, of three savings institutions with
aggregate assets of million at September 30, 1993, including its pending
acquisition of Home Savings. BB&T Financial also has pending the acquisition of
L.S.B. Bancshares, Inc. of South Carolina, Lexington, South Carolina ("LSB"), a
South Carolina-chartered bank holding company with total assets of $646 million
at September 30, 1993. These acquisitions are expected to be consummated in the
first half of 1994. See "DESCRIPTION OF BB&T FINANCIAL--Savings Institution
Acquisitions and Operations" and "--BB&T Financial's Commercial Bank
Acquisitions and Operations."
BB&T Financial continues to evaluate the possibility of acquiring additional
mutual and stock savings institutions, commercial banks and other financial
services companies located in North Carolina, South Carolina and Virginia. BB&T
Financial expects to enter into acquisition agreements with one or more of such
institutions after the date of this Prospectus/Proxy Statement.
BB&T Financial's executive offices are located at 223 West Nash Street,
Wilson, North Carolina 27893 and its telephone number is (919) 399-4291.
For further information concerning BB&T Financial, see "DESCRIPTION OF BB&T
FINANCIAL."
HOME SAVINGS BANK OF ALBEMARLE, S.S.B.
Home Savings is a North Carolina chartered mutual savings bank headquartered
in Albemarle, North Carolina. As a "mutual" institution, Home Savings has no
stockholders. Home Savings had assets of $157.9 million, deposit liabilities of
$139.7 million and retained income of $16.5 million as of September 30, 1993.
The deposits of Home Savings are insured by the Savings Association Insurance
Fund ("SAIF") of the FDIC. Home Savings' principal business consists of
soliciting deposit accounts from the general public and making mortgage loans
to finance the acquisition and construction of residential dwellings.
THE OFFERINGS
Purchase Price and Transfer Restriction for Shares Purchased at the 85%
Price. Shares are being offered to Eligible Member Subscribers in the
Subscription Offering (subject to certain purchase limitations) at either the
85% Price, which is equal to 85% of the BB&T Market Price, and/or the 95%
Price, which is equal to 95% of the BB&T Market Price, and to Voting Members
who are not also Eligible Member Subscribers at the BB&T Market Price. Under
certain circumstances, shares subscribed for by Eligible Member Subscribers in
excess of specified purchase limitations in the Subscription Offering may be
purchased at the BB&T Market Price. See "--Additional Information About The
Subscription Offering--Subscription Limitations" and "THE OFFERINGS--The
Subscription Offering--Maximum and Minimum Purchase Limitations."
SHARES PURCHASED AT THE 85% PRICE IN THE SUBSCRIPTION OFFERING WILL BE
SUBJECT TO THE RESTRICTION THAT SUCH SHARES MAY NOT BE SOLD OR TRANSFERRED BY
SALE, GIFT OR OTHERWISE, FOR A PERIOD OF FOUR MONTHS FOLLOWING THE DATE OF THIS
PROSPECTUS/PROXY STATEMENT, EXCEPT IN THE EVENT OF THE DEATH OF THE SUBSCRIBER.
See "CERTAIN CONSIDERATIONS RELATING TO THE OFFERINGS--Four-Month Transfer
Restriction" and "THE OFFERINGS--The Subscription Offering--Four-Month Transfer
Restriction." Shares purchased at the 95% Price and the BB&T Market Price will
not be subject to any transfer restriction.
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The price of any shares offered in the Community Offering (subject to certain
purchase limitations) is the 95% Price. No sale or transfer restriction will
apply to shares purchased in the Community Offering. See "THE OFFERINGS--
General--Purchase Price."
No sales commmissions will be paid by Subscribers for shares of BB&T
Financial Common Stock purchased in either the Subscription Offering or the
Community Offering.
Although the 85% Price and the 95% Price will be set at a discount to the
market price of the BB&T Financial Common Stock at the time the 85% Price and
95% Price are established, for a variety of reasons, Subscribers may be unable
to sell the shares for which they subscribe at a price equal to or greater than
the 85% Price or the 95% Price. This is particularly true for purchasers who
subscribe in the Subscription Offering at the 85% Price, and who therefore may
not sell or otherwise transfer their shares until four months after the date of
this Prospectus/Proxy Statement. See "CERTAIN CONSIDERATIONS RELATING TO THE
OFFERINGS--Four-Month Transfer Restriction," "--The Purchase Price," and "THE
OFFERINGS--General--Purchase Price."
Eligibility. Eligible Member Subscribers are eligible to participate in the
Subscription Offering. Eligible Member Subscribers are borrowers and account
holders of Home Savings who had loans outstanding on deposits aggregating $50
or more, each as of the close of business on the Eligibility Record Date
(January 31, 1993). Such account holders may include trusts that hold eligible
accounts, including IRA, Keogh and similar retirement accounts. Voting Members
who are not also Eligible Member Subscribers also are eligible to participate
in the Subscription Offering. Voting Members are all persons who held deposit
accounts or borrowings at, or were obligated on a loan from, Home Savings on
the Voting Record Date and who continue to hold such accounts or borrowings, or
be obligated on such a loan, through the date of the Special Meeting scheduled
for March 1, 1994. No person is required to subscribe for any shares of BB&T
Financial Common Stock in the Subscription Offering, and Voting Members may
vote at the Special Meeting whether or not they purchase shares. Under the
Administrator's regulations, no person may transfer or enter into any agreement
or understanding to transfer the legal or beneficial ownership of Subscription
Rights or the underlying shares of BB&T Financial Common Stock to the account
of any other person prior to completion of the Conversion. Additional
information concerning the Subscription Offering can be found below under "--
Additional Information About The Subscription Offering" and "THE OFFERINGS--The
Subscription Offering."
Community Offering Residents are eligible to participate in the Community
Offering. Community Offering Residents are (a) natural persons residing in the
Community Offering Area, (b) IRA, Keogh and similar retirement accounts
established by or for the benefit of natural persons residing in the Community
Offering Area and (c) corporations, partnerships and similar entities
headquartered in the Community Offering Area. Additional information concerning
the Community Offering can be found below under "--Additional Information About
The Community Offering" and "THE OFFERINGS--The Community Offering."
An Eligible Member Subscriber or Voting Member who also is a Community
Offering Resident is eligible to participate in either the Subscription
Offering, the Community Offering or both. Before deciding whether to purchase
in the Subscription Offering or the Community Offering, persons eligible for
each of the Offerings should review carefully the information contained or
referred to below in "--Certain Federal Income Tax Consequences" and in "THE
OFFERINGS--General--Participation in the Offerings by Eligible Member
Subscribers or Voting Members Who Also Are Community Offering Residents" and
"--Certain Federal Income Tax Consequences."
Settlement for Shares. Each Subscriber generally may subscribe for as many
whole shares of BB&T Financial Common Stock as can be purchased at the 85%
Price, the 95% Price and/or the BB&T Market Price, as applicable, with the
amount of funds submitted by the Subscriber (or, in the case of Subscribers who
designate funds for withdrawal from certain eligible Home Savings deposit
accounts, the amount designated for withdrawal from such accounts), subject to
the purchase limitations described under "THE
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OFFERINGS--The Subscription Offering--Maximum and Minimum Purchase Limitations"
and "--The Community Offering--Maximum and Minimum Purchase Limitations." No
fractional shares will be issued and any excess amount of funds for fractional
shares will be refunded or, with respect to any funds designated for withdrawal
from deposit accounts, released. Refunds (or release of funds designated for
withdrawal from eligible deposit accounts) also will be made in the event and
to the extent of oversubscription or termination of the Offerings, and the
interest earned on funds remitted will be paid in cash, or released to the
deposit accounts of such Subscribers. See "THE OFFERINGS--The Subscription
Offering--Refunds" and "--The Community Offering--Refunds."
BB&T Financial will notify each Subscriber of the 85% Price, the 95% Price
and the BB&T Market Price and will cause the certificates representing the BB&T
Financial Common Stock purchased by each Subscriber to be mailed as promptly as
practicable after the consummation of the Conversion and the Acquisition
("Closing Date"). Any refund and/or any interest earned on the amount remitted
other than by authorized withdrawal also will be mailed by check to each
Subscriber promptly after the Closing Date.
Number of Shares Offered. The total number of shares of BB&T Financial Common
Stock to be offered in the Subscription Offering, currently estimated to be
800,000 shares, will be determined by dividing the Appraised Value of Home
Savings, as it will be updated, by the BB&T Market Price. See "THE OFFERINGS--
Appraised Value of Home Savings." The total number of shares of BB&T Financial
Common Stock to be offered in the Community Offering will equal the number of
shares offered but not subscribed for in the Subscription Offering. See "THE
OFFERINGS--The Community Offering."
Trident Financial Corporation ("Trident Financial") has determined the
Appraised Value of Home Savings to be $24 million as of December 14, 1993.
Trident Financial will update the Appraised Value immediately following the
expiration of the Offerings. See "THE OFFERINGS--Appraised Value of Home
Savings." The Appraised Value is not intended and must not be construed as a
recommendation as to the advisability of purchasing the shares of BB&T
Financial Common Stock being offered hereby or as any form of assurance that
such shares may be resold at the price paid by the Subscriber. Trident
Financial also acted as financial advisor to Home Savings in connection with
the Conversion Merger.
Sales Agent. BB&T Financial has retained Trident Securities to act as sales
agent for the sale of shares in the Offerings. Trident Securities is an
affiliate of Trident Financial, which is responsible for determining the
Appraised Value of Home Savings. See "THE OFFERINGS--Plan of Distribution."
Conditions to Completion of Offerings. Completion of the Offerings is subject
to receipt of required regulatory approvals and satisfaction of certain other
conditions contained in the Reorganization Agreement, including approval of the
Plan of Conversion by Voting Members at the Special Meeting scheduled to be
held on March 1, 1994. The Reorganization Agreement may be terminated under
certain circumstances prior to the Closing Date. See "THE OFFERINGS--Timing of
Completion of the Conversion Merger and Sale of Shares" and "--Conditions to
Completion of the Offerings and Termination of the Offerings."
ADDITIONAL INFORMATION ABOUT THE SUBSCRIPTION OFFERING
How to Subscribe. Stock Order Forms, together with full payment or
instructions for payment for the BB&T Financial Common Stock subscribed for
may, be sent by mail in the postage-paid return envelope accompanying this
Prospectus/Proxy Statement, or returned by hand to the Conversion Information
Center, 155 West South Street, Albemarle, North Carolina 28002 (telephone no.
(704) ) or to any of the Home Savings offices or to any BB&T office in
the Community Offering Area. Such Stock Order Forms must be received, whether
mailed or hand delivered, at any of the above locations by the Subscription
Expiration Date (currently expected to be 5:00 p.m., North Carolina time, on
March 1, 1994, unless extended). Home Savings reserves the right to reject
orders submitted by facsimile transmission. Stock Order Forms, once received by
Home Savings, may not be amended, modified or rescinded by Eligible Member
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Subscribers or Voting Members unless permitted in Home Savings' discretion to
correct immaterial irregularities. See "THE OFFERINGS--The Subscription
Offering--How to Subscribe."
Payment for Shares. Payment for shares of BB&T Financial Common Stock may be
made in cash (if made in person), by check or money order or by including
instructions on the Stock Order Form for withdrawal from a Home Savings deposit
account (other than a demand deposit account or NOW account, on which a
Subscriber must write a check). Home Savings reserves the right to reject
orders submitted by wire transfer. Home Savings will pay interest on the funds
received at Home Savings' passbook rate, currently % per annum, and interest
on funds in deposit accounts for which withdrawal is authorized at the account
rate, from the date payment is received or withdrawal is authorized until the
Offerings are either completed or terminated. The amount of interest earned
will NOT be applied toward the purchase of BB&T Financial Common Stock and will
be paid or released to each Subscriber following either consummation or
termination of the Offerings. See "THE OFFERINGS--The Subscription Offering--
How to Subscribe" and "--Method of Payment."
Special procedures must be followed for subscriptions by IRA, Keogh and
similar retirement accounts. See "THE OFFERINGS--The Subscription Offering--
Subscriptions by Beneficial Owners of IRA, Keogh or Similar Retirement
Accounts" and "--Certain Federal Income Tax Consequences."
Home Savings will permit an Eligible Member Subscriber or Voting Member to
pay for any shares of BB&T Financial Common Stock subscribed for by withdrawal
from a Home Savings certificate of deposit account without the assessment of an
early withdrawal penalty. See "THE OFFERINGS--The Subscription Offering--Method
of Payment."
Subscription Limitations. Eligible Member Subscribers or Voting Members who
wish to subscribe for BB&T Financial Common Stock in the Subscription Offering
must specify a minimum purchase of $500 on the Stock Order Form. Subject to the
oversubscription procedures described herein (see "THE OFFERINGS--The
Subscription Offering--Oversubscription Procedures"), the maximum number of
shares of BB&T Financial Common Stock for which each Eligible Member Subscriber
may subscribe at the 85% Price and/or the 95% Price is that number of whole
shares which when multiplied by the 85% Price and/or the 95% Price would equal
$150,000 (or $250,000 in the case of an Eligible Member Subscriber with a
single deposit account with a balance of at least $25,000 or with an additional
account at Home Savings (which may include a loan), in either case at the close
of business on the Eligibility Record Date). In addition, an Eligible Member
Subscriber holding only a loan account or a single deposit account with a
balance of less than $25,000 on the Eligibility Record Date may purchase
additional shares at the BB&T Market Price, provided that the aggregate
purchase price of shares purchased in the Offerings does not exceed $250,000.
Voting Members may purchase in the Subscription Offering at the BB&T Market
Price that number of shares of BB&T Financial Common Stock which, when
multiplied by the BB&T Market Price, would not exceed $250,000. An Eligible
Member Subscriber or Voting Member who also is a Community Offering Resident
may purchase shares in both the Subscription Offering and the Community
Offering, provided that the aggregate purchase price of shares purchased does
not exceed $250,000. See "THE OFFERINGS--The Subscription Offering--Maximum and
Minimum Purchase Limitations."
The Home Savings ESOP. BB&T Financial has agreed to establish the Home
Savings ESOP for the benefit of the full-time employees of Home Savings. It
currently is expected that the Home Savings ESOP will subscribe for 68,293
shares (approximately 8.54% of the estimated number of shares offered in the
Subscription Offering) of BB&T Financial Common Stock in the Subscription
Offering at the 85% Price. The Home Savings ESOP is established for the benefit
of all Home Savings full-time employees, and will not benefit non-employee
directors of Home Savings. The Home Savings ESOP will receive priority over
Eligible Member Subscribers and Voting Members in the case of an
oversubscription for shares in the Subscription Offering. See "THE OFFERINGS--
The Subscription Offering--The Home Savings ESOP," "--Oversubscription
Procedures" and "DESCRIPTION OF CAPITAL STOCK OF BB&T FINANCIAL--Certain
Provisions Which May Have an Anti-Takeover Effect--Employee Stock Ownership
Plans."
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ADDITIONAL INFORMATION ABOUT THE COMMUNITY OFFERING
How to Subscribe. Stock Order Forms, together with full payment or
instructions for payment for the BB&T Financial Common Stock subscribed for,
may be sent by mail in the postage-paid return envelope accompanying this
Prospectus/Proxy Statement to the Conversion Information Center, 155 West South
Street, Albemarle, North Carolina 28002 (telephone no. (704) ) or by hand
delivery to any of Home Savings' offices or to any BB&T office in the Community
Offering Area. Such Stock Order Forms must be received, whether mailed or hand
delivered, at any of the above locations by the Community Expiration Date
(currently expected to be 5:00 p.m., North Carolina time, on March 1, 1994).
Home Savings reserves the right to reject orders submitted by facsimile
transmission. Stock Order Forms, once received by Home Savings, may not be
amended, modified or rescinded by Community Offering Residents, unless
permitted in Home Savings' discretion to correct immaterial irregularities. See
"THE OFFERINGS--The Community Offering--How to Subscribe."
Payment for Shares. Payment for shares of BB&T Financial Common Stock may be
made in cash (if made in person), by check or money order or by including
instructions on the Stock Order Form for withdrawal from a Home Savings deposit
account (other than a demand deposit account or NOW account, on which a
Subscriber must write a check). Home Savings reserves the right to reject
payment submitted by wire transfer. Home Savings will pay interest on the funds
received at Home Savings' passbook rate, currently % per annum, and interest
on funds in deposit accounts for which withdrawal is authorized at the account
rate, from the date payment is received or withdrawal is authorized until the
Offerings are either completed or terminated. The amount of interest earned
will NOT be applied toward the purchase of additional shares of BB&T Financial
Common Stock and will be paid or released to each Subscriber following either
consummation or termination of the Offerings. See "THE OFFERINGS--The Community
Offering--How to Subscribe" and "--Method of Payment."
Special procedures must be followed for subscriptions by IRA, Keogh and
similar accounts. See "THE OFFERINGS--The Community Offering--Subscription by
Beneficial Owners of IRA, Keogh or Similar Retirement Accounts" and "--Certain
Federal Income Tax Consequences."
Home Savings will permit a Community Offering Resident to pay for any shares
of BB&T Financial Common Stock subscribed for by withdrawal from a Home Savings
certificate of deposit account without the assessment of an early withdrawal
penalty. See "THE OFFERINGS--The Community Offering--Method of Payment."
Subscription Limitations. Community Offering Residents who wish to subscribe
for BB&T Financial Common Stock must specify a minimum purchase of $500 on
their Stock Order Form. Subject to the oversubscription procedures described
herein (see "THE OFFERINGS--The Community Offering--Oversubscription
Procedures"), the maximum number of shares of BB&T Financial Common Stock for
which any person may subscribe in the Community Offering is that number of
whole shares of BB&T Financial Common Stock which when multiplied by the 95%
price would not exceed $250,000. An Eligible Member Subscriber or Voting Member
who also is a Community Offering Resident may purchase shares in both the
Subscription Offering and the Community Offering, provided that the aggregate
purchase price of shares purchased does not exceed $250,000. See "THE
OFFERINGS--The Community Offering--Maximum and Minimum Purchase Limitations."
SUMMARY OF PURCHASE OPTIONS
The following briefly summarizes, by category of Subscriber, the purchase
options in the Subscription Offering and the Community Offering. The summary
should be read in conjunction with "THE OFFERINGS--The Subscription Offering--
Maximum and Minimum Purchase Limitations," "--The Community Offering--Maximum
and Minimum Purchase Limitations" and "--General--Purchase Price".
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(1) Eligible Member Subscribers who had a single deposit account with a
balance of less than $25,000 or only a loan account on the Eligibility Record
Date and who are also Community Offering Residents may subscribe for up to:
. $150,000 at the 85% Price and/or the 95% Price in the Subscription
Offering (with shares purchased at the 85% Price being subject to the
four-month transfer restriction), and
. $150,000 at the BB&T Market Price in the Subscription Offering, and/or
. $250,000 at the 95% Price in the Community Offering.
In all cases, the total amount subscribed for together in the Subscription
Offering and the Community Offering cannot exceed $250,000.
(2) Eligible Member Subscribers who had a single deposit account with a
balance of less than $25,000 or only a loan account on the Eligibility Record
Date and who are NOT also Community Offering Residents may subscribe in the
Subscription Offering for up to:
. $150,000 at the 85% Price and/or the 95% Price (with shares purchased at
the 85% Price being subject to the four-month transfer restriction), and
. $150,000 at the BB&T Market Price.
In all cases, the total amount subscribed for cannot exceed $250,000.
(3) Eligible Member Subscribers who had a single deposit account with a
balance of at least $25,000 or who had an additional (second) account (which
may be a loan) on the Eligibility Record Date who are also Community Offering
Residents may subscribe for up to:
. $250,000 at the 85% Price and/or the 95% Price in the Subscription
Offering (with shares purchased at the 85% Price being subject to the
four-month transfer restriction), and/or
. $250,000 at the 95% Price in the Community Offering.
In all cases, the total amount subscribed for together in the Subscription
Offering and the Community Offering cannot exceed $250,000.
(4) Eligible Member Subscribers who had a single deposit account with a
balance of at least $25,000 or who had an additional (second) account (which
may be a loan) on the Eligibility Record Date who are NOT also Community
Offering Residents may subscribe for up to:
. $250,000 at the 85% Price and/or the 95% Price in the Subscription
Offering (with shares purchased at the 85% Price being subject to the
four-month transfer restriction).
(5) Voting Members who are also Community Offering Residents but who are not
Eligible Member Subscribers may subscribe for up to:
. $250,000 at the 95% Price in the Community Offering, and/or
. $250,000 at the BB&T Market Price in the Subscription Offering.
In all cases, the total amount subscribed for together in the Subscription
Offering and the Community Offering cannot exceed $250,000.
(6) Voting Members who are neither Community Offering Residents nor Eligible
Member Subscribers may subscribe for up to:
. $250,000 at the BB&T Market Price in the Subscription Offering.
(7) Community Offering Residents who are neither Eligible Member Subscribers
nor Voting Members may subscribe for up to:
. $250,000 at the 95% Price in the Community Offering.
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CERTAIN FEDERAL INCOME TAX CONSEQUENCES
BB&T Financial and Home Savings have received an opinion of KPMG Peat
Marwick, BB&T Financial's tax advisor, to the effect that consummation of the
Conversion and the Acquisition will not be taxable to Home Savings or its
members, except to the extent that Subscription Rights issued in connection
with the Conversion have an ascertainable fair market value.
Under the general rules that have developed in recent years, gain, if any,
realized by recipients of Subscription Rights, as a result of the Conversion,
must be recognized. The amount of such gain required to be recognized by an
Eligible Member Subscriber or Voting Member will not exceed the sum of (i) the
fair market value, if any, of the interest in the liquidation account received
by the Eligible Member Subscriber, and (ii) the fair market value of the
Subscription Rights received pursuant to the Plan of Conversion.
In several recent private letter rulings, the Internal Revenue Service
("IRS") has concluded that an interest in a liquidation account has only
nominal, if any, fair market value. Private letter rulings, while potentially
instructive, however, may not be relied upon in the present situation as any
expression of the policy of the IRS or as any expression of the present state
of the law in this area.
Recipients of Subscription Rights in the Subscription Offering will be
required to recognize gain, if any, with respect to the receipt of Subscription
Rights, whether or not such Subscription Rights are exercised, because the 85%
Price and/or 95% Price in the Subscription Offering may be less than the fair
market value of the BB&T Financial Common Stock purchased. It is unclear as to
how the Subscription Rights should be valued (particularly in the case of
shares issued with the four-month transfer restriction) or how to determine the
number of Subscription Rights issued to each Eligible Member Subscriber for
this purpose. Under one approach, all Eligible Member Subscribers will
recognize gain attributable to the receipt of Subscription Rights in some
amount regardless of whether they exercise any or all of their Subscription
Rights. In this case, the recipient of Subscription Rights will be able to
claim a loss upon the expiration of any unexercised Subscription Rights.
Alternatively, an Eligible Member Subscriber may be able to claim that gain
should be recognized with respect to such Subscription Rights only to the
extent of the fair market value, if any, of any Subscription Rights actually
exercised. See "CERTAIN CONSIDERATIONS RELATING TO THE OFFERINGS--Receipt of
Taxable Gain by Subscribers in the Subscription Offering" and "THE OFFERINGS--
Certain Federal Income Tax Consequences."
ELIGIBLE MEMBER SUBSCRIBERS AND VOTING MEMBERS ARE URGED, THEREFORE, TO
CONSULT THEIR OWN TAX ADVISORS AS TO THE SPECIFIC TAX CONSEQUENCES OF THE
CONVERSION MERGER TO THEM, AND ANY PURCHASE OF BB&T FINANCIAL COMMON STOCK
PURSUANT TO THE SUBSCRIPTION OFFERING, INCLUDING, WITHOUT LIMITATION, TAX
RETURN REPORTING REQUIREMENTS, THE APPLICATION AND EFFECT OF FEDERAL, FOREIGN,
STATE, LOCAL AND OTHER TAX LAWS AND THE IMPLICATIONS OF ANY PROPOSED CHANGES IN
THE TAX LAWS.
No income, gain or loss will be recognized by a purchaser of BB&T Financial
Common Stock in the Community Offering. A purchaser of BB&T Financial Common
Stock in the Community Offering will have a tax basis in such stock equal to
the purchase price thereof and will have a holding period for such stock
commencing on the day following the date on which such stock is purchased.
USE OF PROCEEDS
The net proceeds from the sale of BB&T Financial Common Stock in the
Offerings, assuming all shares offered are purchased in the Subscription
Offering at the 85% Price, are estimated to range from $16.3 million to $22.3
million. The Plan of Conversion does not require that a minimum number of
shares be sold in the Offerings in order to consummate the Conversion Merger.
Net proceeds from the Offerings thus could be substantially less than the range
indicated above, depending on the number of shares purchased in the Offerings.
However, the Administrator may condition his final approval on a minimum number
of shares being sold in the Conversion Merger. It is possible that shares not
sold in the Offerings may be sold in a public offering. The net proceeds from
the sale of the BB&T Financial Common Stock will be used by BB&T
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Financial (along with additional funds of BB&T Financial from other sources) to
acquire the stock of Home Savings issued in the Conversion. It is possible,
however, that BB&T Financial will use the proceeds from the Offerings for
general corporate purposes in the event that the FDIC takes certain actions
under legislation proposed in the U.S. Congress. See "CERTAIN CONSIDERATIONS
RELATING TO THE OFFERINGS--Potential Effects of Pending Legislation." The
purchase price for the stock to be issued to BB&T Financial by Home Savings in
the Conversion will equal the Appraised Value of Home Savings less expenses
incurred in the Conversion and the Acquisition, but will in no event be less
than the current net worth of Home Savings. See "USE OF PROCEEDS."
CERTAIN CONSIDERATIONS RELATING TO THE OFFERINGS
For a discussion of certain important factors relating to the four-month
transfer restriction imposed on shares purchased at the 85% Price, certain
other factors relating to the 85% Price, the 95% Price, certain tax
consequences of purchasing in the Subscription Offering, the potential effects
on the Conversion Merger of legislation pending in the U.S. Congress and the
effects of extensions in the expiration of the Offerings, see "CERTAIN
CONSIDERATIONS RELATING TO THE OFFERINGS."
INTERESTS OF THE DIRECTORS, OFFICERS AND EMPLOYEES OF HOME SAVINGS IN THE
CONVERSION MERGER
Following the Conversion and the Acquisition, the directors of Home Savings
will continue to serve on the Home Savings Board of Directors, and following
the Merger, they will serve on an advisory board established by BB&T. In
consideration of such service, BB&T will pay each outside director fees of
$12,000 per year. In addition, for as long as each director (including Mr. Hill
and Mr. Swanner) remains on the advisory board, BB&T Financial will reimburse
such director for expenses incurred in attending one convention per year which
is related to the business of Home Savings. Moreover, the outside directors of
Home Savings will be granted, as a group, options to purchase a total of 17,072
shares (which is a number equal to approximately 2.13% of the shares offered in
the Subscription Offering) of BB&T Financial Common Stock and awarded a total
of 25,608 shares (approximately 3.20% of the shares offered in the Subscription
Offering) of restricted stock of BB&T Financial. The directors also will be
entitled to participate in a BB&T Financial director retirement plan. See
"BENEFITS TO BE OFFERED BY BB&T FINANCIAL TO DIRECTORS AND OFFICERS OF HOME
SAVINGS--Director Benefits" in Annex I.
Messrs. Hill and Swanner are expected to become parties to employment
agreements with BB&T Financial and Home Savings (and after the Merger, BB&T),
providing for employment terms of five years (subject to annual extension at
the option of BB&T Financial or, after the Merger, BB&T, beginning on the
fourth anniversary until, in the case of Mr. Hill, age 70, and in the case of
Mr. Swanner, age 65), specified minimum salaries of $150,000 for Mr. Hill and
$115,000 for Mr. Swanner (which will be higher than their salaries at the time
the Reorganization Agreement was signed), and certain other benefits. In
addition, these two officers will be granted, as a group, options to purchase a
total of 30,732 shares (which equals approximately 3.84% of the shares being
offered to Eligible Member Subscribers) of BB&T Financial Common Stock and
awarded a total of 46,098 shares (which equals approximately 5.76% of the
shares being offered to Eligible Member Subscribers) of restricted stock of
BB&T Financial. Nine other officers will be granted, as a group, options to
purchase a total of 20,484 shares (which is a number equal to approximately
2.56% of the shares being offered to Eligible Member Subscribers) of BB&T
Financial Common Stock. All employees of Home Savings (including officers other
than Mr. Hill and Mr. Swanner) will be awarded, as a group, a total of 30,732
shares (which equals approximately 3.84% of the shares being offered to
Eligible Member Subscribers) of restricted stock of BB&T Financial. Shares of
restricted stock of BB&T Financial and options for shares of BB&T Financial
Common Stock awarded to directors, officers and employees of Home Savings are
in addition to, and are not a part of, the estimated 800,000 shares being
offered to Eligible Member Subscribers. Those directors, officers and employees
receiving restricted stock also will be given cash bonuses to compensate them
for a portion of the tax liability associated with the receipt of restricted
stock. Certain additional benefits will be provided to employees of Home
Savings following the Acquisition, including participation in the Home Savings
ESOP, which is expected to hold 68,293 shares
14
<PAGE>
(approximately 8.54% of the shares offered in the Subscription Offering) of
BB&T Financial Common Stock and a one-time cash bonus equal to one month's
salary. For a more detailed description of the benefits to be offered to the
Home Savings directors, officers and employees, see "BENEFITS TO BE OFFERED BY
BB&T FINANCIAL TO DIRECTORS AND OFFICERS OF HOME SAVINGS--Officer Benefits" and
"ADDITIONAL BENEFITS TO BE OFFERED BY BB&T FINANCIAL--Benefits to All
Employees" in Annex I.
The directors and executive officers of Home Savings (and their affiliates)
anticipate subscribing for a total of $560,000 of BB&T Financial Common Stock
in the Subscription Offering. The subscriptions of the directors and executive
officers of Home Savings are subject to the same terms and limitations as the
subscriptions of all other Eligible Members Subscribers, except that any shares
of BB&T Financial Common Stock purchased in the Offerings by directors and
executive officers shall be subject to the restriction that such shares shall
not be sold without the prior written permission of the Administrator for a
period of one year following the Closing Date, except in the event of the death
of the director or executive officer. See "ANTICIPATED SUBSCRIPTIONS FOR SHARES
OF BB&T FINANCIAL COMMON STOCK BY HOME SAVINGS' DIRECTORS AND EXECUTIVE
OFFICERS IN THE OFFERINGS."
BENEFITS OFFERED TO CERTAIN DEPOSITORS OF HOME SAVINGS AND THE HOME SAVINGS
COMMUNITY IN THE CONVERSION MERGER
BB&T Financial will pay to each Eligible Member Subscriber a one-time bonus
equal to 2% of such Eligible Member Subscriber's balances in any deposit
accounts (including certificates of deposit, money market deposit accounts, and
individual retirement accounts) outstanding with Home Savings on the
Eligibility Record Date (January 31, 1993). This one-time bonus will be paid to
Eligible Member Subscribers within 30 days of the consummation of the
Conversion and the Acquisition. This cash bonus may not be applied toward the
purchase of BB&T Financial Common Stock in the Offerings.
BB&T Financial also anticipates making charitable contributions over a five-
year period to the communities served by Home Savings in an amount equal to
$2.1 million. Such contributions will be established in a trust to be
administered by BB&T with the beneficiaries of the trust to be recommended by
the current members of the Home Savings Board of Directors. See "ADDITIONAL
BENEFITS TO BE OFFERED BY BB&T FINANCIAL--Community Benefits" in Annex I.
THE SHARES OF BB&T FINANCIAL COMMON STOCK OFFERED HEREBY ARE NOT DEPOSITS AND
ARE NOT INSURED BY THE FDIC OR ANY OTHER GOVERNMENTAL AGENCY.
15
<PAGE>
BB&T FINANCIAL SUMMARY FINANCIAL INFORMATION
($ IN THOUSANDS, EXCEPT PER SHARE DATA)
The following table sets forth summary historic financial data of BB&T
Financial at or for the nine-month periods ended September 30, 1993 and 1992
and at or for the fiscal years ended December 31, 1992, 1991 and 1990. This
information is derived from the historical consolidated financial statements of
BB&T Financial. The information set forth below should be read in conjunction
with the historical consolidated financial statements and the notes thereto of
BB&T Financial, which are incorporated by reference herein. See "INCORPORATION
OF CERTAIN DOCUMENTS BY REFERENCE."
The data at or for the nine-month periods ended September 30, 1993 and 1992
are unaudited, but have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis and reflect all
adjustments, consisting of only normal recurring adjustments, which in the
opinion of BB&T Financial's management, are necessary for a fair presentation
of the results for such interim periods. All performance ratios for such
interim periods have been annualized. The results of operations and the ratios
for the nine-month period ended September 30, 1993 are not necessarily
indicative of the results to be expected for the full fiscal year ending
December 31, 1993 or for any other interim period.
<TABLE>
<CAPTION>
AT OR FOR THE
NINE MONTHS AT OR FOR THE FISCAL YEARS
ENDED SEPTEMBER 30, ENDED DECEMBER 31,
---------------------- ----------------------------------
1993 1992 1992 1991 1990
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
EARNINGS AND DIVIDENDS
Net income.............. $69,815 $ 59,087 $ 76,076 $ 60,172 $ 53,615
Per share data:
Primary net income.... $ 2.31 $ 2.14 $ 2.89 $ 2.57 $ 2.49
Fully diluted net
income............... 2.26 2.05 2.75 2.44 2.37
Cash dividends
declared............. .75 .66 .91 .85 .81
Average primary shares
outstanding (in
thousands)............. 30,249 27,574 26,313 23,427 21,493
BALANCE SHEET ITEMS
Assets................ $8,089,293 $7,037,159 $6,691,484 $6,229,014 $5,158,726
Securities(1)......... 1,999,655 1,880,399 1,725,014 1,585,935 1,257,751
Loans................. 5,558,878 4,734,747 4,524,665 4,233,429 3,423,810
Deposits.............. 6,084,242 5,620,620 5,346,320 5,203,499 4,406,442
Shareholders' equity.. 698,370 581,010 560,908 486,502 373,506
Book value per share,
end of period........ 22.62 20.96 21.32 19.19 17.51
RATIOS
Performance Ratios(3):
Return on average
assets............... 1.24% 1.18% 1.18% 1.06% 1.05%
Return on average
equity............... 14.29 14.47 14.50 14.11 15.01
Net interest margin,
taxable equivalent... 4.63 4.64 4.69 4.48 4.40
Capital Ratios:
Average equity to
average assets....... 8.71% 8.17% 8.15% 7.52% 6.97%
Equity to assets
(period-end)......... 8.63 8.26 8.38 7.81 7.24
Risk-based capital
ratios(2):
Tier 1 capital...... 12.80 12.36 12.35 11.13 9.72
Total capital....... 14.80 15.42 15.24 14.33 13.04
Leverage ratio(2)..... 8.64 8.56 8.24 7.76 7.06
Asset Quality Ratios:
Allowance for loan
losses to loans
outstanding.......... 1.51% 1.53% 1.56% 1.46% 1.25%
Nonperforming assets
to total assets...... .50 .89 .70 1.29 .93
Net charge-offs to
average loans
outstanding(3)....... .17 .44 .48 .66 .40
Allowance for loan
losses times
nonperforming loans.. 3.24x 1.85x 2.61x 1.08x 1.12x
</TABLE>
- --------
(1) Includes investment securities and securities available for sale.
(2) Calculated in accordance with applicable regulations of the Board of
Governors of the Federal Reserve System ("Federal Reserve"). See
"SUPERVISION AND REGULATION OF BB&T FINANCIAL--Capital Adequacy Guidelines
for Bank Holding Companies."
(3) Annualized for interim periods.
16
<PAGE>
CERTAIN CONSIDERATIONS RELATING TO THE OFFERINGS
Eligible Subscribers should consider the following factors before electing to
purchase in the Subscription Offering or the Community Offering:
Four-Month Transfer Restriction. As described more fully below (see "THE
OFFERINGS--The Subscription Offering--Four-Month Transfer Restriction"), shares
purchased in the Subscription Offering at the 85% Price generally may not be
transferred until four months after the date of this Prospectus/Proxy
Statement. (Shares purchased in the Subscription Offering at the 95% Price or
the BB&T Market Price and shares purchased in the Community Offering at the 95%
Price will not be subject to the four-month transfer restriction.) Purchasers
of shares at the 85% Price thus will not be able to sell such shares for this
period and thus will not be able to realize any profit that may exist by virtue
of the discount reflected in the 85% Price during this period. The four-month
delay imposed on any transfer potentially decreases the chance that the market
price of the BB&T Financial Common Stock will exceed the 85% Price on the date
the Subscriber finally is able to sell the shares. Subscribers seeking
liquidity should consider the effect of the four-month transfer restriction
before subscribing for shares in the Subscription Offering at the 85% Price.
Subscribers also should consider what, if any, effect the restriction might
have on the ability to borrow against shares subject to the restriction.
Receipt of Taxable Gain by Subscribers in the Subscription Offering. Eligible
Member Subscribers who elect to purchase shares in the Subscription Offering at
the 85% Price and/or the 95% Price will recognize gain attributable to the
receipt of Subscription Rights in the year in which the shares are purchased.
It is unclear as to how the Subscription Rights should be valued or how to
determine the number of Subscription Rights issued to each Eligible Member
Subscriber for this purpose.
Under one approach, all Eligible Member Subscribers will recognize gain
attributable to the receipt of Subscription Rights in some amount regardless of
whether they exercise any or all of their Subscription Rights. In this case, a
recipient of Subscription Rights will be able to claim a loss upon the
expiration of any unexercised Subscription Rights. Under another approach, only
Eligible Member Subscribers who actually exercise Subscription Rights will
recognize gain attributable to the receipt of Subscription Rights, and the
value of Subscription Rights received will be determined based on the actual
number of shares acquired pursuant to Subscription Rights.
BB&T Financial is uncertain as to whether it will be required to file
information returns with the IRS related to the value of Subscription Rights
received by Eligible Member Subscribers and, if required, how the value will be
determined for purposes of the information returns (particularly in light of
the four-month restriction imposed on shares purchased at the 85% Price).
Accordingly, Eligible Member Subscribers are urged to consult their own tax
advisors as to the specific tax consequences to them of purchasing BB&T
Financial Common Stock in either the Subscription Offering or the Community
Offering. See "THE OFFERINGS--Certain Federal Income Tax Consequences" for
further discussion.
The Purchase Price. Although Subscribers may purchase BB&T Financial Common
Stock at a discount to the BB&T Market Price, because of potential fluctuations
in the market price of BB&T Financial Common Stock, there can be no assurance
that the 85% Price or the 95% Price actually will be less than, or equal to,
the market price for BB&T Financial Common Stock on the date the Offerings are
consummated and/or on the date Subscribers receive certificates for their
shares or are entitled to sell their shares. Subscribers thus should consider
carefully the volatility of the market for equity securities in determining
whether to subscribe for shares of BB&T Financial Common Stock in the
Subscription Offering and/or the Community Offering. The market price for BB&T
Financial Common Stock may be affected by, among other things, BB&T Financial's
earnings and capital, changes in interest rates, general economic conditions
and other factors affecting the banking industry and the stock market in
general.
Subscribers purchasing in the Subscription Offering at the 85% Price in
particular should consider the potential for price fluctuation in the context
of the four-month transfer restriction. See "THE OFFERINGS--The Subscription
Offering--Four-Month Transfer Restriction." Moreover, while certificates for
shares of BB&T Financial Common Stock will be mailed as soon as practicable
after the Closing Date, until such stock
17
<PAGE>
certificates are delivered to Subscribers, Subscribers in the Subscription
Offering who purchase shares at the 95% Price and the BB&T Market Price and
Subscribers in the Community Offering (i.e., those who purchase shares without
the transfer restriction) may not be able to sell the shares of BB&T Financial
Common Stock for which they have subscribed. See "THE OFFERINGS--General--
Delivery of Stock Certificates."
In addition, because the 85% Price and the 95% Price initially may be less
than the market price for BB&T Financial Common Stock, some Subscribers (as
well as purchasers of BB&T Financial Common Stock in other similar acquisitions
at a similar discount) may be inclined immediately to sell their shares (in the
case of purchases at the 95% Price) or after the expiration of the four-month
transfer restriction (in the case of purchases in the Subscription Offering at
the 85% Price) or effect other transactions in an attempt to realize any profit
between the 85% Price and/or the 95% Price and the then-market price for the
BB&T Financial Common Stock. Depending upon their timing and volume, such
transactions by themselves conceivably could cause the market price for BB&T
Financial Common Stock to decline.
For these and other reasons, Subscribers may be unable to sell the shares for
which they have subscribed in the Subscription Offering and/or the Community
Offering at a price equal to or greater than the 85% Price and/or the 95%
Price.
Moreover, because the market price of the BB&T Financial Common Stock could
increase between now and the date the 85% Price, the 95% Price and/or the BB&T
Market Price are determined, Eligible Subscribers might be able to purchase
BB&T Financial Common Stock in the open market prior to that date at a price
lower than the 85% Price, the 95% Price and/or the BB&T Market Price. Any such
open market purchase would permit the purchaser to obtain the shares
immediately, which would not be the case if the Eligible Subscriber purchased
the shares in the Offerings, with the attendant delay in receipt of the shares
from the date the Stock Order Form is submitted.
Potential Effects of Pending Legislation. On November 22, 1993, three members
of the House Banking Committee, including the Chairman, introduced a bill in
the U.S. Congress, H.R. 3615, which, if enacted, would permit state savings
banks like Home Savings to convert from mutual to stock form on or after
November 22, 1993 only in accordance with regulations adopted by the FDIC which
do not now exist. If H.R. 3615 is enacted into law in its present form, the
FDIC would be required to adopt regulations governing conversions of state
savings banks which are substantially similar to the regulations of the Office
of Thrift Supervision ("OTS") governing conversions of federal savings banks
and savings and loan associations.
The apparent intent of the proposed legislation is to create a uniform
standard for conversions, applied nationwide and under rules imposed by the
federal government. Although BB&T Financial and Home Savings cannot predict the
final outcome, content or effect of H.R. 3615, it is possible that if H.R. 3615
is enacted into law in its current form, the FDIC would require lower levels of
benefits to the directors, officers and employees, as well as lower levels of
benefits to depositors and communities because the OTS generally has approved
transactions with lower levels of such benefits than are provided in this
transaction. Any precise determination, however, is difficult to make because
the OTS has historically approved benefits on a case by case basis.
As drafted, H.R. 3615 would purport to apply to the Conversion Merger of Home
Savings, although the Plan of Conversion was adopted by the Home Savings Board
of Directors well before H.R. 3615 was introduced on November 22, 1993.
If H.R. 3615 were enacted in its current form, the FDIC could take the
position that the Conversion Merger was not consummated in accordance with FDIC
standards under the new law. BB&T Financial and Home Savings, along with other
banks and savings institutions, are seeking to have H.R. 3615 modified to
"'grandfather" (i.e., exempt from compliance with the statute) certain pending
conversion merger transactions, including the Conversion Merger of Home
Savings. If this effort is not successful, if H.R. 3615 is voted into law in
its current form and if it is determined that the Conversion Merger was not in
compliance with the FDIC regulations, it is possible that the FDIC would pursue
remedies against BB&T Financial and
18
<PAGE>
Home Savings, which conceivably could include efforts to unwind the
transaction. BB&T Financial and Home Savings would resist any such action
vigorously.
It is not possible at this time to predict the effect of the legislation if
it is passed. If, for example, the FDIC sought to unwind the Conversion Merger,
it could seek to return Home Savings to its mutual form, in which case BB&T
Financial would no longer own the stock of Home Savings. The employee bonus,
employment contracts, deposit bonus, charitable contributions and all other
components of the Conversion Merger could be reversed, although it is
impossible at this stage to predict exactly what the FDIC would try to do. BB&T
Financial may take the position that the sales of BB&T Financial Common Stock
to Subscribers would not be rescinded and that, instead of using the proceeds
of the Offerings for the purchase or Home Savings, BB&T Financial would use the
proceeds for its general corporate purposes. If this position is successfully
taken (which cannot be assured), whether or not the Conversion Merger is
undone, sales to Subscribers of BB&T Financial Common Stock at the 85% Price,
the 95% Price and/or BB&T Market Price in the Subscription Offering and
Community Offering would not be affected. For further information on how the
proceeds from the Offerings would be used, see "USE OF PROCEEDS."
Potential Effects of Extensions of the Expiration of the Offerings. The
Subscription Offering and the Community Offering are currently scheduled to
expire on March 1, 1994. It is possible, however, that, up until 5:00 p.m. on
March 1, 1994, the Subscription Offering could be extended to a date no later
than , 1994 and that the Community Offering could be extended to a date no
later than , 1994. The Offerings could be extended for a variety of
reasons, including adverse market conditions, the results of the Offerings,
Congressional or regulatory action in connection with H.R. 3615 (see "--
Potential Effects of Pending Legislation") or other developments affecting the
Conversion Merger. Subscribers whose subscription decision might be affected by
the per share purchase price should consider the possibility that the price of
BB&T Financial Common Stock will fluctuate between March 1, 1994 and the date
of any extension of the Offerings.
DESCRIPTION OF BB&T FINANCIAL
BB&T Financial was chartered under North Carolina law in 1973 for the purpose
of holding the stock of BB&T. Primarily through BB&T, BB&T Financial
concentrates on attracting deposits and on lending to middle-market businesses
in the Carolinas. In the 1970s and 1980s, BB&T Financial expanded into new
markets throughout the state through mergers and acquisitions of other North
Carolina commercial banks. In 1987, BB&T Financial acquired a bank holding
company and its subsidiary commercial bank in South Carolina. In 1989, BB&T
Financial began to focus on further expanding its markets in North Carolina
through acquisitions of healthy thrift institutions, as discussed below under
"--Savings Institution Acquisitions and Operations."
BB&T Financial continues to evaluate the possibility of acquiring additional
mutual and stock institutions, commercial banks, insurance agencies and other
financial services companies and it currently anticipates, after the date of
this Prospectus/Proxy Statement, entering into acquisition agreements with one
or more of such institutions. The institutions, banks and companies being
evaluated are located in North Carolina, South Carolina and Virginia.
BB&T FINANCIAL CORPORATION
BB&T Financial is a bank holding company, the principal assets of which are
all of the outstanding shares of common stock of BB&T and BB&T Financial
Corporation of South Carolina (which in turn owns all of the outstanding shares
of capital stock of BB&T-SC). BB&T Financial also includes among its assets the
shares of Citizens of Newton, Mutual Savings, Citizens of Mooresville and Old
Stone and interest-bearing bank balances with, and loans to, BB&T. BB&T
Financial's principal sources of revenue are interest, dividends and management
fees received from its subsidiaries. There are limitations on the subsidiaries'
ability to pay dividends to BB&T Financial. See "SUPERVISION AND REGULATION OF
BB&T FINANCIAL--BB&T and BB&T-SC" and "MARKET PRICE AND DIVIDENDS." At
September 30, 1993, BB&T Financial had consolidated assets of approximately
$8.09 billion and consolidated shareholders' equity of approximately $698.4
million.
19
<PAGE>
BB&T FINANCIAL'S COMMERCIAL BANK ACQUISITIONS AND OPERATIONS
Branch Banking and Trust Company. BB&T is a North Carolina-chartered
commercial bank and is the fourth largest bank in the state. As of September
30, 1993, BB&T operated 223 offices in 118 cities and towns in North Carolina
and had approximately 3,832 full-time and part-time employees. BB&T provides a
wide range of commercial banking, consumer banking, trust and investment
services primarily through its branch network. BB&T also operates an insurance
department and a travel department and is a broker dealer in government and
municipal securities. As of September 30, 1993, BB&T had assets of
approximately $7.62 billion and deposit liabilities of $5.81 billion. As of
that date, its tangible capital was $649.8 million, or 8.51% of assets, and its
total risk-based capital was $735.8 million, or 14.91% of risk-weighted assets.
BB&T's net income was $64.2 million, $69.7 million and $51.5 million for the
nine month period ended September 30, 1993 and the years ended December 31,
1992 and 1991, respectively.
Branch Banking and Trust Company of South Carolina. BB&T-SC, a South
Carolina-chartered commercial bank, is among the ten largest banks in South
Carolina. As of September 30, 1993, BB&T-SC operated 17 offices in five
counties in the Piedmont region of South Carolina and had approximately 185
employees. BB&T-SC provides a full range of commercial banking, consumer
banking, trust and investment services through its branch network. As of
September 30, 1993, BB&T-SC had assets of $501.0 million and deposit
liabilities of $449.2 million. As of that date, its tangible capital was $42.3
million, or 8.44% of assets, and its total risk-based capital was $47.2
million, or 11.95% of risk-weighted assets. BB&T-SC's net income was $5.7
million, $5.7 million and $4.6 million for the nine month period ended
September 30, 1993 and the years ended December 31, 1992 and 1991,
respectively.
On December 7, 1993, BB&T Financial agreed to acquire all of the outstanding
shares of LSB, a South Carolina-chartered bank holding company with 23 offices
in South Carolina, in exchange for approximately 3,834,625 shares of BB&T
Financial Common Stock (subject to adjustment). As of September 30, 1993, LSB
had total assets of $646 million, deposits of $545 million and shareholders
equity of $45 million. The transaction is intended to qualify as a tax-free
exchange and to be accounted for as a pooling of interests. LSB also granted
BB&T Financial an option, exercisable under certain circumstances, to acquire
771,894 shares of LSB common stock (subject to adjustment) at a price of $30
per share.
SAVINGS INSTITUTION ACQUISITIONS AND OPERATIONS
BB&T Financial believes that many savings institutions (which include savings
and loan associations and savings banks) will be acquired by, merged or
otherwise consolidated into, bank holding companies and commercial banks over
the next several years. There are a number of healthy, well-managed savings
institutions located in BB&T Financial's market area. Although no assurance can
be provided that its goals will be realized, BB&T Financial has determined that
the acquisition of what it believes are financially sound, well-managed savings
institutions within North Carolina, South Carolina and possibly Virginia could
improve BB&T Financial's market share, enhance BB&T Financial's ability to
compete with other financial institutions by expanding and improving the
efficiency of BB&T Financial's branch network, and, it is hoped, ultimately
increase earnings and book value per share. The primary focus of its
acquisition strategy has been and is expected to continue to be the acquisition
of such financially sound savings institutions, although BB&T Financial is
considering the acquisition of commercial banks and may, under certain
circumstances, acquire an undercapitalized savings institution or certain of
its assets or liabilities, perhaps with government assistance.
BB&T Financial primarily has focused its business and strategy on meeting the
commercial banking needs of the retail and small and middle market commercial
customer through an extensive branch network. The acquisitions by BB&T
Financial of savings institutions, such as Home Savings, are designed to
complement BB&T Financial's branch expansion and branching strategy. BB&T
Financial generally intends to merge or otherwise consolidate these entities
with and into either BB&T or BB&T-SC, as appropriate. Following any such
mergers, BB&T Financial expects to seek to reorient the focus of the business
of acquired savings institutions to include a higher percentage of consumer and
business loans and to offer services that
20
<PAGE>
produce noninterest income, such as insurance, trust and safe deposit
services, while maintaining such institutions' mortgage origination and
servicing capacities.
Since it began acquiring savings institutions in August 1990, BB&T Financial
has acquired fourteen savings institutions in North Carolina with aggregate
assets of $3.1 billion, and several branches of a fifteenth savings
institution. Seven of the institutions acquired were mutual institutions and
were acquired in "conversion merger" transactions, and the other seven were
stock institutions. BB&T Financial currently has pending the acquisition of
three additional savings institutions, including Home Savings, with total
assets of $537 million at September 30, 1993. See "PRO FORMA COMBINED
CONDENSED FINANCIAL STATEMENTS" and "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF BB&T FINANCIAL." BB&T
Financial continues to pay assessments to the SAIF on the portion of deposits
attributable to its savings institution acquisitions, which assessments may in
the future be higher than the deposit insurance assessments on deposits
insured by the Bank Insurance Fund ("BIF") which insures deposits of
commercial banks. See "SUPERVISION AND REGULATION OF BB&T FINANCIAL--
Acquisitions of Savings Institutions."
Savings institution acquisitions have accounted for a significant percentage
of BB&T Financial's growth during the past several years. Although BB&T
Financial believes that there continue to be a number of thrift institutions
that meet its acquisition criteria in the Carolinas and possibly Virginia, no
assurance can be given that BB&T Financial can continue to make savings
institution acquisitions at the same rate or on the same terms as previously.
For example, the regulatory standards for approval of conversion mergers may
change. See "CERTAIN CONSIDERATIONS RELATING TO THE OFFERINGS--Potential
Effects of Pending Legislation" for a discussion of pending legislation which
could affect conversion mergers. In addition, other bank holding companies in
the Carolinas have begun to acquire mutual savings institutions, which has
increased the competition for attractive acquisition candidates and resulted
in conversion mergers on less favorable terms to the acquirors.
ACQUISITION OF INSURANCE AGENCIES AND OTHER INSTITUTIONS
In the last three years, BB&T Financial has acquired, in exchange for
497,440 shares of BB&T Financial Common Stock, the operations of eight
insurance agencies with operations in several cities throughout North
Carolina. The agencies write commercial and personal insurance policies as
agents on behalf of various insurance underwriters. The insurance operations
have been merged into BB&T and are conducted through a department of BB&T in
the communities where the acquired agencies operated. BB&T Financial has
pending the acquisition of two additional insurance agencies and anticipates
acquiring additional agencies after the date of this Prospectus/Proxy
Statement.
MANAGEMENT OF BB&T FINANCIAL
The following tables set forth the current directors and executive officers
of BB&T Financial and certain information concerning their backgrounds.
<TABLE>
<CAPTION>
DIRECTOR OF
AGE AS OF PRINCIPAL OCCUPATION(S) BB&T FINANCIAL
NAME 12/31/93 DURING LAST FIVE YEARS SINCE
---- --------- ----------------------- --------------
<S> <C> <C> <C>
DIRECTORS
Joseph B. Alala, Jr. ... 60 Senior Partner, Alala, Mullen, Holland 1983
and Cooper, P.A. (Attorneys),
Gastonia, N.C.
John A. Allison IV...... 45 Chairman of the Board and Chief 1986
Executive Officer, BB&T Financial and
Branch Banking and Trust Company,
Wilson, N.C.
W. Watson Barnes........ 57 President, Wilson Petroleum Company, 1981
Inc. (Distributor of petroleum
products), Wilson, N.C.
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
DIRECTOR OF
AGE AS OF PRINCIPAL OCCUPATION(S) BB&T FINANCIAL
NAME 12/31/93 DURING LAST FIVE YEARS SINCE
---- --------- ----------------------- --------------
<S> <C> <C> <C>
Paul B. Barringer....... 63 President and Chief Executive Officer, 1975
Coastal Lumber Company (Dealer in
lumber products), Weldon, N.C.
Robert L. Brady......... 63 Senior Vice President, Branch Banking 1991
and Trust Company, Greensboro, N.C.
Prior to April 1992, President, Gate
City Federal Savings & Loan
Association, Greensboro, N.C.
W.G. Clark III.......... 60 President, Clark Industries, Inc. 1981
(Farming), Tarboro, N.C.
Jesse W. Corbett, Jr. .. 57 Personal Investments, Morehead City, 1981
N.C. Prior to June 1988, President,
Corbett Motor Company, Inc.
(Automobile dealership), Wilson, N.C.
W.R. Cuthbertson, Jr. .. 63 Senior Vice President, Branch Banking 1983
and Trust Company, Charlotte, N.C.
Fred H. Deaton, Jr...... 62 Personal Investments, Statesville, 1974
N.C.
Joe L. Dudley, Sr. ..... 56 President and Chief Executive Officer, 1992
Dudley Products, Inc. (Hair care
products), Greensboro, N.C.
Tom D. Efird............ 54 President, Standard Distributors, Inc. 1982
(Beverage wholesaler), Gastonia, N.C.
O. William Fenn, Jr. ... 67 Personal Investments, High Point, N.C. 1991
Prior to April 1992, Vice Chairman,
LADD Furniture Company (Furniture
manufacturer), High Point, N.C.
James E. Heins.......... 63 Telecommunications Consultant, 1985
Pinehurst, N.C. Prior to August,
1991, Vice President of Government
Relations, ALLTEL Corporation
(Telecommunications), Sanford, N.C.
Raymond A. Jones, Jr. .. 69 Personal Investments, Charlotte, N.C. 1975
Kelly S. King........... 45 Senior Executive Vice President, BB&T 1991
Financial Corporation, and President,
Branch Banking and Trust Company,
Wilson, N.C.
David R. LaFar III...... 64 Chairman, LaFar Industries, Inc. 1990
(Textile manufacturer), Gastonia,
N.C.
J. Ernest Lathem, M.D... 60 Urologist, The Willow Practice, P.A., 1987
Greenville, S.C.
James H. Maynard........ 54 Chairman, Investors Management 1985
Corporation (Restaurants), Raleigh,
N.C.
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
DIRECTOR OF
AGE AS OF PRINCIPAL OCCUPATION(S) BB&T FINANCIAL
NAME 12/31/93 DURING LAST FIVE YEARS SINCE
---- --------- ----------------------- ---------------
<S> <C> <C> <C>
Dorothy G. Owen......... 59 Chairman of Board of Directors, Owen 1992
Steel Co., Inc. (Steel fabricator),
Columbia, S.C.
W.H. Parks.............. 55 President, Branch Banking and Trust 1987
Company of South Carolina,
Greenville, S.C.
A. Winniett Peters...... 67 Chairman of the Board, Standard 1977
Commercial Tobacco Company (Tobacco
processors and exporters), Wilson,
N.C.
Richard L. Player, Jr. . 59 President, Player, Inc. (Commercial 1990
and industrial general contractor),
Fayetteville, N.C.
S.B. Tanner III......... 66 Chairman of the Board, Tanner 1982
Companies, Inc. (Manufacturer of
ladies' apparel), Rutherfordton, N.C.
Larry J. Waggoner....... 58 Real Estate Development and 1985
Investments, Naples, Fla. Prior to
August 1991, President, Rental Towel
& Uniform Services, Inc. (Rental
services), Graham, N.C.
Henry G. Williamson, 46 President and Chief Operating Officer, 1986
Jr. ................... BB&T Financial Corporation and Chief
Operating Officer, Branch Banking and
Trust Company, Wilson, N.C.
William B. Young, M.D... 68 Retired Specialist in Internal 1974
Medicine, Wilson, N.C.
EXECUTIVE OFFICERS
EMPLOYEE OF
BB&T SINCE
-----------
John A. Allison IV...... 45 Chairman of the Board and Chief 1971
Executive Officer, BB&T Financial
Corporation and Branch Banking and
Trust Company
Henry G. Williamson, 46 President and Chief Operating Officer, 1972
Jr. ................... BB&T Financial Corporation and Chief
Operating Officer, Branch Banking and
Trust Company
Kelly S. King........... 45 Senior Executive Vice President, BB&T 1972
Financial Corporation and President,
Branch Banking and Trust Company
W. Kendall Chalk........ 48 Senior Executive Vice President, BB&T 1975
Financial Corporation and Branch
Banking and Trust Company
Scott E. Reed........... 45 Senior Executive Vice President and 1972
Treasurer, BB&T Financial Corporation
and Senior Executive Vice President,
Branch Banking and Trust Company
</TABLE>
23
<PAGE>
THE OFFERINGS
GENERAL
The Offerings are being made pursuant to the terms of the Plan of Conversion
and the Reorganization Agreement. The following discussion does not purport to
be complete and is subject to and is qualified in its entirety by reference to
all of the provisions of the Plan of Conversion, which is attached hereto as
Annex II, and the Reorganization Agreement, which has been filed as an exhibit
to the Registration Statement. See "AVAILABLE INFORMATION."
Purchase Price. Shares are being offered in the Subscription Offering to
Eligible Member Subscribers at three different prices. Eligible Member
Subscribers may elect to purchase shares either at the 85% Price, which will be
a price equal to 85% of the BB&T Market Price, and/or at the 95% Price, which
will be a price equal to 95% of the BB&T Market Price. Shares are also being
offered in the Subscription Offering at the BB&T Market Price (without any
four-month transfer restriction) to (i) Voting Members who are not also
Eligible Member Subscribers and (ii) Eligible Member Subscribers who had a
single deposit account with a balance of less than $25,000 on deposit or only a
loan account, each at Home Savings as of the Eligibility Record Date, if they
subscribe for more than $150,000 of BB&T Financial Common Stock. Shares offered
but not sold in the Subscription Offering will be offered in the Community
Offering to Community Offering Residents at the 95% Price (subject to maximum
and minimum purchase limitations), see "--The Community Offering--Maximum and
Minimum Purchase Limitations."
SHARES PURCHASED IN THE SUBSCRIPTION OFFERING AT THE 85% PRICE WILL BE
SUBJECT TO THE RESTRICTION THAT SUCH SHARES MAY NOT BE SOLD OR TRANSFERRED, BY
SALE, GIFT OR OTHERWISE, FOR A PERIOD OF FOUR MONTHS FOLLOWING THE DATE OF THIS
PROSPECTUS/PROXY STATEMENT, EXCEPT IN THE EVENT OF THE DEATH OF THE SUBSCRIBER.
Shares purchased in the Subscription Offering at the 95% Price or the BB&T
Market Price and in the Community Offering at the 95% Price will not be subject
to any transfer restriction.
Although the 85% Price and the 95% Price will be set at a discount to the
market price of the BB&T Financial Common Stock at the time the 85% Price and
the 95% Price are established, Subscribers may be unable to sell the shares for
which they subscribe at a price equal to or greater than the 85% Price or the
95% Price. Moreover, because shares purchased in the Subscription Offering at
the 85% Price may not be transferred for a period of four months, the market
price of BB&T Financial Common Stock on the date that such shares may be sold
could be substantially different than the market price of such shares on the
dates on which they are subscribed for and received. See "CERTAIN
CONSIDERATIONS RELATING TO THE OFFERINGS--Four-Month Transfer Restriction" and
"--the Purchase Price."
Participation in the Offerings by Eligible Member Subscribers or Voting
Members Who Also Are Community Offering Residents. An Eligible Member
Subscriber or Voting Member who also is a Community Offering Resident is
eligible to participate in either the Subscription Offering, the Community
Offering or both. Eligible Member Subscribers who elect to subscribe for shares
in the Subscription Offering at the 85% Price will be entitled to a lower
purchase price than in the Community Offering, but, unlike the shares purchased
at the 95% Price in the Subscription Offering or in the Community Offering,
shares purchased in the Subscription Offering at the 85% Price are subject to
the four-month transfer restriction. See "--The Subscription Offering--Four-
Month Transfer Restriction." However, Voting Members who are not Eligible
Member Subscribers and who subscribe in the Subscription Offering will pay the
BB&T Market Price rather than the lower 95% Price they would be entitled to pay
in the Community Offering if they are Community Offering Residents.
In the event of an oversubscription for the shares of BB&T Financial Common
Stock in the Subscription Offering and/or the Community Offering, Eligible
Member Subscribers and Voting Members who subscribe in the Subscription
Offering will be entitled to priority over Subscribers in the Community
Offering. Thus, in the event of an oversubscription, shares may not be
available to fill subscriptions of those Eligible Member Subscribers and Voting
Members subscribing in the Community Offering. BB&T Financial cannot predict
the extent to which Eligible Member Subscribers and Voting Members will
subscribe for shares in the Subscription Offering or the likelihood of an
oversubscription. See "THE OFFERINGS--The Subscription Offering--
Oversubscription Procedures."
24
<PAGE>
There also may be certain important differences in the tax consequences
between participating in the Subscription Offering and participating in the
Community Offering, including the fact that Eligible Member Subscribers and
Voting Members who are also Community Offering Residents should not recognize
taxable gain as a result of purchasing shares in the Community Offering,
whereas Eligible Member Subscribers and Voting Members who elect to purchase
shares in the Subscription Offering will recognize taxable gain attributable to
the receipt and exercise of Subscription Rights. However, under one theory even
those Eligible Member Subscribers who elect not to exercise their Subscription
Rights may be required to recognize taxable gain due to the receipt of these
Subscription Rights, although in most cases such Eligible Member Subscribers
would be entitled to recognize offsetting losses when the unexercised
Subscription Rights expire. See "CERTAIN CONSIDERATIONS RELATING TO THE
OFFERINGS--Receipt of Taxable Gain by Subscribers in the Subscription Offering"
and "--Certain Federal Income Tax Consequences." Those who are eligible to
participate in both the Subscription Offering and the Community Offering and
who wish to subscribe should consider these factors and the other information
concerning the Offerings contained herein before deciding whether to elect to
participate in the Subscription Offering, the Community Offering or both. For a
discussion of purchase limitations for such persons, see "--The Subscription
Offering--Maximum and Minimum Purchase Limitations" and "--The Community
Offering--Maximum and Minimum Purchase Limitations."
Delivery of Stock Certificates. Stock certificates representing shares of
BB&T Financial Common Stock purchased in the Offerings will be mailed by BB&T
Financial's transfer agent to the persons entitled thereto at the address noted
on the Stock Order Form as soon as practicable after the completion of the
Offerings. Any certificates returned as undeliverable will be held by BB&T
Financial until claimed by the persons legally entitled thereto or otherwise
disposed of in accordance with applicable law. Subscribers should note that
there may be delays from the date the Stock Order Form is submitted until
Subscribers receive their stock certificates. See "CERTAIN CONSIDERATIONS
RELATING TO THE OFFERINGS--The Purchase Price."
THE SUBSCRIPTION OFFERING
BB&T Financial and Home Savings have caused this Prospectus/Proxy Statement
and Annexes hereto, a Stock Order Form and additional information concerning
the Subscription Offering to be mailed or otherwise delivered to each Eligible
Member Subscriber and Voting Member of Home Savings. Additional copies of any
of these documents are available upon request from the Conversion Information
Center, 155 West South Street, Albemarle, North Carolina 28002 (telephone no.
(704) - ). Any questions or requests for additional information regarding
the Conversion Merger or the Offerings may be directed to the Conversion
Information Center.
Eligible Member Subscribers and Voting Members may subscribe for shares of
BB&T Financial Common Stock in the Subscription Offering. Eligible Member
Subscribers are holders of Home Savings deposit accounts aggregating $50 or
more or loan accounts, each on the Eligibility Record Date (which is January
31, 1993). Voting Members consist of holders of deposit accounts or borrowings
at, and persons obligated on a loan from, Home Savings on the Voting Record
Date (which is February 9, 1994) who continue to hold such accounts or
borrowings or be obligated on such loan through the date of the Special
Meeting, scheduled to be held March 1, 1994.
Under the Administrator's regulations, no person may transfer or enter into
any agreement or understanding to transfer the legal or beneficial ownership of
Subscription Rights or the underlying shares of BB&T Financial Common Stock to
the account of any other person prior to completion of the Conversion. No
person is required to subscribe for any shares of BB&T Financial Common Stock.
Voting Members may vote at the Special Meeting whether or not they purchase
shares.
Four-Month Transfer Restriction. SHARES PURCHASED IN THE SUBSCRIPTION
OFFERING AT THE 85% PRICE ARE SUBJECT TO THE RESTRICTION THAT SUCH SHARES MAY
NOT BE SOLD OR OTHERWISE TRANSFERRED, BY SALE, GIFT OR OTHERWISE, FOR A PERIOD
OF FOUR MONTHS FOLLOWING THE DATE OF THIS PROSPECTUS/PROXY STATEMENT, EXCEPT IN
THE EVENT OF THE DEATH OF THE SUBSCRIBER. Any shares purchased in the
Subscription Offering at the 95% Price or the BB&T
25
<PAGE>
Market Price will not be subject to this restriction. Each certificate
representing any shares subject to the four-month transfer restriction will
bear an appropriate notice of such restriction. Shares issued as a dividend,
stock split or otherwise with respect to any such restricted shares will be
subject to the same restriction for the remainder of such four-month period.
See "CERTAIN CONSIDERATIONS RELATING TO THE OFFERINGS--Four-Month Transfer
Restriction."
Number of Shares Offered. The total number of shares of BB&T Financial Common
Stock to be offered in the Subscription Offering will be determined by dividing
(i) the Appraised Value of Home Savings as it will be updated after the
Offerings are completed (see "--Appraised Value of Home Savings") by (ii) the
BB&T Market Price. No fractional shares will be issued.
How to Subscribe. Eligible Member Subscribers and Voting Members may
subscribe for shares of BB&T Financial Common Stock by properly completing and
signing the Stock Order Form and hand delivering it to any Home Savings office
or to any BB&T office in the Community Offering Area or by mailing it in the
postage-paid return envelope accompanying this Prospectus/Proxy Statement to
the Conversion Information Center, in each case accompanied by full payment, or
instructions for payment, for the subscribed shares by the Subscription
Expiration Date (currently anticipated to be 5:00 p.m., North Carolina time, on
March 1, 1994, although the Subscription Offering may be extended to a date not
later than , 1994).
Home Savings reserves the right to reject orders submitted by facsimile
transmission. Failure of Home Savings for any reason to receive from any
Eligible Member Subscriber or Voting Member a properly completed and executed
Stock Order Form and payment or withdrawal instructions by such time will be
deemed a waiver and release by such Eligible Member Subscriber or Voting Member
of any rights that such Eligible Member Subscriber or Voting Member may have in
the Subscription Offering. A Stock Order Form, once received by Home Savings,
cannot be amended, modified or rescinded by the Subscriber. Home Savings may,
but is not required to, waive any immaterial irregularities in any Stock Order
Form or require the submission of a corrected Stock Order Form or the
remittance of full payment for subscribed shares by such date as Home Savings
may specify.
Method of Payment. Full payment or instructions for withdrawal from a Home
Savings deposit account (other than a demand deposit account or NOW account, on
which a Subscriber must write a check) of the Eligible Member Subscriber or
Voting Member for the amount of the BB&T Financial Common Stock for which the
Subscriber has subscribed must accompany each properly executed Stock Order
Form for subscriptions to be valid. The actual number of shares issued to each
such Eligible Member Subscriber or Voting Member will be equal to the amount
received from such Eligible Member Subscriber or Voting Member, subject to
adjustment for maximum purchase limitations (see "--Maximum and Minimum
Purchase Limitations") and oversubscriptions (see "--Oversubscription
Procedures"), divided by the 85% Price, the 95% Price and/or the BB&T Market
Price, as applicable. Because no fractional shares will be issued, the Eligible
Member Subscriber or Voting Member will receive as a refund an amount equal to
(i) the total dollar amount for which each person subscribed minus (ii) the
product of the number of whole shares to be received by such Eligible Member
Subscriber or Voting Member and the applicable purchase price or prices.
All shares of BB&T Financial Common Stock purchased in the Subscription
Offering (other than by the Home Savings ESOP) may be paid for in cash (if
delivered in person), or by check or money order. Home Savings reserves the
right to reject payment submitted by wire transfer. If an Eligible Member
Subscriber or Voting Member has a deposit account with Home Savings (other than
a demand deposit account or NOW account, on which a Subscriber must write a
check), such Subscriber may pay for the shares subscribed for by authorizing
and directing Home Savings on the Stock Order Form to make a withdrawal from
such deposit account in an amount equal to the aggregate dollar amount for
which such Subscriber wishes to subscribe. In the case of withdrawal requests,
funds for which such withdrawal is authorized will remain in the Subscriber's
account until withdrawn by Home Savings on the Closing Date, and may not be
withdrawn by such Subscriber unless and until the Subscription Offering has
been completed or terminated. Prior to such withdrawal by Home Savings, any
interest payable on such accounts will continue to be paid in accordance with
the account's contractual rate of interest.
26
<PAGE>
All amounts received for the purchase of shares in the Subscription Offering
(other than by designation for withdrawal from an eligible deposit account)
will be placed in a special segregated Home Savings account for the Offerings.
Home Savings will pay interest to the Subscriber on funds deposited in this
account at Home Savings' passbook rate, currently % per annum, from the date
payment is received until the Offerings are either completed or terminated.
The amount of interest earned will be paid to each Subscriber and will NOT be
applied toward the purchase of additional shares of BB&T Financial Common
Stock.
Home Savings will permit an Eligible Member Subscriber or Voting Member to
pay for any shares of BB&T Financial Common Stock subscribed for by withdrawal
from a Home Savings certificate of deposit account (including withdrawal from
an IRA invested in a certificate of deposit account if the procedures
described in the next paragraph are followed) without the assessment of an
early withdrawal penalty. If the authorized withdrawal is from a certificate
account and the remaining balance does not meet the applicable minimum balance
requirement, the entire certificate will be cancelled at the time of the
withdrawal and the remaining balance will earn interest thereafter at Home
Savings' passbook rate, currently % per annum.
Subscriptions by Beneficial Owners of IRA, Keogh or Similar Retirement
Accounts. Beneficial owners of IRA, Keogh or similar retirement accounts are
not themselves Eligible Member Subscribers or Voting Members by virtue of
owning such accounts, but the account itself may be an Eligible Member
Subscriber or Voting Member. Payment for the BB&T Financial Common Stock may
be made with funds from an IRA, Keogh or similar retirement account only if
the beneficial owner of such account(s) authorizes and directs Home Savings to
transfer such account(s) to a self-directed account at an independent trustee
that permits the account to hold stock. The independent trustee then must be
directed by the beneficial owner to complete a Stock Order Form for such
shares and to deliver such Stock Order Form, together with funds from such
account, in an amount equal to the aggregate dollar amount of shares
subscribed for. Any shares so subscribed for and purchased would become part
of the IRA, Keogh or other retirement account. Those who are interested in
utilizing IRA, Keogh or similar retirement account funds to subscribe for
shares of BB&T Financial Common Stock should contact the Conversion
Information Center prior to the Subscription Expiration Date for appropriate
instructions.
For purposes of determining compliance with maximum purchase limitations,
purchases by the beneficial owner of any IRA, Keogh or similar retirement
account will be aggregated with purchases by such retirement account. See "--
Maximum and Minimum Purchase Limitations."
Refunds. Refunds to Subscribers in the Subscription Offering will be
remitted (and funds designated by Subscribers for withdrawal from deposit
accounts released) (a) in lieu of the issuance of fractional shares in the
Subscription Offering, (b) in the event and to the extent of an
oversubscription in the Subscription Offering (see "--Oversubscription
Procedures") and (c) in the event that the Subscription Offering is
terminated. In addition, any interest payable to a Subscriber on funds
delivered as payment for shares will be remitted. Any refunds and/or interest
due to Subscribers on funds remitted will be mailed to the Subscriber at the
address designated on the Stock Order Form promptly after the Closing Date or
the termination of the Conversion Merger, as the case may be.
The Home Savings ESOP. BB&T Financial has agreed to cause BB&T to establish
the Home Savings ESOP for the benefit of the full-time employees of Home
Savings. The purchase of the shares of BB&T Financial Common Stock by the Home
Savings ESOP will be funded by a five-year loan from BB&T Financial to the
Home Savings ESOP, which will be repaid through contributions each year to the
Home Savings ESOP by BB&T Financial on behalf of the Home Savings ESOP
participants. It currently is expected that the Home Savings ESOP will
subscribe for 68,293 shares of BB&T Financial Common Stock in the Subscription
Offering at the 85% Price. The Home Savings ESOP will receive priority over
Eligible Member Subscribers and Voting Members in the case of an
oversubscription for shares in the Subscription Offering. See "--
Oversubscription Procedures." For additional information concerning the voting
and tendering of shares in the Home Savings ESOP, see "DESCRIPTION OF CAPITAL
STOCK OF BB&T FINANCIAL--Certain Provisions Which May Have an Anti-Takeover
Effect--Employee Stock Ownership Plans."
27
<PAGE>
Maximum and Minimum Purchase Limitations. The Plan of Conversion provides
for certain limitations to be placed on the purchase of shares in the
Subscription Offering:
(a) Each Eligible Member Subscriber or Voting Member who wishes to
subscribe for BB&T Financial Common Stock in the Subscription Offering must
specify a minimum purchase of $500 on the Stock Order Form. An Eligible
Member Subscriber or Voting Member who also is a Community Offering
Resident and who wishes to subscribe for shares of BB&T Financial Common
Stock in both the Subscription Offering and the Community Offering must
specify a minimum purchase of $500 in each Offering.
(b) Each Eligible Member Subscriber with a single deposit account with a
balance of at least $25,000 at Home Savings or with an additional account
relationship (including a loan) at Home Savings, in each case on the
Eligibility Record Date (January 31, 1993), may subscribe at the 85% Price
and/or the 95% Price for that number of whole shares of BB&T Financial
Common Stock which, when multiplied by the 85% Price and/or the 95% Price,
as applicable, would not exceed $250,000. An additional account
relationship may consist of a demand deposit account, savings account,
certificate of deposit, IRA, Keogh and/or similar retirement account or a
loan at Home Savings. Home Savings will require any Eligible Member
Subscriber claiming an additional account relationship or a deposit balance
of at least $25,000 with Home Savings to provide evidence satisfactory to
Home Savings of the existence of such additional account relationship or
deposits as of the Eligibility Record Date. All determinations as to
whether such Eligible Member Subscriber has submitted sufficient evidence
of such additional account relationship or deposits shall be made by Home
Savings in its sole discretion and shall be final and conclusive. If
sufficient evidence of such additional account relationship or deposits is
not provided, Home Savings in its sole discretion may reject orders
received in the Subscription Offering by such Eligible Member Subscriber in
excess of the limit set forth in paragraph (c).
(c) Each Eligible Member Subscriber with only a loan account or with a
single deposit account with a balance of less than $25,000 with Home
Savings at the Eligibility Record Date may purchase at the 85% Price and/or
the 95% Price that number of whole shares of BB&T Financial Common Stock
which, when multiplied by the 85% Price and/or the 95% Price, as
applicable, would not exceed $150,000. Additional shares may be purchased
by such persons at the BB&T Market Price, provided that the aggregate
purchase price of shares purchased at the 85% Price, the 95% Price and/or
the BB&T Market Price does not exceed $250,000 in the aggregate.
(d) Voting Members (who are not also Eligible Member Subscribers) may
purchase in the Subscription Offering at the BB&T Market Price, that number
of whole shares of BB&T Financial Common Stock which, when multiplied by
the BB&T Market Price, would not exceed $250,000.
(e) An Eligible Member Subscriber or Voting Member who also is a
Community Offering Resident may subscribe in the Community Offering at the
95% Price for that number of whole shares of BB&T Financial Common Stock
which, when added to the amount subscribed for in the Subscription
Offering, would not exceed $250,000.
(f) The Home Savings ESOP may subscribe at the 85% Price and/or the 95%
Price for that number of shares of BB&T Financial Common Stock which, when
multiplied by the 85% Price and/or the 95% Price, would not exceed 1% of
the Outstanding BB&T Financial Common Stock. It currently is anticipated
that the Home Savings ESOP will subscribe for 68,293 shares of BB&T
Financial Common Stock at the 85% Price, or less than . % of the
Outstanding BB&T Financial Common Stock.
(g) No Subscriber may acquire, through the purchase of BB&T Financial
Common Stock in the Subscription Offering and/or the Community Offering,
beneficial ownership in the aggregate (taking into account shares that may
be held by such person) of more than 5% of the Outstanding BB&T Financial
Common Stock, except that the number of shares of BB&T Financial Common
Stock owned in the aggregate by the Home Savings ESOP and any other
employee stock ownership plan which BB&T Financial has established or may
establish may not exceed 10% of the Outstanding BB&T Financial Common
Stock.
(h) For purposes of determining compliance with maximum subscription
limitations, purchases by the beneficial owner of any IRA, Keogh or similar
retirement account will be aggregated with purchases by such retirement
account.
28
<PAGE>
Oversubscription Procedures. In the event of an oversubscription for the
shares of BB&T Financial Common Stock in the Subscription Offering, shares
will first be allocated to the Home Savings ESOP (see "--The Home Savings
ESOP"). Remaining shares then will be allocated among Eligible Member
Subscribers and Voting Members as follows:
(a) Shares subscribed for at the 85% Price and/or the 95% Price will be
allocated among subscribing Eligible Member Subscribers who qualified as
such by virtue of deposit account(s) held on the Eligibility Record Date so
as to permit each such Eligible Member Subscriber to purchase the lesser of
(x) the number of whole shares for which such Eligible Member Subscriber
subscribed for at the 85% Price and/or the 95% Price, and (y) the number of
shares equal to the proportion that the amount held in Home Savings
qualifying deposit accounts by each such Eligible Member Subscriber at the
close of business on the Eligibility Record Date bears to the total amount
held in Home Savings qualifying deposit accounts by all Eligible Member
Subscribers whose subscriptions remain unsatisfied. If the amount so
allocated exceeds the amount subscribed for by any one or more such
Eligible Member Subscriber, the excess shall be reallocated (one or more
times as necessary) among such Eligible Member Subscribers whose
subscriptions are still not fully satisfied on the same principle described
above until all available shares have been allocated or all subscriptions
satisfied.
(b) Any shares remaining after the allocation described in (a) above will
be allocated among subscriptions at the BB&T Market Price, if any, by
Eligible Member Subscribers who qualified as such by virtue of deposit
account(s) held on the Eligibility Record Date, so as to permit each such
Eligible Member Subscriber to purchase the lesser of (x) the number of
shares subscribed for at the BB&T Market Price or (y) the number of shares
equal to the proportion that the amount of qualifying deposits of each such
Eligible Member Subscriber bears to the total amount of qualifying deposits
of all such Eligible Member Subscribers who subscribe for shares at the
BB&T Market Price. If the amount so allocated exceeds the amount subscribed
for by any one or more such Eligible Member Subscriber, the excess shall be
reallocated (one or more times as necessary) among such Eligible Member
Subscribers whose subscriptions are still not fully satisfied on the same
principle described above until all available shares have been allocated or
all subscriptions satisfied.
(c) Any shares remaining after the allocations described in (a) and (b)
above will be allocated among subscriptions of Voting Members who are not
Eligible Member Subscribers so as to permit each such Voting Member to
purchase the proportion that the amount of shares subscribed for by such
Voting Member bears to the total amount of shares subscribed for by all
such Voting Members. If the amount so allocated exceeds the amount
subscribed for by any one or more such Voting Member, the excess shall be
reallocated (one or more times as necessary) among those Voting Members
whose subscriptions are still not fully satisfied on the same principle
described above until all available shares have been allocated or all
subscriptions satisfied.
(d) Any shares remaining after the allocations described in (a), (b) and
(c) above will be allocated among subscriptions at the 85% price and/or the
95% price of Eligible Member Subscribers who qualified as such only by
virtue of borrowing(s) held on the Eligibility Record Date so as to permit
each such Eligible Member Subscriber to purchase the proportion that the
amount of shares subscribed for by such Eligible Member Subscriber bears to
the total amount subscribed for by all such Eligible Member Subscribers. If
the amount so allocated exceeds the amount subscribed for by any one or
more such Eligible Member Subscriber, the excess shall be reallocated (one
or more times as necessary) among such Eligible Member Subscribers whose
subscriptions are still not fully satisfied on the same principle described
above until all available shares have been allocated or all subscriptions
satisfied.
(e) Any shares remaining after the allocation described in (a), (b), (c)
and (d) above will be allocated among subscriptions at the BB&T Market
Price of Eligible Member Subscribers who qualified as such only by virtue
of borrowing(s) held on the Eligibility Record Date, if any, so as to
permit each such Eligible Member Subscriber to purchase the proportion that
the amount of shares subscribed for by such Eligible Member Subscriber
bears to the total amount subscribed for by all such Eligible Member
Subscribers. If the amount so allocated exceeds the amount subscribed for
by any one or more such Eligible Member Subscriber, the excess shall be
reallocated (one or more times as necessary) among such Eligible Member
Subscribers whose subscriptions are still not fully satisfied on the same
principle described above until all available shares have been allocated or
all subscriptions satisfied.
29
<PAGE>
Eligible Member Subscribers or Voting Members who also are Community Offering
Residents who elect to subscribe in the Subscription Offering will receive
priority over Community Offering Residents who subscribe in the Community
Offering in the event of an oversubscription in the Subscription Offering.
Otherwise, if such persons subscribe for shares in the Community Offering, they
will receive any shares remaining after allocations among those who subscribe
in the Subscription Offering. See "--The Community Offering--Oversubscription
Procedures."
Persons in Non-Qualified States or Foreign Jurisdictions. BB&T Financial will
make reasonable efforts to comply with the securities laws of all jurisdictions
in the United States in which Eligible Member Subscribers and Voting Members
reside. However, Subscription Rights may not be offered to any person who
resides in a foreign country, or who resides in any jurisdiction in the United
States if any of the following apply: (i) a small number of persons otherwise
eligible to subscribe for shares of BB&T Financial Common Stock under the Plan
of Conversion reside in such jurisdiction; (ii) the issuance of Subscription
Rights or the offer or sale of BB&T Financial Common Stock to such persons
would require BB&T Financial, under the securities laws of such jurisdiction,
to register as a broker or a dealer or otherwise qualify the BB&T Financial
Common Stock for sale in such jurisdiction; or (iii) such registration or
qualification would be impracticable for reasons of cost or otherwise. No
payments will be made in lieu of the granting of Subscription Rights.
THE COMMUNITY OFFERING
Any shares of BB&T Financial Common Stock not subscribed for in the
Subscription Offering may be subscribed for in the Community Offering by
Community Offering Residents. If all shares of BB&T Financial Common Stock
being offered are subscribed for in the Subscription Offering, no shares of
BB&T Financial Common Stock will be available for sale in the Community
Offering and all funds submitted by Community Offering Residents in the
Community Offering will be refunded with interest. See "--Refunds" and "--
Oversubscription Procedures." The Community Offering will be completed at the
Community Expiration Date (currently expected to be 5:00 p.m., North Carolina
time, on March 1, 1994, although it could be extended and close at any date
thereafter, but not later than , 1994).
Community Offering Residents consist of (a) natural persons residing in the
Community Offering Area, (b) IRA, Keogh and similar retirement accounts
established by or for the benefit of natural persons residing in the Community
Offering Area, and (c) corporations, partnerships and similar entities
headquartered in the Community Offering Area. Home Savings may require a
Community Offering Resident to provide satisfactory evidence that such
purchaser qualifies as a Community Offering Resident. All such determinations
will be made by Home Savings in its sole discretion and will be final and
conclusive. Moreover, the right to purchase BB&T Financial Common Stock in the
Community Offering is subject to the right of Home Savings in its sole
discretion to accept or reject, in whole or in part, orders received in the
Community Offering.
This Prospectus/Proxy Statement, a Stock Order Form and additional
information concerning the Community Offering are being provided to certain
Community Offering Residents. Additional copies of any of these documents are
available to Community Offering Residents upon request from the Conversion
Information Center, 155 West South Street, Albemarle, North Carolina 28002
(telephone no. (704) - ). Home Savings reserves the right not to send
copies of documents to persons whose only address in the Community Offering
Area is a post office box. Any questions or requests for additional information
regarding the Conversion Merger and the Offerings may be directed to the
Conversion Information Center.
How to Subscribe. A Community Offering Resident may subscribe for shares of
BB&T Financial Common Stock by properly completing and signing the Stock Order
Form and mailing it in the postage-paid return envelope accompanying this
Prospectus/Proxy Statement, to the Conversion Information Center at the address
noted above or by hand delivering it to any Home Savings office, accompanied by
full payment, or instructions for payment, for the subscribed shares by the
Community Expiration Date (currently expected
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to be 5:00 p.m., North Carolina time, on March 1, 1994, although the deadline
may be extended and close at a date thereafter, but not later than ,
1994).
The failure for any reason to receive from a Community Offering Resident a
properly completed and executed Stock Order Form and payment by such time will
be deemed a waiver and release by such Community Offering Resident of any right
to subscribe for shares of BB&T Financial Common Stock in the Community
Offering. Home Savings reserves the right to reject orders submitted by
facsimile transmission. A completed Stock Order Form, once received, cannot be
amended, modified or rescinded by the Community Offering Resident. Home Savings
may, but is not required to, waive any immaterial irregularities in any Stock
Order Form or require the submission of a corrected Stock Order Form or the
remittance of full payment for subscribed shares by such date as Home Savings
may specify.
Method of Payment. Full payment (or instructions for withdrawal from such
deposit account if the Community Offering Resident has a deposit account at
Home Savings--other than a demand deposit account or NOW account, on which a
Subscriber must write a check) for the amount of the BB&T Financial Common
Stock for which the Community Offering Resident has subscribed must accompany
each properly executed Stock Order Form for subscriptions to be valid. The
actual number of shares issued to each Community Offering Resident will equal
the dollar amount received from such Community Offering Resident, subject to
adjustment for maximum purchase limitations (see "--Maximum and Minimum
Purchase Limitations") and oversubscriptions (see "--Oversubscription
Procedures"), divided by the 95% Price. Because no fractional shares will be
issued, Community Offering Residents will receive as a refund an amount equal
to (i) the total dollar amount for which each such Subscriber subscribed minus
(ii) the product of the number of whole shares to be received by such
Subscriber and the 95% Price, as described above.
All shares of BB&T Financial Common Stock purchased in the Community Offering
may be paid for in cash (if delivered in person), or by check or money order.
Home Savings reserves the right to reject payment submitted by wire transfer.
If a Community Offering Resident has a deposit account with Home Savings (other
than a demand deposit account or NOW account, on which the Subscriber must
write a check), such Subscriber may pay for the shares subscribed for by
authorizing and directing Home Savings on the Stock Order Form to make a
withdrawal from such deposit account in an amount equal to the aggregate dollar
amount of shares of BB&T Financial Common Stock for which such Subscriber
wishes to subscribe. In the case of withdrawal requests, funds for which such
withdrawal is authorized will remain in the Subscriber's account until
withdrawn by Home Savings on the Closing Date, and may not be withdrawn by such
Subscriber unless and until the Community Offering has been completed or
terminated. Prior to such withdrawal by Home Savings, any interest payable on
such accounts will continue to be paid in accordance with the account's
contractual rate of interest.
All amounts received for the purchase of shares in the Community Offering
(other than by designation for withdrawal from an eligible deposit account at
Home Savings) will be placed in a special segregated Home Savings account for
the Offerings. Home Savings will pay interest to the Subscriber on funds
deposited in this account at Home Savings passbook rate, currently % per
annum, from the date payment is received until the Offerings are either
completed or terminated. The amount of interest earned will be paid to each
Subscriber and will NOT be applied toward the purchase of additional shares of
BB&T Financial Common Stock.
Home Savings will permit a Community Offering Resident to pay for any shares
of BB&T Financial Common Stock subscribed for by withdrawal from a certificate
of deposit account established at Home Savings (including an IRA invested in a
certificate of deposit account if the procedures described in the next
paragraph are followed) without the assessment of an early withdrawal penalty.
If the authorized withdrawal is from a certificate account and the remaining
balance does not meet the applicable minimum balance requirement, the entire
certificate will be cancelled at the time of the withdrawal and the remaining
balance will earn interest thereafter at Home Savings' passbook rate, currently
% per annum.
Subscriptions by Beneficial Owners of IRA, Keogh or Similar Retirement
Accounts. IRA, Keogh and similar retirement accounts established by or for the
benefit of natural persons residing in the Community
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Offering Area also are Community Offering Residents and may subscribe for
shares of BB&T Financial Common Stock in the Community Offering. In the case of
subscriptions by IRA, Keogh or similar retirement deposit accounts established
at Home Savings, BB&T or BB&T-SC, the beneficial owner of the account first
must authorize and direct such institution to transfer the account(s) to a
self-directed account at an independent trustee that permits the account to
hold stock. In such a case, the independent trustee then must be directed by
the beneficial owner to complete and deliver a Stock Order Form together with
full payment for the shares from such account. Any shares so subscribed for and
purchased would become part of the IRA, Keogh or other retirement account.
Those who are interested in utilizing IRA, Keogh or similar retirement account
funds to subscribe for shares of BB&T Financial Common Stock should contact the
Conversion Information Center prior to the Community Expiration Date for
appropriate instructions.
For purposes of determining compliance with maximum purchase limitations,
purchases by the beneficial owner of any IRA, Keogh or similar retirement
account will be aggregated with purchases by such retirement account. See "--
Maximum and Minimum Purchase Limitations."
Refunds. Refunds to Subscribers in the Community Offering will be remitted
(and funds designated by Subscribers for withdrawal from eligible deposit
accounts at Home Savings released) (a) if no shares of BB&T Financial Common
Stock remain available for sale after completion of the Subscription Offering,
(b) in the event and to the extent of an oversubscription in the Community
Offering (see "--Oversubscription Procedures"), (c) in lieu of the issuance of
fractional shares in the Community Offering, and (d) in the event that the
Community Offering is terminated. In addition, any interest payable to a
Subscriber in the Community Offering on funds delivered as payment for shares
will be remitted. Any refunds and/or interest due to such Subscriber on funds
remitted will be mailed to the Subscriber at the address designated on the
Stock Order Form promptly upon the completion or termination of the Offerings.
Oversubscription Procedures. If the BB&T Financial Common Stock offered in
the Subscription Offering is fully subscribed, then no shares of BB&T Financial
Common Stock will be available for purchase in the Community Offering and all
funds submitted pursuant to the Community Offering will be refunded, with
interest (and funds designated by subscribers for withdrawal from eligible
deposit accounts at Home Savings, released). See "--Refunds." If Community
Offering Residents order more in the Community Offering than is available for
purchase, shares shall be allocated among Community Offering Residents as
follows:
(a) Shares will first be allocated among the subscriptions of Community
Offering Residents who are natural persons so as to permit each such
Community Offering Resident to purchase the same proportion that the amount
of shares subscribed for by such Community Offering Resident bears to the
total amount of shares subscribed for by all such Community Offering
Residents.
(b) Any shares remaining after the allocation described in paragraph (a)
above will be allocated among the subscriptions of Community Offering
Residents who are not natural persons so as to permit each such Community
Offering Resident to purchase the same proportion that the amount of shares
subscribed for by such Community Offering Resident bears to the total
amount of shares subscribed for by all such Community Offering Residents.
Eligible Member Subscribers or Voting Members who also are Community Offering
Residents who purchase shares of BB&T Financial Common Stock in the Community
Offering will, in the event of an oversubscription in the Community Offering,
be subject to the oversubscription procedures described in the preceding
paragraphs.
Maximum and Minimum Purchase Limitations. The Plan of Conversion provides for
certain limitations to be placed on the purchase of shares in the Community
Offering:
(a) Each Community Offering Resident who wishes to subscribe for BB&T
Financial Common Stock in the Community Offering must specify a minimum
purchase of $500 on the Stock Order Form.
(b) An Eligible Member Subscriber or Voting Member who also is a
Community Offering Resident and who wishes to subscribe for shares of BB&T
Financial Common Stock in both the Subscription Offering and the Community
Offering must specify a minimum purchase of $500 in each Offering.
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(c) Each Community Offering Resident may subscribe at the 95% Price for
an amount of shares of BB&T Financial Common Stock which, when multiplied
by the 95% Price, would not exceed $250,000.
(d) An Eligible Member Subscriber or Voting Member who also is a
Community Offering Resident may subscribe at the 95% Price in the Community
Offering for an amount of shares of BB&T Financial Common Stock which, when
multiplied by the 95% Price and added to the dollar amount subscribed for
in the Subscription Offering, would not exceed $250,000.
(e) No Eligible Subscriber may acquire, through the purchase of BB&T
Financial Common Stock in the Subscription Offering and/or the Community
Offering, beneficial ownership in the aggregate (taking into account shares
that may be held by such person) of more than 5% of the Outstanding BB&T
Financial Common Stock, except that the number of shares of BB&T Financial
Common Stock owned in the aggregate by the Home Savings ESOP and any other
employee stock ownership plan which BB&T Financial has established or may
establish may not exceed 10% of the Outstanding BB&T Financial Common
Stock.
(f) For purposes of determining compliance with the maximum purchase
limitations, purchases by the beneficial owner of any IRA, Keogh or similar
retirement account will be aggregated with purchases by such retirement
account.
APPRAISED VALUE OF HOME SAVINGS
Under the Plan of Conversion, the number of shares of BB&T Financial Common
Stock that must be offered in connection with the Conversion Merger is based on
the Appraised Value of Home Savings. As of December 14, 1993, Trident Financial
determined the Appraised Value to be $24 million. The estimate of 800,000
shares being offered hereby has been determined by dividing the Appraised Value
by an assumed last sale price on the Nasdaq NMS of a share of BB&T Financial
Common Stock on the Community Expiration Date of $30.00 per share. In
accordance with the Administrator's regulations, and as provided for in the
Plan of Conversion, Trident Financial will update the Appraised Value promptly
following the expiration of the Offerings. If the Appraised Value is higher or
lower than $24 million, the aggregate dollar amount of shares offered in the
Subscription Offering will be correspondingly adjusted without a resolicitation
of Subscribers, as long as the Appraised Value as finally determined by Trident
Financial remains within the Estimated Valuation Range of $20.4 million to
$27.6 million. If Trident Financial determines that the Appraised Value must be
adjusted to an amount that is not within the Estimated Valuation Range, the
Administrator's approval must be obtained before such Appraised Value may be
used as a basis for determining the actual number of shares of BB&T Financial
Common Stock offered in the Subscription Offering. Such approval may be
conditioned upon a resolicitation of Subscribers. In the event resolicitation
is required, Subscribers will be given the opportunity to have their
subscription funds returned and will be provided updated information upon which
to base a decision whether to continue their subscriptions. In such case, the
subscriptions of any Subscriber who does not respond to the resolicitation may
be automatically rescinded.
In determining the Appraised Value, Trident Financial reviewed, among other
factors, Home Savings' audited financial statements for the five years ended
September 30, 1993, as well as other financial information, some of which is
contained in Home Savings' application to the Administrator to effect the
Conversion Merger. Trident Financial also reviewed conditions in the securities
markets in general and for financial institution stocks in particular. In
addition, Trident Financial considered the prices paid in mergers and
acquisitions of other thrift institutions. Trident Financial also examined the
economy in Home Savings' primary market area and compared it with the state and
national economy. Further, Trident Financial examined the competitive
environment in which Home Savings operates, assessed its relative strengths and
weaknesses and compared its operating performance with that of other thrift
institutions. Trident Financial also considered the market value of Home
Savings' assets and liabilities as well as Home Savings' prospects for the
future in determining the Appraised Value. When Trident Financial updates the
Appraised Value following the expiration of the Offerings, it intends to
consider, among other things, any new developments or changes in Home Savings'
financial performance and condition, management policies, conditions in the
equity markets for financial institution stocks, conditions in the markets for
mergers and acquisitions of thrift
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institutions and the results of the Offerings. In conducting its appraisal,
Trident Financial has relied on, and assumed the accuracy and completeness of,
the financial information provided by Home Savings. Trident Financial did not
independently verify the financial statements and other information provided by
Home Savings, nor did Trident Financial independently value the assets or
liabilities of Home Savings.
Copies of Trident Financial's appraisal of Home Savings and the detailed
memorandum setting forth the methods and assumptions for such appraisals are on
file and available for inspection at the Office of the Administrator at 1110
Navaho Drive, Suite 301, Raleigh, North Carolina, 27609.
Trident Financial will receive an aggregate fee for its services of $25,000.
BB&T Financial and Home Savings have agreed to indemnify Trident Financial
against certain liabilities arising out of or based upon its performance of
services, except where Trident Financial is determined to have been negligent
or to have failed to exercise due diligence in the preparation of its
appraisal. Trident Financial also acted as financial advisor to Home Savings in
connection with the Conversion Merger and received a fee for such services of
$35,000. Trident Financial is an affiliate of Trident Securities, which is
acting as a sales agent in connection with the Offerings. See "THE OFFERINGS--
Plan of Distribution."
THE APPRAISAL OF HOME SAVINGS IS NOT INTENDED, AND MUST NOT BE CONSTRUED, AS
A RECOMMENDATION OF ANY KIND AS TO THE ADVISABILITY OF PURCHASING SHARES OF
BB&T FINANCIAL COMMON STOCK. THE APPRAISAL CONSIDERS HOME SAVINGS ONLY AND
SHOULD NOT BE CONSIDERED AS AN INDICATION OF THE LIQUIDATION VALUE OF HOME
SAVINGS OR ITS VALUE FOLLOWING THE ACQUISITION. IN ADDITION, THE APPRAISED
VALUE IS NOT INTENDED, AND MUST NOT BE CONSTRUED, TO EXPRESS AN OPINION AS TO
THE VALUE OF BB&T FINANCIAL COMMON STOCK TO BE OFFERED IN THE SUBSCRIPTION
OFFERING OR THE COMMUNITY OFFERING.
TIMING OF COMPLETION OF THE CONVERSION MERGER AND SALE OF SHARES
The Administrator's regulations require that the sale of the BB&T Financial
Common Stock offered in connection with the Conversion Merger be completed
within 45 calendar days after the expiration of the Subscription Offering. In
the event the sale of BB&T Financial Common Stock cannot be completed within
the required 45-day period, one or more extensions of time to complete the sale
may be granted by the Administrator, but no single extension of time may exceed
90 days. No assurance can be given that an extension will be granted if
requested. In the event of such an extension, BB&T Financial will distribute to
each Subscriber a notice of the extension of time. In the event of an
extension, Subscribers will be given the right to increase, decrease or rescind
their subscriptions at any time prior to 20 days before the end of the
extension period and will be provided updated information upon which to base a
decision whether to continue their subscriptions. The subscription of any
Subscriber who does not affirmatively respond may be automatically rescinded.
If the Appraised Value of Home Savings is required to be revised as a result of
any such extension, no assurance can be given that such Appraised Value, as
revised, will be approved by the Administrator. Therefore, it is possible that
if the Conversion Merger cannot be completed within the requisite period, it
will be terminated. In such event, or in the event no extension is granted, all
funds will be returned to Subscribers promptly after the date the Conversion
Merger is terminated, together with accrued interest, if any, and all
withdrawal authorizations will be terminated.
After the expiration of the Offerings but prior to the Closing Date, upon the
occurrence of any event, circumstance or change of circumstance which would be
material to the investment decision of a Subscriber, BB&T Financial will
request the Administrator's approval of a notice to be delivered to
Subscribers. Any such notice will grant to each Subscriber the right to
increase, decrease or rescind his or her subscription for a period of not less
than the greater of 20 days from the date of the mailing of such notice or the
period remaining in an extension of time granted by the Administrator. The
subscription of any Subscriber who does not respond to the notice may be
automatically rescinded.
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The Plan of Conversion and the regulations of the Administrator require that
the Conversion be completed within 12 months from the date on which the Plan of
Conversion is approved by the Voting Members of Home Savings (the Special
Meeting to consider the Plan of Conversion is scheduled to be held on March 1,
1994). The Reorganization Agreement provides, however, that either BB&T
Financial or Home Savings may terminate the Reorganization Agreement if the
Conversion and the Acquisition are not completed by the close of business on
July 31, 1994. The Conversion and the Acquisition will be consummated on the
Closing Date, which will be as soon as practicable after the Subscription
Offering and the Community Offering expire.
CONDITIONS TO COMPLETION OF THE OFFERINGS AND TERMINATION OF THE OFFERINGS
The respective obligations of BB&T Financial and Home Savings to consummate
the transactions contemplated by the Reorganization Agreement, including the
Offerings, are subject to the satisfaction (or, in some cases, waiver) of
certain conditions, including (a) receipt of certain required regulatory
approvals, (b) approval of the Plan of Conversion (which will be considered at
the Special Meeting) by the Voting Members of Home Savings (c) an opinion from
KPMG Peat Marwick with respect to certain tax matters (see "--Certain Federal
Income Tax Consequences"), (d) material performance by Home Savings of all
obligations and compliance with all covenants required by the Reorganization
Agreement, (e) that BB&T Financial shall not have determined in good faith that
there has been a material adverse change in the condition or operations of Home
Savings since September 30, 1992 and (f) that the average closing price of the
BB&T Financial Common Stock reported on the Nasdaq NMS for the ten trading days
prior to the Closing Date not be less than $25.00 per share.
The Administrator has approved mailing of the Prospectus/Proxy Statement and
related materials, and conditioned final approval of the Conversion and the
Acquisition upon the receipt of certain additional materials. An application
for the Acquisition was approved by the Federal Reserve Bank of Richmond on
December 1, 1993. BB&T Financial anticipates effecting the Merger sometime
after the Acquisition and will consummate the Acquisition whether or not any
approvals required to effect the Merger have been received. BB&T Financial has
not yet determined the means by which it will effect the Merger.
The Plan of Conversion may be amended or terminated by the Board of Directors
of Home Savings with the concurrence of the Administrator until the Closing
Date, provided that BB&T Financial concurs in the amendment. See "--Timing of
Completion of the Conversion Merger and Sale of Shares." The Reorganization
Agreement may be terminated at any time prior to the Closing Date by the mutual
consent in writing of BB&T Financial and Home Savings. Either party may
terminate the Reorganization Agreement at the Closing Date if the required
conditions to such party's obligations have not been satisfied or waived. In
addition, either party may terminate the Reorganization Agreement at any time
if the other party has materially breached the Reorganization Agreement (and
such breach is not cured by the earlier of 30 days after the date on which
written notice of such breach is given to the party committing the breach or
the Closing Date), or if the required regulatory approvals are not obtained and
the time periods for appeals and requests for reconsideration have run. The
Reorganization Agreement also may be terminated by either party if the Closing
Date has not occurred by the close of business on July 31, 1994.
In the event of a termination, all Subscribers in the Offerings will receive
refunds for amounts remitted for their subscriptions (or funds designated for
withdrawal will be released) plus any interest that may be due. See "--The
Subscription Offering--Refunds" and "--The Community Offering--Refunds."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
General. The following is a summary discussion of the material federal income
tax consequences of the Conversion and Acquisition, and the purchase by
Eligible Member Subscribers and Voting Members of BB&T Financial Common Stock
pursuant to the Offerings. The summary is based on the law as currently
constituted and is subject to change in the event of changes in the law,
including amendments to applicable statutes or regulations or changes in
judicial or administrative rulings, some of which could be given retroactive
effect. The summary does not address any foreign, state or local tax
consequences, except for
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certain North Carolina income tax consequences, nor does it address all aspects
of federal income taxation that may apply to the Conversion and the
Acquisition. The tax consequences to a particular Eligible Member Subscriber or
Voting Member, for example, likely will depend on his or her particular
circumstances or status (e.g., a foreign person, tax-exempt entity, etc.),
which may not be addressed in this summary. Eligible Member Subscribers and
Voting Members are urged, therefore, to consult their own tax advisors as to
the specific tax consequences to them of the Conversion Merger, and any
purchase of BB&T Financial Common Stock pursuant to the Subscription Offering,
including, without limitation, tax return reporting requirements, the
application and effect of federal, foreign, state, local and other tax laws and
the implications of any proposed changes in the tax laws.
A recipient of Subscription Rights will be required to recognize gain with
respect to the receipt of Subscription Rights to the extent of the fair market
value of the Subscription Rights received. An Eligible Member Subscriber or
Voting Member will be able to claim a loss upon the expiration of any
unexercised Subscription Rights to the extent of the gain recognized on the
receipt of such Subscription Rights. An Eligible Member Subscriber or Voting
Member may be able to claim that the Subscription Rights received have a fair
market value only to the extent of the fair market value, if any, of any
Subscription Rights actually exercised by the Eligible Member Subscriber or
Voting Member. See "--Certain Income Tax Consequences of the Conversion Merger
to Recipients of Subscription Rights" for further discussion.
BB&T Financial and Home Savings have received an opinion of KPMG Peat Marwick
(the "Tax Opinion"), tax advisors to BB&T Financial, which reaches certain
conclusions with respect to certain federal and North Carolina income tax
consequences of the Conversion and the Acquisition and the purchase of BB&T
Financial Common Stock pursuant to the Subscription and Community Offerings.
Where appropriate or useful, this discussion will refer to the Tax Opinion and
particular conclusions expressed therein. However, such an opinion represents
only that advisor's best judgment as to the matters expressed therein and has
no binding effect on the IRS or official status of any kind. There can be no
assurance that the IRS could not successfully contest in the courts an opinion
expressed by the advisor as set forth in the Tax Opinion or that legislative,
administrative or judicial decisions or interpretations may not be forthcoming
that would significantly change the opinions set forth in the Tax Opinion. The
IRS will not currently issue private letter rulings concerning a transaction's
qualification under certain types of reorganizations or certain federal income
tax consequences resulting from such qualification. Accordingly, no private
letter ruling has been, nor is it anticipated that such a ruling will be,
requested from the IRS with respect to the Conversion Merger.
Reorganization Status and Certain Other Tax Effects. The Tax Opinion states
that the Conversion and the Acquisition will qualify as one or more tax-free
reorganizations under Section 368(a) of the Internal Revenue Code of 1986, as
amended (the "Code"), and that the Conversion and the Acquisition will result
in the following federal income tax consequences, among others: (i) no gain or
loss will be recognized to Home Savings in either its mutual or its stock form;
(ii) no gain or loss will be recognized to Home Savings upon the receipt of
money from BB&T Financial in exchange for shares of its common stock; (iii) no
gain or loss will be recognized by Eligible Member Subscribers or Voting
Members upon the deemed issuance to them of deposit accounts in the stock
savings bank following the Conversion in the same dollar amount as their
deposit accounts with Home Savings prior to the Conversion; (iv) the Eligible
Member Subscribers and Voting Members of Home Savings will realize gain, if
any, upon the exchange of their membership interests in Home Savings for
interests in the liquidation account and Subscription Rights; however, any such
gain will be recognized only in an amount not in excess of the fair market
value of the Subscription Rights and the interests in the liquidation account
received; (v) the tax basis of deposit account holders of Home Savings in their
deposit accounts with the stock savings bank will be the same as their tax
basis in their deposit accounts with Home Savings immediately prior to the
Conversion and their tax basis in their interests in the liquidation account
will be zero increased by the amount of gain, if any, recognized on their
receipt; (vi) the tax basis of the Subscription Rights will be zero, increased
by the amount of gain, if any, recognized on their receipt; (vii) no gain or
loss will be recognized to a holder of Subscription Rights upon the exercise of
such rights; (viii) no income, gain or loss will be recognized by the
purchasers of BB&T Financial Common Stock in the Community Offering; (ix) the
tax basis for shares of BB&T Financial Common Stock purchased (pursuant to
either the Subscription Offering or the Community Offering) will be the amount
paid therefor
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increased by the basis, if any, of the Subscription Rights exercised; (x) the
holding period for BB&T Financial Common Stock acquired in the Subscription
Offering will commence on the date the Subscription Rights are exercised and
the holding period for BB&T Financial Common Stock acquired in the Community
Offering will commence on the day following the date said stock is purchased;
and (xi) an Eligible Member Subscriber will be in receipt of taxable income in
the amount of the bonus interest paid to the Eligible Member Subscriber, at
the time such amount is paid after paid or made available.
The Tax Opinion states that the consummation of the Conversion and the
Acquisition will be treated in substantially the same manner for North
Carolina income tax purposes as for federal income tax purposes.
Certain Income Tax Consequences of the Conversion Merger to Recipients of
Subscription Rights. The Tax Opinion states that gain, if any, realized by
recipients of Subscription Rights, as a result of the Conversion Merger, must
be recognized, but the amount of such gain required to be recognized by an
Eligible Member Subscriber or Voting Member will not exceed the sum of (i) the
fair market value of the Subscription Rights received pursuant to the
Conversion, and (ii) the fair market value, if any, of the interest in the
liquidation account received by the Eligible Member Subscriber.
The application of these rules to the Conversion Merger is complicated by
the fact that the Eligible Member Subscribers will receive Subscription Rights
to purchase BB&T Financial Common Stock at a price which may be less that than
the fair market value of the BB&T Financial Common Stock. In the past,
taxpayers have taken the position that rights to purchase stock offered at
fair market value in conversions of mutual thrifts (such as, arguably, the
rights to purchase shares in the Subscription Offering at the BB&T Market
Price) do not have independent value. This analysis may not apply to the
Subscription Rights to purchase BB&T Financial Common Stock in the
Subscription Offering at the 85% Price and/or the 95% Price because those
Subscription Rights enable Eligible Member Subscribers to purchase shares at
less than fair market value. The determination of whether the Subscription
Rights received have a determinable fair market value could be affected by a
number of factors including, without limitation, the nontransferability of the
Subscription Rights, the excess, if any, of the market price of the BB&T
Financial Common Stock over the actual purchase price, the four-month transfer
restriction placed on shares of BB&T Financial Common Stock acquired in the
Subscription Offering at the 85% Price, and the period of time during which
the Subscription Rights will be outstanding and exercisable, as well as other
possible factors. Accordingly, it is unclear as to how the Subscription Rights
should be valued or how to determine the number of Subscription Rights issued
to each Eligible Member Subscriber for this purpose. The Tax Opinion does not
address the determination of fair market value of the Subscription Rights. No
tax opinion was sought on this issue because of the particular factual
circumstances of the transaction.
In recent years, the IRS has indicated in several private letter rulings
that any gain realized as a result of the receipt of subscription rights with
a fair market value must be recognized by the subscription rights holder
regardless of whether or not such subscription rights are exercised. However,
in a private letter ruling issued by the IRS to BB&T Financial in connection
with its 1991 acquisitions of Gate City Federal Savings & Loan Association
("Gate City") and Albemarle Savings & Loan Association ("Albemarle"), the IRS
concluded, under circumstances substantially similar to the Conversion Merger,
that a subscription rights recipient realized gain from receipt of
subscription rights only if the subscription rights are exercised. Subsequent
to issuing the private letter ruling in Gate City and Albemarle, the IRS
decided to review its policy regarding the proper tax treatment of the receipt
of subscription rights and has indicated that no more private letter rulings
on this issue will be granted until such review is completed. Regardless,
private letter rulings, while potentially instructive, may not be relied upon
in the present situation as any expression of the policy of the IRS or as any
expression of the present state of the law in this area and, due to the
existence of conflicting private letter rulings it is uncertain as to the
conclusion the IRS would reach with regard to the Subscription Rights received
by the Eligible Member Subscribers in this transaction. Furthermore, the
existence of conflicting rulings makes it unclear as to how to determine the
number of Subscription Rights issued to each Eligible Member Subscriber or
Voting Member. The Tax Opinion does not opine as to whether gain will be
recognized by a Subscription Rights holder who does not exercise Subscription
Rights. No tax opinion was sought on this issue because of the existence of
conflicting private letter rulings and the uncertainty as to the conclusion
that the IRS would reach with regard to this issue.
37
<PAGE>
The Tax Opinion states that if a recipient of Subscription Rights is required
to recognize gain upon receipt of Subscription Rights and does not exercise
some or all of the Subscription Rights received, the recipient of such rights
will be entitled to claim, for the year in which the Subscription Rights
expire, a loss in an amount equal to the recipient's tax basis in such
Subscription Rights. See "--Basis in Subscription Rights and Interests in
Liquidation Account." Such loss will be a capital loss provided the BB&T
Financial Common Stock that would have been acquired upon the exercise of such
Subscription Rights would have constituted a capital asset in the hands of the
Eligible Member Subscriber. Although the loss will be equal in amount to the
gain recognized upon receipt of such Subscription Rights, the character of the
loss as a capital loss may not necessarily be the same as the character of the
gain required to be recognized upon receipt of such Subscription Rights,
certain additional tax forms may have to be filed with regard to such loss, and
under certain circumstances the year in which a holder of Subscription Rights
is entitled to deduct the loss may be later than the year in which the gain
from receipt of such Subscription Rights is recognized. For most recipients of
Subscription Rights, any gain recognized with regard to the Subscription Rights
received will be treated as capital gain.
BB&T Financial is uncertain as to whether it will be required to file
information returns with the IRS related to the value of Subscription Rights
received by Eligible Member Subscribers and, if required, how the value will be
determined for purposes of the information returns (particularly in light of
the four-month restriction imposed on shares purchased at the 85% Price).
Accordingly, Eligible Member Subscribers are urged to consult their own tax
advisors as to the specific tax consequences to them of purchasing BB&T
Financial Common Stock in either the Subscription Offering or the Community
Offering.
In several recent private letter rulings, the IRS has concluded that an
interest in a liquidation account has only nominal, if any, fair market value.
Private letter rulings, while potentially instructive, however, may not be
relied upon in the present situation as any expression of the policy of the IRS
or as any expression of the present state of the law in this area.
Basis in Subscription Rights and Interests in Liquidation Account. The Tax
Opinion states that a person who receives, as part of the Conversion Merger,
Subscription Rights in the Subscription Offering will have a tax basis in such
Subscription Rights equal to zero, increased by the amount of gain, if any,
recognized by such Subscription Rights holder with regard to such Subscription
Rights. A Subscription Rights holder's tax basis in the interest in the
liquidation account received by such Subscription Rights holder will be equal
to the fair market value of the interest in the liquidation account received.
If the interest in the liquidation account is determined to have no fair market
value, the Subscription Rights holder's basis therein will be zero.
Exercise of Subscription Rights Received in the Subscription Offering. The
Tax Opinion states that a Subscription Rights holder who receives Subscription
Rights in the Conversion (i) will not recognize any additional taxable income
as a result of the purchase of BB&T Financial Common Stock pursuant to the
exercise of such Subscription Rights, (ii) will have a tax basis in the BB&T
Financial Common Stock so purchased equal to the purchase price paid therefor
increased by the tax basis, if any, of the Subscription Rights exercised, and
(iii) will have a holding period for such BB&T Financial Common Stock
commencing on the date the Subscription Rights are exercised.
Purchase of BB&T Financial Common Stock Pursuant to the Community
Offering. The Tax Opinion states that no income, gain or loss will be
recognized by a purchaser of BB&T Financial Common Stock pursuant to the
Community Offering and that a purchaser of BB&T Financial Common Stock pursuant
to the Community Offering will have a tax basis in such stock equal to the
purchase price thereof, and will have a holding period for such stock
commencing on the day following the date on which such stock is purchased.
IRA, Keogh or Similar Accounts. Those persons who are beneficial owners of
IRA, Keogh or similar retirement accounts are not themselves Eligible Member
Subscribers or Voting Members by virtue of having such accounts, but the
account itself may be an Eligible Member Subscriber or Voting Member. Thus, the
tax consequences of the receipt and exercise of Subscription Rights will be
applicable to the IRAs and Keogh accounts themselves, and not the beneficial
owners thereof. So long as such accounts are tax-exempt,
38
<PAGE>
under section 408 of the Code (in the case of IRAs) or section 501(a) of the
Code (in the case of Keogh accounts), there will be no taxable gain to the
accounts resulting from receipt of Subscription Rights. In the case of an IRA,
Keogh or similar retirement account established at Home Savings, BB&T or BB&T-
SC, however, in order to subscribe for shares in the Subscription Offering or
Community Offering, the beneficial owner first must authorize and direct such
institution to transfer the account to a self-directed account at an
independent trustee that permits the account to hold stock. Payment for the
BB&T Financial Common Stock under these circumstances will have no federal
income tax consequences to the IRA or Keogh account or to the beneficial owner
of such account. To the extent that the balance in an IRA or Keogh account is
increased as a result of the exercise of Subscription Rights, additional income
generally will be recognized upon the future withdrawal of such account
balance.
Interest Payments and Backup Withholding. Any amounts received from a
Subscriber for the purchase of shares in the Subscription Offering (other than
by designation of such amounts for withdrawal from an eligible deposit account)
or in the Community Offering will be deposited in a special account at Home
Savings. Home Savings will pay interest to the Subscriber on such funds at its
passbook rate, currently % per annum, from the date payment is received
until the Conversion is completed or terminated. Interest described in this
paragraph should constitute ordinary interest income to the Subscriber.
For federal income tax purposes, Home Savings is required, under certain
circumstances, to withhold 31 percent of payments ("reportable payments") of
interest to a Subscriber who is not exempt from "backup withholding." Backup
withholding applies if, among other things, (i) the Subscriber fails to furnish
Home Savings with his or her social security number or other taxpayer
identification number ("TIN") on the Stock Order Form, (ii) the IRS notifies
Home Savings that the TIN furnished by the Subscriber is incorrect, (iii) the
IRS notifies Home Savings that the Subscriber has failed to report interest
properly, or (iv) under certain circumstances, the Subscriber fails to provide
Home Savings with a certified statement, signed under penalties of perjury,
that the TIN provided to Home Savings is correct and that such Subscriber is
not subject to backup withholding. Backup withholding will not apply to a
reportable payment of interest if the Subscriber is an exempt recipient (such
as a corporation or a financial institution). Any amounts withheld under the
backup withholding rules would be allowed as a refund or a credit against a
Subscriber's federal income tax provided that required information is furnished
to the IRS.
PLAN OF DISTRIBUTION
A Prospectus/Proxy Statement and other offering materials for the
Subscription Offering are available to Eligible Member Subscribers and Voting
Members by mail, with additional copies being available to Eligible Member
Subscribers and Voting Members by contacting the Conversion Information Center,
155 West South Street, Albemarle, North Carolina 28002 (telephone no. (704)
-- ). Offering materials for the Community Offering will be distributed
through Home Savings and by Trident Securities, as sales agent in the
Offerings. In the Subscription Offering and the Community Offering, officers
and directors of BB&T Financial and Home Savings will be available to answer
questions and also may participate in informational meetings held by Trident
Securities for interested persons. Such officers and directors are not
authorized to make statements about BB&T Financial or Home Savings unless such
information also is set forth in this Prospectus/Proxy Statement, nor may they
render investment advice, and if any such information or investment advice is
given, it may not be relied upon. Eligible Member Subscribers, Voting Members
and Community Offering Residents will be instructed to send Stock Order Forms,
together with cash (if delivered in person) or checks in full payment for their
subscriptions for BB&T Financial Common Stock (or appropriate account
withdrawal instructions), by mail in the postage-paid return envelope
accompanying the Prospectus/Proxy Statement to the Conversion Information
Center or by hand delivery to any Home Savings office or to any BB&T office in
the Community Offering Area. See "--The Subscription Offering--Method of
Payment" and "--The Community Offering--Method of Payment."
BB&T Financial and Home Savings have retained Trident Securities to assist
BB&T Financial in marketing the shares of BB&T Financial Common Stock in the
Offerings and to provide related financial advisory services. Trident
Securities will assist in: (1) training and educating Home Savings and BB&T
Financial employees regarding the mechanics of the conversion process; (2)
conducting informational
39
<PAGE>
meetings for interested investors; (3) organizing the sales efforts in Home
Savings' local communities; and (4) keeping records of subscriptions by
Subscribers. Trident Securities is an affiliate of Trident Financial, which has
determined the Appraised Value of Home Savings. Trident Financial also acted as
financial advisor to Home Savings in connection with the Conversion Merger. See
"--Subscription Offering--Appraised Value of Home Savings" and "EXPERTS."
Trident Securities is registered with the SEC as a broker-dealer and is a
member of the National Association of Securities Dealers, Inc. ("NASD"). For
its services, BB&T Financial has agreed to pay Trident Securities a fee of $
plus % of the aggregate dollar amount of BB&T Financial Common Stock sold to
Eligible Member Subscribers, Voting Members and Community Offering Residents
(except for sales of shares to directors and executive officers of BB&T
Financial and Home Savings and their associates and the sale of shares to the
Home Savings ESOP). Such compensation may be deemed to be underwriting
compensation under the Securities Act of 1933, as amended.
BB&T Financial has agreed to reimburse Trident Securities for its out-of-
pocket expenses (including legal fees) associated with its services as sales
agent. BB&T Financial also has agreed to indemnify Trident Securities against
liabilities and expenses (including legal fees) incurred in connection with
certain claims or litigation arising out of or based upon untrue statements or
omissions contained in the offering material for the shares of BB&T Financial
Common Stock offered in the Subscription Offering and in the Community Offering
or to make certain contributions in respect thereof.
THE SHARES OF BB&T FINANCIAL COMMON STOCK OFFERED HEREBY ARE NOT DEPOSITS AND
ARE NOT AND WILL NOT BE INSURED BY THE FDIC OR ANY OTHER GOVERNMENTAL AGENCY.
ANTICIPATED SUBSCRIPTIONS FOR SHARES OF BB&T FINANCIAL COMMON STOCK
BY HOME SAVINGS DIRECTORS AND EXECUTIVE OFFICERS
IN THE OFFERINGS
The following table sets forth the aggregate dollar amount of shares of BB&T
Financial Common Stock presently expected to be subscribed for by Home Savings'
directors and executive officers, including their associates, in the Offerings:
<TABLE>
<CAPTION>
ANTICIPATED
AGGREGATE
SUBSCRIPTION
NAME POSITION AMOUNT
---- -------- ------------
<S> <C> <C>
Troy E. Alexander....... Director $200,000
Caldwell A. Holbrook,
Jr .................... Director 10,000
Joel A. Huneycutt....... Director 100,000
Douglas Dwight Stokes... Director 100,000
Carl M. Hill............ President and Chief Executive
Officer and Chairman of the Board of
Directors 100,000
Executive Vice President and
R. Ronald Swanner....... Director 50,000
--------
All Directors and Executive Officers as a Group:............. 560,000
</TABLE>
Shares of BB&T Financial Common Stock purchased in the Offerings by directors
and executive officers shall be subject to the restriction that these shares
shall not be sold without the prior written permission of the Administrator for
a period of one year following the Closing Date, except in the event of the
death of the director or executive officer.
In addition, each outside director will be granted ten-year options to
acquire 4,268 shares of BB&T Financial Common Stock at an exercise price equal
to the market price of BB&T Financial Common Stock on the date of grant (which
will be the closing date of the Conversion) and will be awarded 6,402 shares of
restricted BB&T Financial Common Stock. Mr. Hill will receive ten-year options
to acquire 17,073 shares,
40
<PAGE>
and Mr. Swanner will receive ten-year options to acquire 13,659 shares, of BB&T
Financial Common Stock at an exercise price equal to the market price of BB&T
Financial Common Stock on the date of grant. Mr. Hill will receive 25,610
shares and Mr. Swanner will receive 20,488 shares of restricted BB&T Financial
Common Stock. None of the shares to be issued pursuant to options or restricted
stock awards are part of the shares issued in the Subscription Offering or the
Community Offering. The options and restricted stock will vest 20% per year
over five years beginning on the first year after the close of the Conversion
and the Acquisition.
MARKET PRICE AND DIVIDENDS
BB&T Financial Common Stock is listed for quotation on the Nasdaq NMS under
the symbol "BBTF." The following table sets forth, for the indicated periods,
the high and low closing prices for the BB&T Financial Common Stock as reported
by the Nasdaq NMS, and the cash dividends declared per share of BB&T Financial
Common Stock for the indicated periods.
<TABLE>
<CAPTION>
PRICE RANGE CASH DIVIDENDS
----------- DECLARED
HIGH LOW PER SHARE
----- ----- --------------
<S> <C> <C> <C>
1992
First Quarter...................................... 27.75 21.88 .22
Second Quarter..................................... 30.13 25.50 .22
Third Quarter...................................... 29.88 27.38 .22
Fourth Quarter..................................... 32.25 28.75 .25
1993
First Quarter...................................... 35.38 31.00 .25
Second Quarter..................................... 34.38 31.63 .25
Third Quarter...................................... 34.63 32.25 .25
Fourth Quarter..................................... .27
1994
First Quarter (through January , 1994)............
</TABLE>
On , the last reported sale price of BB&T Financial Common Stock, as
reported on the Nasdaq NMS, was $ . On , there were holders of
record of BB&T Financial Common Stock and shares outstanding. On May 27,
1993, the date BB&T Financial and Home Savings entered into the Reorganization
Agreement, the last reported sale price of BB&T Financial Common Stock, as
reported on the Nasdaq NMS, was $ .
The holders of BB&T Financial Common Stock are entitled to receive dividends
when and if declared by the Board of Directors out of funds legally available
therefor. BB&T Financial has paid, and prior to 1973, BB&T paid, regular
quarterly cash dividends since 1921. Although BB&T Financial currently intends
to continue to pay quarterly cash dividends on the BB&T Financial Common Stock,
there can be no assurance that BB&T Financial's dividend policy will remain
unchanged after completion of the Subscription Offering and the Community
Offering. The declaration and payment of dividends thereafter will depend upon
business conditions, operating results, capital and reserve requirements and
the Board of Directors' consideration of other relevant factors.
BB&T Financial is a legal entity separate and distinct from its subsidiaries
and its revenues depend in significant part on the payment of dividends from
its subsidiary financial institutions, particularly BB&T. BB&T Financial's bank
subsidiaries are subject to certain legal restrictions on the amount of
dividends they are permitted to pay. See "SUPERVISION AND REGULATION OF BB&T
FINANCIAL--BB&T and BB&T-SC."
41
<PAGE>
USE OF PROCEEDS
It is estimated that the net proceeds from the sale of the shares of BB&T
Financial Common Stock in the Offerings (assuming that all shares offered are
sold at the 85% Price) will range from $16.3 million to $22.3 million. The net
proceeds from the sale of the BB&T Financial Common Stock will be used by BB&T
Financial (along with additional funds from BB&T Financial) to acquire the
stock of Home Savings issued in the Conversion. It is possible, however, that
BB&T Financial will use the proceeds from the Offerings for general corporate
purposes in the event that the FDIC takes certain actions under legislation
proposed in the U.S. Congress. See "CERTAIN CONSIDERATIONS RELATING TO THE
OFFERINGS--Potential Effects of Pending Legislation." The purchase price of the
stock to be issued by Home Savings in the Conversion will equal the Appraised
Value of Home Savings less expenses incurred in the Conversion and the
Acquisition, but will in no event be less than the current net worth of Home
Savings.
The Plan of Conversion does not require a minimum number of shares to be sold
in the Offerings in order to consummate the Conversion. Thus, the net proceeds
from the Offerings could be substantially less than those set forth above.
However, the Administrator may condition his final approval of the Conversion
and the Acquisition on a minimum number of shares being sold in the Conversion
Merger. It is possible that shares not sold in the Offerings may be sold in a
public offering.
The estimated amount of net proceeds, which are expected to range from $16.3
million to $22.3 million, was determined by subtracting the estimated Offering
expenses of the sale of the shares of BB&T Financial Common Stock in the
Offerings from the estimated gross proceeds (which are expected to range from
$17.3 million to $23.5 million, based on the sale of all shares to be offered
based on the minimum and maximum of the Estimated Valuation Range of Home
Savings as determined by Trident Financial). In calculating the net proceeds,
it is assumed that: (a) 100% of the shares of BB&T Financial Common Stock
offered will be purchased in the Subscription Offering at the 85% Price and
none of the shares of BB&T Financial Common Stock offered will be sold in the
Subscription Offering at the 95% Price or the BB&T Market Price or in the
Community Offering at the 95% Price; (b) the 85% Price will be $25.50 (based on
an assumed BB&T Market Price of $30.00); and (c) Trident Securities will
receive a fee of $ and a sales agency commission of % of the aggregate
dollar amount of such stock sold by Trident Securities in the Offerings. See
"THE OFFERINGS--Plan of Distribution."
The actual proceeds may be more or less than the estimated amount, depending
on, among other things, the BB&T Market Price, the Appraised Value and the
actual number of shares of BB&T Financial Common Stock purchased in the
Subscription Offering and the Community Offering. The following table sets
forth information regarding the range of the number of shares to be issued and
estimated gross proceeds and net proceeds based on the Appraised Value and the
minimum and maximum of the Estimated Valuation Range (as determined by Trident
Financial), and the assumptions set forth in the preceding paragraph.
<TABLE>
<CAPTION>
$20.40 MILLION $24.00 MILLION $27.60 MILLION
APPRAISED APPRAISED APPRAISED
VALUE VALUE VALUE
-------------- -------------- --------------
<S> <C> <C> <C>
Estimated Number of Shares to be
Sold in the Subscription
Offering(1)...................... 680,000 800,000 920,000
Estimated 85% Price Per Share..... $ 25.50 $ 25.50 $ 25.50
----------- ----------- -----------
Estimated Gross Proceeds from the
Offerings........................ $17,340,000 $20,400,000 $23,460,000
Expenses.......................... 1,040,000 1,085,000 1,135,000
----------- ----------- -----------
Estimated Net Proceeds from the
Offerings........................ $16,300,000 $19,315,000 $22,325,000
=========== =========== ===========
</TABLE>
- --------
(1) Calculated by dividing Appraised Value by estimated BB&T Market Price of
$30.00 per share.
42
<PAGE>
CAPITALIZATION
The following table sets forth the historic consolidated capitalization of
BB&T Financial at September 30, 1993 and the pro forma consolidated
capitalization of BB&T Financial after giving effect to the Conversion, based
upon the sale of BB&T Financial Common Stock under the assumptions set forth
under "USE OF PROCEEDS" and "PRO FORMA COMBINED CONDENSED FINANCIAL
STATEMENTS," as applied to the Acquisition of Home Savings.
<TABLE>
<CAPTION>
$20.40 MILLION $24.00 MILLION $27.60 MILLION
BB&T APPRAISED APPRAISED APPRAISED
FINANCIAL VALUE VALUE VALUE
---------- -------------- -------------- --------------
($ IN THOUSANDS)
<S> <C> <C> <C> <C>
Deposits................ $6,084,242 $6,223,927 6,223,927 6,223,927
========== ========== ========= =========
Borrowings:
Short-term............ $ 917,317 $ 917,317 917,317 917,317
Long-term............. 292,778 292,778 292,778 292,778
---------- ---------- --------- ---------
Total borrowings.... $1,210,095 1,210,095 1,210,095 1,210,095
========== ========== ========= =========
Shareholders' Equity(1):
Common stock.......... $ 77,192 79,148 79,448 79,748
Paid-in capital....... 253,269 270,686 273,401 276,111
Retained earnings..... 372,635 372,635 372,635 372,635
Less loan to employee
stock ownership plan. 4,726 6,467 6,467 6,467
Less reserve for re-
stricted stock....... -- 3,073 3,073 3,073
---------- ---------- --------- ---------
Total shareholders'
equity............. $ 698,370 $ 712,929 $ 715,944 $ 718,954
========== ========== ========= =========
</TABLE>
- --------
(1) Includes the issuance of 102,439 shares of restricted BB&T Financial Common
Stock to be issued to the outside directors, executive officers and
employees of Home Savings, subject to vesting over a five-year period
beginning on the first anniversary after the date of grant.
43
<PAGE>
PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
The following unaudited pro forma combined condensed balance sheet as of
September 30, 1993 and the unaudited pro forma combined condensed statement of
income for the year ended December 31, 1992 and nine months ended September 30,
1993 combine the historical financial statements of BB&T Financial, Old Stone,
Citizens of Newton, Mutual Savings, Citizens of Mooresville, Scotland Savings
Bank, S.S.B. ("Scotland Savings"), Home Savings, Asheville Savings Bank,
S.S.B., Asheville, North Carolina ("Asheville Savings") and LSB. The pro forma
combined condensed statements give effect to the affiliations of each
institution with BB&T Financial as if it had occurred on September 30, 1993
with respect to the balance sheet, and at the beginning of each period for the
income statements, presented under the purchase method of accounting for
business combinations. The pro forma combined condensed statements give effect
to the affiliation of BB&T Financial with Mutual Savings, Old Stone and
Citizens of Mooresville and the expected affiliation of BB&T Financial with
Home Savings and with Scotland Savings and Asheville Savings under the purchase
method of accounting, at and for the reporting periods indicated. The purchase
method of accounting requires that all assets and liabilities be adjusted to
their estimated fair market value as of the date of acquisition. The pro forma
combined condensed financial statements give effect to the affiliation of BB&T
Financial with Citizens of Newton and LSB under the pooling-of-interests method
of accounting. The pooling-of-interests method of accounting combines assets
and liabilities at their historical bases and restates the results of
operations as if BB&T and the institution had been combined at the beginning of
all reported periods.
The pro forma statements are provided for informational purposes only. The
pro forma combined condensed statement of income is not necessarily indicative
of actual results that would have been achieved had the acquisitions been
consummated at the beginning of the periods presented, and is not indicative of
future results. The pro forma financial statements should be read in
conjunction with the audited financial statements and the notes thereto of BB&T
Financial, incorporated by reference herein.
44
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
45
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
SEPTEMBER 30, 1993
($ IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
BB&T HOME CITIZENS OF MUTUAL
FINANCIAL SAVINGS OLD STONE NEWTON SAVINGS
---------- ------- --------- ----------- -------
<S> <C> <C> <C> <C> <C>
ASSETS
Cash and due from banks, non-
interest-bearing............ $ 301,778 3,532 9,496 3,984 1,991
Interest-bearing bank bal-
ances....................... 9,753 7,038 29,286 16,831 212
Federal funds sold........... -- -- -- -- 8,600
Investment and mortgage-
backed securities........... 1,999,655 27,345 114,196 23,830 29,740
Loans........................ 5,558,878 117,199 386,545 208,236 44,247
Less allowance for loan loss-
es.......................... 84,038 144 4,235 705 437
---------- ------- ------- ------- ------
5,474,840 117,055 382,310 207,531 43,810
Bank premises and equipment.. 110,382 1,029 2,482 4,714 638
Goodwill..................... 5,818 -- -- 1,663 --
Other assets................. 187,067 1,910 10,952 3,327 1,398
---------- ------- ------- ------- ------
Total assets............... $8,089,293 157,909 548,722 261,880 86,389
========== ======= ======= ======= ======
LIABILITIES
Deposits:
Noninterest-bearing......... $ 746,122 507 5,100 5,625 895
Interest-bearing............ 5,338,120 139,178 478,136 217,923 78,290
---------- ------- ------- ------- ------
Total deposits............. 6,084,242 139,685 483,236 223,548 79,185
Short-term borrowed funds.... 917,317 -- -- -- --
Long-term debt............... 292,778 -- 20,000 15,000 --
Negative goodwill............ 38,652 -- -- -- --
Other liabilities............ 57,934 1,721 7,549 1,334 655
---------- ------- ------- ------- ------
Total liabilities.......... 7,390,923 141,406 510,785 239,882 79,840
SHAREHOLDERS' EQUITY
Common stock................. 77,192 -- -- 1,245 --
Paid-in capital.............. 253,269 -- 35,000 5,336 --
Retained earnings............ 372,635 16,503 2,937 15,417 6,549
Less loan to employee stock
ownership plan.............. 4,726 -- -- -- --
Less reserve for restricted
stock....................... -- -- -- -- --
---------- ------- ------- ------- ------
698,370 16,503 37,937 21,998 6,549
---------- ------- ------- ------- ------
Total liabilities and
shareholders' equity...... $8,089,293 157,909 548,722 261,880 86,389
========== ======= ======= ======= ======
CAPITAL RATIOS
Equity to assets............. 8.63%
Net book value per share..... $ 22.62
</TABLE>
46
<PAGE>
<TABLE>
<CAPTION>
BB&T
PURCHASE FINANCIAL
ACCOUNTING FULLY
CITIZENS OF SCOTLAND ASHEVILLE CONVERSION AND OTHER POOLING COMBINED
MOORESVILLE SAVINGS SAVINGS LSB ADJUSTMENTS ADJUSTMENTS ADJUSTMENTS PRO FORMA
- ----------- -------- --------- --- ----------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
488 580 9,934 37,061 (2,937)(d) 361,269
(4,371)(l)
(267)(m)
2,022 1,071 19,606 -- 85,819
-- 6,750 1,150 14,200 30,700
4,185 5,383 33,685 221,305 54,914 (a) 6,500 (g) 2,520,738
52,577 40,805 242,825 381,224 11,700 (h) 7,044,236
203 177 1,758 4,980 96,677
------ ------ ------- ------- ------ ------- ------ ----------
52,374 40,628 241,067 376,244 11,700 6,947,559
776 876 5,927 14,896 3,000 (i) 135,474
(9,246)(p)
-- -- -- -- 22,483 (j) 29,964
562 191 12,196 13,754 (4,450)(o) 226,907
------ ------ ------- ------- ------ ------- ------ ----------
60,407 55,479 323,565 677,460 54,914 23,918 10,338,430
====== ====== ======= ======= ====== ======= ====== ==========
132 842 9,381 76,356 844,960
52,469 47,118 269,820 492,629 7,113,683
------ ------ ------- ------- ------ ------- ------ ----------
52,601 47,960 279,201 568,985 7,958,643
2,500 -- 17,059 45,015 58,250 (b) 1,040,141
-- -- -- 8,000 335,778
-- -- -- -- 30,864 (p) 69,516
346 351 2,442 3,367 12,148 (e) 106,977
(566)(f)
8,916 (n)
10,780 (s)
------ ------ ------- ------- ------ ------- ------ ----------
55,447 48,311 298,702 625,367 121,898 9,511,055
-- -- -- 7,767 6,249 (a) 641 (k) 1,676 (q) 96,590
1,820 (r)
-- -- -- 21,734 54,821 (a) (35,000)(c) (1,676)(q) 338,900
7,236 (k) (1,820)(r)
4,960 7,168 24,863 22,592 (2,937)(d) 410,644
(4,371)(l)
(267)(m)
(55,405)(p)
-- -- -- (6,156)(a) -- 10,882
-- -- -- (7,877)(k) 7,877
------ ------ ------- ------- ------ ------- ------ ----------
4,960 7,168 24,863 52,093 54,914 (97,980) -- 827,375
------ ------ ------- ------- ------ ------- ------ ----------
60,407 55,479 323,565 677,460 54,914 23,918 10,338,430
====== ====== ======= ======= ====== ======= ====== ==========
8.00
21.56
</TABLE>
47
<PAGE>
(a) Investment of net proceeds from issuance of 216,539, 266,667, 216,471,
800,000 and 1,000,000 shares of BB&T Financial Common Stock in connection
with the acquisitions of Mutual Savings, Scotland Savings, Citizens of
Mooresville, Home Savings and Asheville Savings, respectively, based on
estimated appraised values of $8,000,000, $8,000,000, $6,000,000,
$24,000,000 and $30,000,000, respectively. Using actual 85% Prices of
$28.58 for Mutual Savings and $27.09 for Citizens of Mooresville and an
assumed 85% price of $25.50 for Scotland Savings, Home Savings and
Asheville Savings, assuming that all shares are sold in the Subscription
Offering and that 23,529, 26,667, 18,898, 68,293 and 100,000 shares are
purchased by the BB&T Employee Stock Ownership Plan at the 85% Price for
Mutual Savings, Scotland Savings, Citizens of Mooresville, Home Savings and
Asheville Savings, respectively.
(b) To record the acquisition of all the outstanding common shares of Old Stone
at a cost of $58,250,000 in cash.
(c) To reduce the equity of Old Stone to zero.
(d) To record payment of closing expenses and cash dividend to be paid by Old
Stone prior to acquisition.
(e) To record the estimated tax liabilities on the recapture of the tax bad
debt reserves.
(f) To adjust the deferred tax liabilities as a result of purchase accounting
adjustments at BB&T Financial's combined federal and North Carolina
statutory tax rate of 40.12%.
(g) To adjust the investment and mortgage-backed securities portfolios to
estimated market value.
(h) To adjust the loan portfolios to estimated market value.
(i) To adjust the fixed assets of Old Stone to estimated market value.
(j) To record the excess of cost of Old Stone over the fair value of the net
assets acquired (goodwill). The amount of goodwill will be deducted from
earnings over a period of ten years in accordance with Accounting
Principles Board Opinion No. 16.
(k) To record the issuance of 256,474 shares of restricted stock to key
employees and directors of acquired mutual savings institutions.
(l) To record the payment of funds, net of tax effect at BB&T Financial's
combined federal and North Carolina statutory tax rate of 40.12%, to
charitable trusts in which proceeds will be distributed at the discretion
of directors of the acquired savings institutions.
(m) To record cash bonuses, net of tax effect paid to employees of acquired
savings institutions prior to acquisition.
(n) To record the pension liability for employees and directors of acquired
savings institutions.
(o) To reduce the purchased mortgage servicing rights of Asheville Savings to
zero.
(p) To record the excess of fair value of net assets acquired over cost
(negative goodwill) of savings institutions acquired in conversion mergers,
after reducing the adjusted basis in premises and equipment to zero. The
amount of negative goodwill will be added to earnings over a period of ten
years in accordance with Accounting Principles Board Opinion No. 16.
(q) To record the issuance of 1,168,311 shares of BB&T Financial Common Stock
for all the 1,245,043 outstanding shares of Citizens of Newton common
stock, assuming an exchange ratio of .9389 shares of BB&T Common Stock for
each share of Citizens of Newton common stock.
(r) To record the issuance of 3,834,625 shares of BB&T Financial Common Stock
for all the 3,106,972 outstanding shares of LSB common stock, assuming an
exchange ratio of 1.2342 shares of BB&T common stock for each share of LSB
common stock.
(s) To record liability for 1% deposit premium to be paid on deposits of
Scotland Savings and Citizens of Mooresville and for 2% deposit premiums to
be paid on deposits of Home Savings and for 2.5% deposit premium to be paid
on deposits of Asheville Savings.
48
<PAGE>
(PAGE INTENTIONALLY LEFT BLANK)
49
<PAGE>
UNAUDITED PRO FORMA COMBINED STATEMENTS OF INCOME
NINE MONTHS ENDED SEPTEMBER 30, 1993(A)
($ IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
BB&T
FINANCIAL
PRO FORMA
WITH
BB&T COMPLETED CITIZENS OF MUTUAL CITIZENS
FINANCIAL ACQUISITIONS NEWTON SAVINGS OLD STONE SAVINGS
---------- ------------ ----------- ------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Interest income......... $ 395,573 402,348 16,572 4,579 30,078 3,526
Interest expense........ 162,286 165,607 7,836 2,597 15,492 1,782
---------- ---------- ------ ----- ------ -----
Net interest income.... 233,287 236,741 8,736 1,982 14,586 1,744
Provision for loan loss-
es..................... 13,250 13,795 356 90 1,246 67
---------- ---------- ------ ----- ------ -----
Net interest income af-
ter provision for loan
losses................. 220,037 222,946 8,380 1,892 13,340 1,677
Noninterest income...... 79,136 79,612 1,468 79 2,119 70
Noninterest expense..... 196,712 198,933 4,856 1,277 9,155 1,112
---------- ---------- ------ ----- ------ -----
Income before income
taxes.................. 102,461 103,625 4,992 694 6,304 635
Income taxes............ 32,646 32,998 2,020 260 2,328 251
---------- ---------- ------ ----- ------ -----
Net Income.............. $ 69,815 70,627 2,972 434 3,976 384
========== ========== ====== ===== ====== =====
Earnings Per Share(k):
Primary net income..... $ 2.31 2.31
Fully diluted net in-
come.................. 2.26 2.27
Average Common Shares:
Primary................ 30,248,866 30,640,860
Fully diluted.......... 31,011,123 31,403,117
</TABLE>
- --------
(a) BB&T Financial, Old Stone, Asheville Savings and LSB have fiscal years
ending December 31. Citizens of Newton, Scotland Savings and Home Savings
have fiscal years ending September 30. Mutual Savings has a fiscal year
ending June 30, and Citizens of Mooresville has a fiscal year ending March
31. The financial data included herein in each case is for the nine months
ended September 30, 1993, except for Citizens of Newton which is for the
nine months ended June 30, 1993.
(b) Estimated interest income on the investable funds of Mutual Savings,
Scotland Savings, Citizens of Mooresville, Home Savings and Asheville
Savings provided from their conversions at an estimated rate of 4.58% which
is equal to estimated available investment yields at the beginning of the
period.
(c) Tax (benefit) expense using BB&T Financial's combined federal and North
Carolina statutory income tax rate of 40.12%.
(d) Amortization of excess of cost over fair value of assets acquired
(goodwill) of Old Stone over a ten-year period using the straight-line
method.
(e) Amortization of excess of fair value of net assets acquired over cost
(negative goodwill) of Mutual Savings, Scotland Savings, Citizens of
Mooresville, Home Savings and Asheville Savings over a ten-year period
using the straight-line method.
(f) Reduced depreciation from write-down of premises and equipment of Mutual
Savings, Scotland Savings, Citizens of Mooresville, Home Savings and
Asheville Savings and write up of Old Stone.
(g) Reduced interest income from write-up of investment securities and loans of
acquired entities.
(h) To record expense of restricted stock and ESOP over a five-year period.
(i) To adjust for reduced amortization of purchased mortgage servicing rights.
(j) To record interest expense on borrowed funds used to acquire Old Stone at
an estimated rate of 4.55%.
(k) Pro forma share data and per share data is computed based on the issuance
of 1,168,311 shares in the acquisition of Citizens of Newton, 3,834,625
shares in the acquisition of LSB, and the issuance of 216,539, 266,667,
216,471, 800,000 and 1,000,000 shares of BB&T Financial Common Stock in
consummating the acquisitions of Mutual Savings, Scotland Savings, Citizens
of Mooresville, Home Savings and Asheville Savings, respectively.
50
<PAGE>
<TABLE>
<CAPTION>
PURCHASE BB&T FINANCIAL
SCOTLAND HOME ASHEVILLE CONVERSION ACCOUNTING FULLY COMBINED
SAVINGS SAVINGS SAVINGS LSB COMBINED ADJUSTMENT ADJUSTMENTS PRO FORMA
- -------- ------- --------- --- -------- ---------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
3,136 9,835 17,480 34,904 522,458 1,886(b) (1,899)(g) 522,445
1,440 4,369 9,818 13,674 222,615 1,988 (j) 224,603
----- ----- ------ ------ ------- ----- ------ ----------
1,696 5,466 7,662 21,230 299,843 1,886 (3,887) 297,842
5 -- 464 1,162 17,185 17,185
----- ----- ------ ------ ------- ----- ------ ----------
1,691 5,466 7,198 20,068 282,658 1,886 (3,887) 280,657
35 206 3,900 5,424 92,913 2,315 (e) 95,228
819 1,712 8,806 18,307 244,977 1,686 (d) 248,678
(306)(f)
2,741 (h)
(420)(i)
----- ----- ------ ------ ------- ----- ------ ----------
907 3,960 2,292 7,185 130,594 1,886 (5,273) 127,207
367 1,483 841 2,011 42,559 757(c) (2,368)(c) 40,948
----- ----- ------ ------ ------- ----- ------ ----------
540 2,477 1,451 5,174 88,035 1,129 (2,905) 86,259
===== ===== ====== ====== ======= ===== ====== ==========
2.26
2.22
38,220,205
38,982,462
</TABLE>
51
<PAGE>
UNAUDITED PRO FORMA COMBINED STATEMENTS OF INCOME YEAR ENDED DECEMBER 31,
1992(A) ($ IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
BB&T
FINANCIAL
PRO FORMA
WITH
BB&T COMPLETED CITIZENS OF MUTUAL CITIZENS OF
FINANCIAL ACQUISITIONS NEWTON SAVINGS OLD STONE MOORESVILLE
---------- ------------ ----------- ------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Interest income......... $ 493,449 564,342 24,474 6,868 46,781 4,900
Interest expense........ 225,094 265,956 13,753 4,224 26,130 2,799
---------- ---------- ------ ----- ------ -----
Net interest income.... 268,355 298,386 10,721 2,644 20,651 2,101
Provision for loan
losses................. 29,000 31,939 190 236 2,474 53
---------- ---------- ------ ----- ------ -----
Net interest income
after provision for
loan losses............ 239,355 266,447 10,531 2,408 18,177 2,048
Noninterest income...... 87,164 92,405 2,053 63 3,271 416
Noninterest expense..... 218,012 238,931 6,651 1,462 11,352 1,366
---------- ---------- ------ ----- ------ -----
Income before income
taxes.................. 108,507 119,921 5,933 1,009 10,096 1,098
Income taxes............ 32,431 41,252 2,288 401 3,088 380
---------- ---------- ------ ----- ------ -----
Net income.............. 76,076 78,669 3,645 608 7,008 718
========== ========== ====== ===== ====== =====
Earnings Per Share(k):
Primary net income..... $ 2.89 2.72
Fully diluted net
income................ 2.75 2.60
Average Common Shares:
Primary................ 26,312,788 28,893,405
Fully diluted.......... 28,349,464 30,930,081
</TABLE>
- --------
(a) BB&T Financial, Old Stone, Asheville Savings and LSB have fiscal years
ending December 31, Citizens of Newton, Scotland Savings and Home Savings
have fiscal years ending September 30, Mutual Savings has a fiscal year
ending June 30, and Citizens of Mooresville has a fiscal year ending March
31. The financial data included herein in each case is for the most
recently completed fiscal year.
(b) Estimated interest income on the investable funds of Mutual Savings,
Scotland Savings, Citizens of Mooresville, Home Savings and Asheville
Savings provided from their conversions at an estimated rate of 6.45%
which is equal to estimated available yields at the beginning of the
period.
(c) Tax (benefit) expense using BB&T Financial's combined federal and North
Carolina statutory income tax rate of 39.27%.
(d) Amortization of excess of cost over fair value of assets acquired
(goodwill) of Old Stone over a ten-year period using the straight-line
method.
(e) Amortization of excess of fair value of net assets acquired over cost
(negative goodwill) of Mutual Savings, Scotland Savings, Citizens of
Mooresville, Home Savings and Asheville Savings over a ten-year period
using the straight-line method.
(f) Reduced depreciation from write-down of premises and equipment of Mutual
Savings, Scotland Savings, Citizens of Mooresville, Home Savings and
Asheville Savings and write up of Old Stone.
(g) Reduced interest income from write-up of investment securities and loans
of acquired entities.
(h) To record expense of restricted stock and ESOP plans over a five-year
period.
(i) To adjust for reduced amortization of purchased mortgage servicing rights.
(j) To record interest expense on borrowed funds used to acquire Old Stone at
an estimated rate of 6.15%.
(k) Pro forma share data and per share data is computed based on the issuance
of 1,168,971 shares in the acquisition of Citizens of Newton, 3,834,624
shares in the acquisition of LSB, and the issuance of 216,539, 266,667,
216,471, 800,000 and 1,000,000 shares of BB&T Financial Common Stock in
consummating the acquisitions of Mutual Savings, Scotland Savings,
Citizens of Mooresville, Home Savings and Asheville Savings, respectively.
52
<PAGE>
<TABLE>
<CAPTION>
BB&T
FINANCIAL
PURCHASE FULLY
SCOTLAND HOME ASHEVILLE CONVERSION ACCOUNTING COMBINED
SAVINGS SAVINGS SAVINGS LSB COMBINED ADJUSTMENT ADJUSTMENTS PRO FORMA
- -------- ------- --------- ------ -------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
4,775 13,502 27,732 47,725 741,099 3,542(b) (2,532)(g) 742,109
2,628 8,042 18,450 21,111 363,093 -- 3,582 (j) 366,675
----- ------ ------ ------ ------- ----- ------ ----------
2,147 5,460 9,282 26,614 378,006 3,542 (6,114) 375,434
60 -- 640 2,528 38,120 -- -- 38,120
----- ------ ------ ------ ------- ----- ------ ----------
2,087 5,460 8,642 24,086 339,886 3,542 (6,114) 337,314
68 523 4,054 5,964 108,817 3,086 (e) 111,903
1,053 2,355 9,602 21,477 294,249 2,248 (d) 299,184
(406)(f)
3,654 (h)
(561)(i)
----- ------ ------ ------ ------- ----- ------ ----------
1,102 3,628 3,094 8,573 154,454 3,542 (7,963) 150,033
408 1,215 1,553 2,434 53,019 1,391(c) (3,456)(c) 50,954
----- ------ ------ ------ ------- ----- ------ ----------
694 2,413 1,541 6,139 101,435 2,151 (4,507) 99,079
===== ====== ====== ====== ======= ===== ====== ==========
2.71
2.62
36,472,750
38,509,426
</TABLE>
53
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA OF BB&T FINANCIAL
($ IN THOUSANDS, EXCEPT PER SHARE DATA)
The following table presents selected historical consolidated financial data
of BB&T Financial at or for the nine-month periods ended September 30, 1993 and
1992 and at or for the five fiscal years ended December 31, 1992. This
information (other than certain capital ratios) is derived from the historical
consolidated financial statements of BB&T Financial. The information set forth
below should be read in conjunction with the historical consolidated financial
statements and the notes thereto of BB&T Financial which are incorporated by
reference herein. See "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."
The data at or for the nine-month periods ended September 30, 1993 and 1992
are unaudited, but have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis and reflect all
adjustments, consisting of only normal recurring adjustments, which in the
opinion of the management of BB&T Financial are necessary for a fair
presentation of the results for such interim periods. All performance ratios
for such interim periods for BB&T Financial have been annualized. The results
of operations and the ratios for the nine-month period ended September 30, 1993
are not necessarily indicative of the results to be expected for the full year
ending December 31, 1993 or for any other interim period.
54
<PAGE>
<TABLE>
<CAPTION>
AT OR FOR THE
NINE MONTHS ENDED
SEPTEMBER 30, AT OR FOR THE FISCAL YEARS ENDED DECEMBER 31,
----------------------- -------------------------------------------------
1993 1992 1992 1991 1990 1989 1988
----------- ---------- --------- --------- --------- --------- ---------
($ IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
Interest income......... $ 395,573 392,087 509,778 527,658 517,798 523,972 427,219
Interest expense........ 162,286 185,965 225,094 288,064 307,825 332,324 250,274
----------- ---------- --------- --------- --------- --------- ---------
Net interest income..... 233,287 206,122 268,355 222,163 191,455 170,561 156,410
Provision for loan loss-
es..................... 13,250 23,532 29,000 38,000 19,235 12,478 11,984
----------- ---------- --------- --------- --------- --------- ---------
Net interest income af-
ter provision for loan
losses................. 220,037 182,590 239,355 184,163 172,220 158,083 144,426
Noninterest income...... 79,136 67,165 87,164 83,552 62,103 55,706 44,385
Noninterest expense..... 196,712 164,742 218,012 184,833 162,433 153,522 137,065
----------- ---------- --------- --------- --------- --------- ---------
Income before taxes..... 102,461 85,013 108,507 82,882 71,890 60,267 51,746
Income taxes............ 32,646 25,926 32,431 22,710 18,275 13,820 9,029
----------- ---------- --------- --------- --------- --------- ---------
Net income.............. $ 69,815 59,087 76,076 60,172 53,615 46,447 42,717
=========== ========== ========= ========= ========= ========= =========
PER SHARE DATA:
Net income:
Primary................ $ 2.31 2.14 2.89 2.57 2.49 2.17 2.05
Fully diluted.......... 2.26 2.05 2.75 2.44 2.37 2.08 1.96
Cash dividends.......... .75 .66 .91 .85 .81 .74 .69
Market price:
High................... 35.38 32.25 32.25 23.63 20.38 24.50 18.25
Low.................... 31.00 21.88 21.88 14.50 14.50 16.38 14.25
Close.................. 33.88 29.13 31.88 22.00 15.88 20.00 17.00
Book value, end of peri-
od..................... 22.62 20.96 21.32 19.19 17.51 15.83 14.61
SELECTED AVERAGE BAL-
ANCES:
Assets.................. $ 7,500,543 6,674,339 6,439,038 5,676,520 5,124,573 5,059,390 4,461,609
Earning assets.......... 7,040,171 6,289,862 6,064,983 5,347,481 4,777,248 4,725,288 4,154,952
Investment securi-
ties(1)................ 1,857,843 1,716,857 1,658,607 1,472,972 1,211,350 1,177,838 966,572
Loans................... 5,168,121 4,564,869 4,398,867 3,813,131 3,469,454 3,471,961 3,116,576
Deposits................ 5,870,598 5,500,296 5,240,684 4,782,945 4,147,377 3,964,268 3,539,322
Interest-bearing liabil-
ities.................. 6,074,134 5,455,248 5,237,814 4,693,997 4,233,730 4,198,980 3,646,633
Shareholders' equity.... 653,108 545,497 524,639 426,591 357,102 323,991 290,663
SELECTED PERIOD END BAL-
ANCES:
Assets.................. $ 8,089,293 7,037,159 6,691,484 6,229,014 5,158,726 5,243,390 4,804,591
Earning assets.......... 7,568,286 6,631,378 6,250,279 5,820,120 4,799,074 4,741,187 4,478,973
Investment securi-
ties(1)................ 1,999,655 1,880,399 1,725,014 1,585,935 1,257,751 1,144,144 1,058,128
Loans................... 5,558,878 4,734,747 4,524,665 4,233,429 3,423,810 3,512,768 3,356,844
Deposits................ 6,084,242 5,620,620 5,346,320 5,203,499 4,406,442 4,265,149 3,903,138
Interest-bearing liabil-
ities.................. 6,548,215 5,717,710 5,369,001 5,059,530 4,172,705 4,263,658 3,890,124
Shareholders' equity.... 698,370 581,010 560,908 486,502 373,506 339,941 307,428
Shares outstanding (in
thousands)............. 30,876,759 27,713,820 26,312 25,348 21,328 21,473 21,038
RATIOS
Performance ratios(3):
Return on average as-
sets................... 1.24% 1.18 1.18 1.06 1.05 .92 .96
Return on average equi-
ty..................... 14.29 14.47 14.50 14.11 15.01 14.34 14.70
Net interest margin,
taxable equivalent..... 4.63 4.64 4.69 4.48 4.40 4.06 4.26
Capital ratios:
Average equity to aver-
age assets(3).......... 8.71% 8.17 8.15 7.52 6.97 6.40 6.51
Equity to assets (peri-
od-end)................ 8.63 8.26 8.38 7.81 7.24 6.48 6.40
Risk-based capital ra-
tios(2):
Tier 1 capital......... 12.80 12.36 12.35 11.13 9.72 N/A N/A
Total capital.......... 14.80 15.42 15.24 14.33 13.04 N/A N/A
Leverage ratio(2)....... 8.64 8.56 8.24 7.76 7.06 N/A N/A
</TABLE>
- --------
(1) Includes securities available for sale.
(2) Calculated in accordance with applicable Federal Reserve regulations which
became effective in 1989. See "SUPERVISION AND REGULATION OF BB&T
FINANCIAL--Capital Adequacy Guidelines for Bank Holding Companies."
(3) Annualized for interim periods.
55
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS OF BB&T FINANCIAL
The following discussion and analysis is intended to assist readers in
understanding BB&T Financial's results of operations and changes in financial
position for the past three years and for the three quarters ending September
30, 1993 and 1992. This review should be read in conjunction with the
consolidated financial statements, accompanying footnotes and supplemental
financial data incorporated by reference herein. See "INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE."
In 1989 BB&T Financial became one of the first bank holding companies in the
country to take advantage of new legislation and agree to acquire a healthy
savings institution. During the period January 1, 1990 through the date of this
Prospectus/Proxy Statement, BB&T Financial has consummated the acquisitions of
fourteen savings institutions or their holding companies with total assets of
approximately $ billion and several branches of a fifteenth institution. The
following table provides information relative to the twelve acquisitions.
<TABLE>
<CAPTION>
TOTAL ASSETS METHOD
DATE OFFICES (DATE OF OF
INSTITUTION ACQUIRED AT ACQUISITION ACQUISITION) ACCOUNTING
----------- -------- -------------- ------------ --------------------
<S> <C> <C> <C> <C>
Carolina Bancorp, Inc. . 8-20-90 4 $297 million Pooling-of-Interests
High Point, N.C.
First Federal Savings
Bank of Pitt County.... 9-01-90 5 137 million Pooling-of-Interests
Greenville, N.C.
Home Savings & Loan
Association, Inc. ..... 3-15-91 5 240 million Purchase
Durham, N.C.
Gate City Federal
Savings & Loan
Association............ 8-08-91 11 460 million Purchase
Greensboro, N.C.
Albemarle Savings & Loan
Association............ 8-08-91 2 98 million Purchase
Elizabeth City, N.C.
Peoples Federal Savings
Bank of 6-26-92 2 107 million Purchase
Thomasville............
Thomasville, N.C.
First Fincorp, Inc. .... 2-24-93 10 334 million Purchase
Kinston, N.C.
Security Financial
Holding Company........ 2-25-93 9 316 million Pooling-of-Interests
Durham, N.C.
Carolina Savings Bank... 5-18-93 5 143 million Purchase
Wilmington, N.C.
Edenton Savings & Loan
Association............ 5-18-93 1 40 million Purchase
Edenton, N.C.
Citizens Savings Bank,
S.S.B., Inc. .......... 10-25-93 11 263 million Pooling-of-Interests
Newton, N.C.
Mutual Savings Bank of
Rockingham County,
Inc., S.S.B. .......... 10-29-93 3 88 million Purchase
Reidsville, N.C.
Old Stone Bank of North
Carolina, A Federal
Savings Bank........... 11-24-93 14 537 million Purchase
High Point, N.C.
Citizens Savings Bank,
S.S.B., Inc. .......... 12-23-93 2 60 million Purchase
Mooresville, N.C.
</TABLE>
The acquisitions of Carolina Bancorp, Inc., First Federal Savings Bank of
Pitt County, Home Savings & Loan Association, Inc., First Fincorp, Inc.,
Security Financial Holding Company and Citizens of Newton were consummated
through the issuance of BB&T Financial Common Stock for all of the outstanding
shares of each of the respective entities. The acquisition of Old Stone was
consummated through the payment of $58.25 million in cash for all of the issued
and outstanding stock of Old Stone. The acquisitions of Gate City, Albemarle,
Peoples Federal Savings Bank of Thomasville ("Peoples"), Carolina Savings,
Edenton
56
<PAGE>
Savings, Mutual Savings and Citizens of Mooresville involved each converting
from a mutual to a stock institution with simultaneous acquisition by BB&T
Financial of all the stock issued in the conversion. To effect the acquisitions
of the mutual institutions, BB&T Financial sold 2,528,441 shares of BB&T
Financial Common Stock in 1991, 382,395 shares of BB&T Financial Common Stock
in 1992 and 940,192 shares of BB&T Financial Common Stock in 1993. In making
the acquisitions, BB&T Financial invested proceeds from the offerings in Gate
City, Albemarle, Peoples, Carolina Savings, Edenton Savings, Mutual Savings and
Citizens of Mooresville. Each of these associations (except Mutual Savings,
Citizens of Newton, Old Stone and Citizens of Mooresville) has been
subsequently merged into BB&T. There was an excess of net assets acquired over
cost for these institutions of approximately $56 million (negative goodwill),
which is being amortized as an accrual into BB&T Financial's earnings over
periods of ten years. The amount of income from amortized negative goodwill
included in earnings totalled approximately $4.0 million in 1992 and $1.5
million in 1991. As these acquisitions were accounted for as purchases, the
results of their operations are included with those of BB&T Financial
subsequent to the dates of their respective acquisitions. The growth rates in
balance sheet and income and expense accounts of BB&T Financial for 1992 and
1991 have been increased by these acquisitions.
In addition to acquiring the foregoing institutions, on June 1, 1993, BB&T
Financial acquired approximately $185 million of deposit liabilities, $68
million of loans and $4 million of fixed assets from 1st Home Federal Savings
and Loan Association of the Carolinas, F.A., Greensboro, North Carolina ("1st
Home") for $6.25 million in cash.
BB&T Financial has agreements to acquire through the date of this
Prospectus/Proxy Statement three additional mutual thrift institutions,
including Home Savings, and a bank holding company, all of whose assets
totalled approximately $1.2 billion as of September 30, 1993. The following
table provides information relative to those pending acquisitions.
<TABLE>
<CAPTION>
ANTICIPATED
ANTICIPATED TOTAL ASSETS METHOD OF
INSTITUTION ACQUISITION DATE OFFICES (9/30/93) ACCOUNTING
----------- ---------------- ------- ------------ --------------------
<S> <C> <C> <C> <C>
Scotland Savings Bank, 1st Qtr. 1994 2 $55 million Purchase
S.S.B. ................
Laurinburg, N.C.
Home Savings Bank of
Albemarle, S.S.B. ..... 1st Qtr. 1994 2 158 million Purchase
Albemarle, N.C.
Asheville Savings Bank, 1st Qtr. 1994 9 324 million Purchase
SSB ...................
Asheville, N.C.
L.S.B. Bancshares, Inc.
of South Carolina...... 2nd Qtr. 1994 23 646 million Pooling-of-Interests
</TABLE>
Home Savings, Scotland Savings and Asheville Savings are each mutual savings
institutions. Those acquisitions involve each converting from a mutual to a
stock institution with a simultaneous acquisition by BB&T Financial. To effect
the acquisition of these mutual institutions, BB&T Financial anticipates
selling approximately 2,066,667 shares of BB&T Financial Common Stock. BB&T
Financial anticipates recording negative goodwill in connection with these
acquisitions of $21 million, which will be amortized as an accrual to income
over a ten-year period.
LSB is a South Carolina-chartered bank holding company. BB&T Financial
anticipates issuing approximately 3,834,625 shares (subject to adjustment) of
BB&T Financial Common Stock in connection with the acquisition.
RESULTS OF OPERATIONS
1992 COMPARED WITH 1991 AND 1990. BB&T Financial recorded higher earnings in
1992 for the tenth consecutive year. Net income totalled $76.1 million in 1992,
an increase of $15.9 million or 26.4% over 1991. Net income for 1991 was $60.2
million and was $6.6 million or 12.2% over the earnings of $53.6 million
recorded in 1990. The five-year compound annual growth rate of net income has
been 14.6%.
57
<PAGE>
Primary net income per share rose 12.5% from 1991 to $2.89 and fully diluted
net earnings per share grew 12.7% to $2.75 in 1992. Primary net income per
share was $2.57 in 1991 and $2.49 in 1990, while fully diluted per share
earnings for those two years were $2.44 and $2.37, respectively. The following
highlights underscore the key elements of performance for 1992.
. The portfolios of earning assets are the primary sources of
profitability. Average earning assets increased 13.4% for the year, while
taxable equivalent net interest income rose $45.1 million or 18.8%. This
followed an increase in taxable equivalent net interest income of $29.6
million or 14.1% in 1991.
. The provision for loan losses was reduced by $9 million or 23.7%. This
followed an increase of $18.8 million or 97.6% in 1991. BB&T Financial
recorded a historically high provision in 1991 because of unusually high
levels of both nonperforming assets and actual charge-offs. Improved
asset quality allowed BB&T Financial to reduce its provision for loan
losses to a historically more normal level in 1992.
. Noninterest income for 1992 increased $3.6 million or 4.3% to $87.2
million in 1992. This followed an increase of $21.4 million or 34.5% in
1991. Noninterest income included gains on sales of securities of $5.4
million in 1992, $10.5 million in 1991 and $410,000 in 1990, and the
amortization of negative goodwill of approximately $4.0 million in 1992
and $1.5 million in 1991.
. Noninterest expense totalled $218.0 million in 1992. This represented an
increase of 18.0% from the $184.8 million in 1991, which was an increase
of 13.8% over 1990.
. The effective tax rate was 29.9% in 1992, compared with 27.4% in 1991 and
25.4% in 1990.
The return on average assets for 1992 was 1.18%, compared with 1.06% in 1991
and 1.05% in 1990. The returns on average shareholders' equity for each of the
last three years were 14.50%, 14.11% and 15.01%, respectively. The annual
return on average equity has exceeded 14% in each of the past ten years. At the
end of 1992 the ratio of equity to assets was 8.38%, compared with 7.81% a year
earlier and 7.24% at the end of 1990. BB&T Financial's risk-adjusted total
capital ratio was 15.24% at the end of the year, up from 14.33% twelve months
earlier. This ratio for BB&T Financial has consistently been in the top 10% of
the 100 largest U.S. bank holding companies. The following table provides
highlights of key profitability measures for each of the past five years.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED DECEMBER 31,
--------------------------------------
1992 1991 1990 1989 1988
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Return on average assets................ 1.18% 1.06% 1.05% .92% .96%
Return on average equity................ 14.50 14.11 15.01 14.34 14.70
Net interest margin..................... 4.69 4.48 4.40 4.06 4.26
Yield to break even(1).................. 2.64 2.60 2.50 2.33 2.52
</TABLE>
- --------
(1) Noninterest expense plus provision for loan losses less noninterest income,
divided by average earning assets.
NET INTEREST INCOME. Net interest income represents the principal source of
earnings for BB&T Financial. Net interest income equals the amount by which
interest income exceeds interest expense. For 1992 net interest income
represented 75.5% of net revenues (net interest income plus noninterest
income), compared with 72.7% in 1991 and 75.5% in 1990. The relationship of net
interest income to total revenues was lower in 1991 because of the gains on
sales of securities.
The taxable equivalent net yield on average earning assets is the primary
measure used in evaluating the effectiveness of the management of earning
assets and funding liabilities. The net yield on average earning assets was
4.69% in 1992, 4.48% in 1991 and 4.40% in 1990. Higher net interest margins
during the past three years represent a reversal of steadily declining net
yields through the latter half of the 1980's.
Three factors were primarily responsible for the improved net interest
margins in recent years. A slower rate of growth in earning assets,
particularly loans (excluding the effect of acquisitions), has reduced the
necessity of generating large amounts of additional non-core funding. The
growth experienced has been funded with lower cost retail deposits, including
regular savings, interest checking, money rate savings and retail certificates
of deposit.
Second, through the retention of profits and the addition of equity through
various offerings in 1992 and 1991, shareholders' equity, rather than interest-
bearing liabilities, is now funding a proportionately greater
58
<PAGE>
amount of BB&T Financial's earning assets. The ratio of average interest-
bearing liabilities to average earning assets was 86.4% in 1992, compared with
87.8% in 1991 and 88.6% in 1990. This relatively small decline in the
dependence on interest-bearing liabilities translates to a savings in excess of
$3.5 million in interest expense for 1992.
Third, market forces have had perhaps the greatest effect on the improved net
yields over the past two years. The prime rate of interest was 10% throughout
most of 1990. The prime rate of interest declined progressively to a rate of
6.5% at the end of 1991 and ultimately declined to 6% in 1992. Approximately
50% of the loans originated by BB&T Financial's subsidiaries are priced based
on the prime rate. Although BB&T Financial's subsidiaries have substantial
portfolios of residential mortgage and consumer loans which earn interest at
fixed rates or at variable rates that change annually, the returns on BB&T
Financial's loan portfolios declined materially during 1992. The average rate
earned on loans was 8.69% in 1992, compared with 10.33% in 1991 and 11.34% in
1990. Thus, the return on average interest-earning assets was 8.41% in 1992,
down from 9.87% in 1991 and 10.84% in 1990.
At the same time, the rates paid for deposits and other funds declined during
the year, and these declines generally preceded, and were of a greater
magnitude than, the reduction in the rates earned on assets. The average cost
of interest-bearing liabilities was 4.30% for 1992, a reduction of 184 basis
points from 6.14% in 1991, which in turn was a reduction from 7.27% in 1990.
The average rate earned on earning assets declined 146 basis points to 8.41% in
1992, compared with 9.87% in 1991 and 10.84% in 1990. The net result of these
forces was an improvement in the interest rate spread to 4.11% in 1992. The
interest rate spreads were 3.73% in 1991 and 3.57% in 1990. The combination of
these factors, as well as gains of approximately $18.2 million provided by
interest rate swaps in 1992 and $7.8 million in 1991, resulted in improvement
in the net interest margin in 1992 and 1991 and provided greater amounts of net
interest income. The following table shows the changes in interest income and
interest expense for each major component of interest-earning assets and
interest-bearing liabilities attributable to changes in volume and rate. The
change in interest due to both rate and volume has been allocated
proportionately to volume variance and rate variance based on the relationship
of the absolute dollar change in each.
<TABLE>
<CAPTION>
1992-1991 1991-1990
--------------------------- ---------------------------
INCOME/ INCOME/
EXPENSE VOLUME RATE EXPENSE VOLUME RATE
VARIANCE VARIANCE VARIANCE VARIANCE VARIANCE VARIANCE
-------- -------- -------- -------- -------- --------
(THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
INTEREST INCOME
Loans................... $(11,678) 55,789 (67,467) 690 37,135 (36,445)
Investment securities:
U.S. Government and
other................. 5,296 18,381 (13,085) 15,246 23,313 (8,067)
State and municipal.... (7,438) (6,387) (1,051) (2,311) (1,859) (452)
-------- ------ ------- ------- ------ -------
Total investment secu-
rities............... (2,142) 11,994 (14,136) 12,935 21,454 (8,519)
Interest-bearing bank
balances.............. (2,454) (2,620) 166 (5,375) (5,014) (361)
Federal funds sold..... (1,606) (1,026) (580) 1,610 1,659 (49)
-------- ------ ------- ------- ------ -------
Total interest income. (17,880) 64,137 (82,017) 9,860 55,234 (45,374)
-------- ------ ------- ------- ------ -------
INTEREST EXPENSE
Interest-bearing depos-
its:
Savings................ (1,232) 3,052 (4,284) 856 1,494 (638)
Interest checking...... (3,566) 4,431 (7,997) 587 2,317 (1,730)
Money rate savings..... (10,744) 3,244 (13,988) (3,123) 4,746 (7,869)
Certificates of deposit
and other time
deposits.............. (45,335) 6,084 (51,419) 2,946 33,817 (30,871)
-------- ------ ------- ------- ------ -------
Total interest-bearing
deposits............. (60,877) 16,811 (77,688) 1,266 42,374 (41,108)
Short-term borrowed
funds................. (930) 7,496 (8,426) (18,859) (9,989) (8,870)
Long-term debt......... (1,163) (117) (1,046) (2,168) (1,412) (756)
-------- ------ ------- ------- ------ -------
Total interest ex-
pense................ (62,970) 24,190 (87,160) (19,761) 30,973 (50,734)
-------- ------ ------- ------- ------ -------
NET INTEREST INCOME..... $ 45,090 39,947 5,143 29,621 24,261 5,360
======== ====== ======= ======= ====== =======
</TABLE>
59
<PAGE>
PROVISION FOR LOAN LOSSES. An annual provision for loan losses is charged
against earnings in order to maintain the allowance for loan losses at a level
considered adequate by management to absorb existing and potential losses in
the loan portfolio. As a result of improved asset quality, the provision
recorded by BB&T Financial in 1992 was $29 million, compared with $38 million
in 1991 and $19.2 million in 1990. The decrease of $9 million in 1992 followed
an increase of $18.8 million or 97.6% in 1991. The greater provisions recorded
in 1991 and 1990 reflected increased levels of net charge-offs and
nonperforming assets, a persistent economic slowdown and a deterioration in
real estate markets and values. For a more detailed discussion of loan credit
qualities, see "--Balance Sheet Management," particularly, the section "--
Nonperforming Loans and Allowance for Loan Losses."
NONINTEREST INCOME. Noninterest income for BB&T Financial consists of
service charges on deposit accounts, trust revenue, mortgage origination and
servicing revenues, insurance commissions, gains and losses on investment
securities transactions, and other commissions and fees derived from various
banking and bank-related activities. Noninterest income has traditionally been
an important factor contributing to profitability at BB&T Financial, and its
importance has increased in recent years. Noninterest income for 1992 totalled
$87.2 million, compared with $83.6 million last year and $62.1 million in
1990. Over the past five years, noninterest income has grown at a compound
annual rate of 15.6%.
Gains on sales of securities totalled $5.4 million in 1992, compared with
$10.5 million in 1991. For several years prior to 1991, gains and losses
realized from sales of securities by BB&T Financial were relatively
immaterial. In recent years, both through generation within its banking
subsidiaries and through the acquisition of savings associations, BB&T
Financial built a significant portfolio of mortgage-backed securities. These
securities had attractive yields, and, as market rates of interest declined in
1991, the value of such securities increased. However, the speed of repayment
increased dramatically as mortgage holders refinanced to take advantage of
lower home mortgage rates. BB&T Financial sold a significant amount of its
portfolio of mortgage-backed securities in the final half of 1991 and early
1992, thereby realizing gains totalling approximately $8 million. BB&T
Financial was able to realize a significant amount of the inherent gains in
its portfolio of mortgage-backed securities prior to the heavy refinancing of
home mortgages, which commenced in the first quarter of 1992 and continued
throughout the year. This was an opportune decision by BB&T Financial, as a
significant amount of those gains would have disappeared as loans were paid
off at par.
Service charges on deposit accounts have historically represented the
largest single item of noninterest income. This continued to be the case in
1992, as such charges totalled $29.2 million, an increase from $26.3 million
in 1991 and $22.6 million in 1990. Deposit services are repriced annually to
reflect current costs and competitive factors.
BB&T Financial has made significant investments in its mortgage banking and
insurance agency operations in recent years. Mortgage banking income (which
includes servicing fees and profits from the origination and sale of loans)
increased by $722,000 or 6.8% to a total of $11.4 million in 1992. This
followed increases of $2.9 million or 36.9% in 1991 and $4.4 million or 128.1%
in 1990. There was a heavy volume of mortgage loan originations in 1992
because of significant declines in home mortgage interest rates. As a result,
BB&T Financial realized gains from the origination and sale of mortgages
totalling $9.5 million in 1992, an increase of $5.7 million over 1991. This
increase was offset by a write-off of approximately $4.6 million in the excess
servicing receivable in the second half of 1992 to coincide with reduced
values resulting from accelerated prepayments. General insurance commissions
increased $519,000 or 8.6% to a total of $6.5 million for the year. BB&T
Financial's insurance agencies have become an increasingly important source of
noninterest revenue, and this trend is expected to continue and accelerate in
the future. BB&T Financial has expanded its network of insurance agencies
through acquisitions in recent years, and, in 1992, BB&T Financial agreed to
acquire three additional agencies, two of which acquisitions were consummated
in 1992.
Other service charges, commissions and fees were $13.0 million in 1992, and
$11.0 million in 1991. Bank card fees represent the largest source of other
service charges, commissions and fees. Bank card income totalled approximately
$6.5 million in 1992, up from $6.1 million in the previous year. In recent
years, BB&T Financial has expanded the sale of fixed income investment
securities to its customers. BB&T Financial markets both individual
obligations and mutual fund shares. Commissions from sales of securities
totalled
60
<PAGE>
$579,000 in 1992, an increase of $311,000 from 1991. BB&T Financial plans to
significantly increase its sales staff in 1993, and its ultimate objective is
to have investment specialists in each of its regions in North and South
Carolina. BB&T Financial plans to establish a separate investment services
subsidiary of BB&T Financial with full service brokerage capabilities. This
activity represents a significant potential new source of noninterest revenue
for BB&T Financial.
A traditional service at many banks has been the offering of trust services.
BB&T Financial has had a trust department for over 80 years. Trust revenues
from corporate and personal trust services increased 15.0% in 1992 and 14.7% in
1991 to a total of $6.5 million in 1992. The trust division has historically
maintained collective funds to provide investment alternatives to its trust
clients. In 1992 the trust division established its own family of proprietary
mutual funds. BB&T Financial will now manage five mutual funds, which will
provide investment alternatives both for its trust clients and its other
customers.
Finally, noninterest income included approximately $4.0 million in amortized
negative goodwill in 1992 and $1.5 million in 1991. Negative goodwill (excess
of net assets acquired over cost) totalling $6.6 million in 1992 and $33.4
million in 1991 was recorded in the purchase acquisitions of thrifts.
NONINTEREST EXPENSE. Noninterest expense for 1992 increased 18.0% to $218.0
million. This followed an increase of 13.8% in 1991. The acquisitions of three
savings associations in 1991 and one in 1992 were accounted for as purchases,
and, accordingly, prior period history was not restated. The expense growth in
1992 and 1991 includes the incremental cost of operations related to these
acquisitions, and the cost of standardizing their operating systems and
procedures to those of BB&T Financial.
Salaries and wages increased 16.4% in 1992 and 9.5% in 1991, which includes
approximately 5% annual merit increases, the effects of the additional
employees who joined BB&T Financial with the consummation of the four thrift
acquisitions, and above average incentive compensation because of the superior
1992 performance of BB&T Financial. Other personnel expense increased 18.0%
from $15.6 million in 1991 to $18.4 million in 1992. Such expenses grew 26.2%
in 1991. The annual cost of employee health insurance has increased
approximately $1.5 million over the past two years, while the annual pension
expense has grown $1.2 million over the same period.
BB&T Financial has increased its commitment to employee training and
education in recent years. As a result of this heightened commitment, the total
cost of training increased $922,000 or 45.4% to a total of $3.0 million in
1992, following an increase of $757,000 in 1991.
Premiums paid to the FDIC for deposit insurance increased $1.6 million or
16.1% to a total of $11.4 million for 1992. For 1991 the increase was $4.7
million or 90.0%. Insurance premiums have increased dramatically in recent
years, as the FDIC has had to look to healthy banks to cover the cost of actual
or pending failures of unhealthy institutions. For the period beginning January
1, 1991, the rate was increased from $.12 per $100 of deposits to $.195. There
was a further increase to $.23 for the period beginning July 1, 1991. There
have been no additional increases for BB&T Financial's bank subsidiaries since
that date, and BB&T Financial does not anticipate increases in deposit
insurance rates for 1993. See "SUPERVISION AND REGULATION OF BB&T FINANCIAL--
BB&T and BB&T-SC."
Another noteworthy item of other operating expense was an increase of
$643,000 or 23.2% in advertising and public relations expense in 1992. This
increase is partially reflective of heightened marketing efforts in the cities
in which the acquired thrifts operated. Net occupancy expense increased 10.7%
and furniture and equipment expense rose 15.5% in 1992. During the year BB&T
Financial opened five new offices, added two through merger and closed 12
offices. All of the new offices involved the relocation and/or consolidation of
existing offices. During 1992, BB&T Financial reduced the number of locations
from 220 to 210. BB&T Financial also implemented its loan platform automation
retail pilot program in three cities, purchased in excess of 650 additional
CRTs and personal computers, added 12 new and replaced 11 existing automated
teller machines, purchased and installed a new data base management system and
human resource system, and began implementation of full teller automation.
Capital expenditures for new facilities, renovations, and furniture and
equipment are estimated at approximately $44.3 million for 1993, following
outlays of $28.7 million in 1992 and $15.1 million in 1991. Generally, capital
expenditures are funded by either funds generated from normal operations or
through short-term and long-term leases.
61
<PAGE>
The following table sets forth information regarding BB&T Financial's
operating efficiency.
<TABLE>
<CAPTION>
AT OR FOR THE FISCAL YEAR ENDED DECEMBER 31,
----------------------------------------------
1992 1991 1990 1989 1988
--------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Percent of average assets:
Noninterest income........... 1.35% 1.47 1.21 1.10 .99
Noninterest expense.......... 3.39 3.26 3.17 3.03 3.07
Personnel expense............ 1.65 1.60 1.58 1.53 1.58
Occupancy and equipment ex-
pense....................... .55 .55 .56 .52 .56
Other operating expense...... 1.19 1.10 1.02 .99 .93
Net noninterest expense (non-
interest expense less nonin-
terest income).............. 2.03 1.78 1.96 1.93 2.08
Net revenues (net interest in-
come plus noninterest income)
times noninterest expense..... 1.63x 1.65 1.56 1.47 1.46
Assets per employee (millions). $ 2.03 2.04 1.75 1.71 1.54
</TABLE>
In 1990, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards No. ("FAS") 106, "Employers' Accounting for
Post Retirement Benefits Other Than Pensions". The provisions of FAS 106 must
be adopted for years ending after December 31, 1992. FAS 106 will change the
way most employers account for post retirement benefits other than pensions,
particularly for those companies such as BB&T Financial that provide health
care benefits to retirees and their dependents. BB&T Financial has historically
accounted for post retirement benefits on a cash basis. FAS 106 requires that
the accrual basis be used with costs being recorded as benefits are earned. FAS
106 allows companies either to record the total liability for past services as
an accounting change in the year of implementation and recognize current costs
on an ongoing basis thereafter or to amortize the liability for past service
over a period of years. BB&T Financial will apply the provisions of FAS 106
beginning in 1993. BB&T Financial will amortize the initial liability of $12.4
million over a period of approximately 20 years. The impact of adoption will be
an increase in expense of approximately $1.3 million in 1993.
INCOME TAXES. BB&T Financial's effective tax rate has increased annually
since 1987. Changes in tax laws in recent years have reduced the availability
of and the advantages of tax-exempt securities for banks.
At BB&T Financial, as tax-exempt investments have matured, they have been
replaced with taxable assets which has resulted in a higher effective tax rate.
BB&T Financial's banking subsidiaries are allowed to make investments in small
issue tax-exempt obligations of governmental units, but the amount of such
investments available in the market has not been of the same magnitude as
maturing investments. Therefore, the trend to higher effective tax rates is
likely to continue into the future.
The following table sets forth information regarding federal income taxes
paid by BB&T Financial.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED DECEMBER 31,
----------------------------------------
1992 1991 1990 1989 1988
------- ------ ------ ------ -------
($ IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Tax expense at 34%................... $36,892 28,180 24,443 20,491 17,594
Increase (decrease) in taxes
resulting from:
State income taxes, net of federal
tax benefit....................... 1,427 1,178 859 -- --
Tax-exempt interest................ (5,340) (7,603) (8,799) (9,755) (10,169)
Disallowed interest expense........ 538 1,001 1,242 1,335 1,203
Accrual of federal income taxes on
excess tax bad debt reserve....... -- -- -- 900 --
Other items, net................... (1,086) (46) 530 849 401
------- ------ ------ ------ -------
Income tax expense................... $32,431 22,710 18,275 13,820 9,029
======= ====== ====== ====== =======
Effective tax rate................... 29.9% 27.4 25.4 22.9 17.4
Tax-exempt interest income as a
percent of pretax income............ 14.5 27.0 36.0 47.6 57.8
======= ====== ====== ====== =======
</TABLE>
62
<PAGE>
The FASB has issued FAS 109, "Accounting for Income Taxes". The provisions of
FAS 109 must be adopted for years beginning after December 31, 1992. FAS 109
will change BB&T Financial's method of accounting for income taxes from the
deferred method to the asset and liability method. Under the deferred method,
annual income tax expenses are matched with pretax accounting income by
providing deferred taxes at current tax rates for timing differences between
the determination of net income for financial reporting and tax purposes. The
objective of the asset and liability method is to establish deferred tax assets
and liabilities for the temporary differences between the financial reporting
basis and the tax basis of assets and liabilities at enacted tax rates expected
to be in effect when such amounts are realized or settled. BB&T Financial will
adopt the provisions of FAS 109 in 1993. This adoption will have no material
impact on either the financial condition or results of operations of BB&T
Financial.
FINANCIAL CONDITION
Average assets grew 13.4% in 1992, following increases of 10.8% in 1991 and
1.3% in 1990. Through its savings institution acquisitions, BB&T Financial
added assets of approximately $240 million in March, 1991, $558 million in
August, 1991 and $107 million in June, 1992. Average assets have increased at
an average annual rate of 10.0% over the past five years. Over the same five-
year period, the compound annual growth rates based on average balances have
been 10.3% for earning assets, 9.9% for loans, 11.7% for investment securities
and 10.6% for deposits. All growth rates have been enhanced by the effects of
acquisitions accounted for as purchases.
BB&T Financial experienced an above average rate of growth throughout most of
the 1980's, as a concerted effort was made to penetrate new markets to gain the
strength and operating efficiencies associated with size. BB&T Financial
generated this growth both through internal efforts and through acquisition.
The rate of internal growth has slowed in recent years as a result both of
management design and a general economic slow down. However, through its
acquisition strategy, BB&T Financial had acquired six savings institutions with
total assets of approximately $1.3 billion at December 31, 1992. These thrifts
have provided a new base of retail core deposits, a new constituency of
customers to which both credit and non-credit products and services can be
marketed, and an expanded branch distribution system in several of the major
metropolitan markets of North Carolina. The recent slower rate of growth and
the additional thrift retail deposits have enabled BB&T Financial to improve
profitability by maintaining and improving net interest margins and spreads
through a more profitable mix of funding liabilities.
In 1990 and 1991 serious problems developed in many real estate markets
throughout the country. These problems spread to other parts of the economy and
had many negative implications. As a result, BB&T Financial has placed
increased emphasis on the management of all lending activities.
Over the past three years, lending for construction and development at BB&T
Financial was restricted by both intent and demand. As a result, construction
loans declined from $421 million or 12.0% of loans at the end of 1989 to $356
million or 7.9% of loans on December 31, 1992. Generally, the decline in real
estate values was not as great in the Carolinas as in other parts of the
country, but the vacancy rates for many commercial properties did rise to
unprofitable levels, particularly in the metropolitan areas of the Carolinas.
The situation has improved significantly in recent months, as occupancy rates
have increased and real estate values have stabilized and shown improvement in
selected markets and segments.
Demand for consumer loans, installment and other loans to individuals, has
been weak over the past three years because of the sluggish economy and
excessive levels of consumer debt built up in the 1980's. The continuing
slowdown in automobile sales has had a negative impact on growth in direct and
indirect automobile loans in recent years. As a result of these factors,
consumer loans declined from $504 million or 14.3% of loans at the end of 1989
to $465 million or 10.3% at the end of 1992.
Gross loans were $4.5 billion at the end of 1992. This represented an
increase of approximately $291.3 million in 1992, following an increase of
approximately $810 million in 1991. The three savings institutions acquired in
1991 had loans totalling approximately $620 million at the respective dates of
acquisition, while the savings institution added in 1992 had approximately $80
million. Thus, the internally generated loan
63
<PAGE>
growth was $211 million in 1992 and $190 million in 1991. The comparatively
slower rate of growth in loans reflects the caution exercised by both BB&T
Financial and its customers, as businesses and individuals waited for signs of
renewed economic activity. The long range objective of BB&T Financial is to
maintain a rate of internal growth which approximates the growth of its markets
in the Carolinas. BB&T Financial believes that this will result in a rate of
increase which will be sustainable and provide for growth and profitability,
but it will not match the rate of internal growth experienced during the decade
of the 1980's.
Investment securities (including securities available for sale) increased
8.8% to a total of $1.73 billion at the end of 1992, following increases of
26.1% in 1991 and 9.9% in 1990. BB&T Financial historically has maintained an
investment portfolio of 21-25% of total assets. At the end of 1992, investment
securities represented 25.8% of assets. BB&T Financial expects the investment
portfolio to continue to represent 21-25% of total assets over the long-term,
but it is likely that the portfolio will exceed these parameters over the
short-term.
The policy at BB&T Financial is to invest primarily in securities of the U.S.
Government and its agencies and in investment grade municipals. Neither BB&T
Financial nor any of its subsidiaries have invested in non-investment grade
bonds. The following table provides a percentage breakdown of the securities
portfolios by risk class as of December 31, 1991 and 1992.
<TABLE>
<CAPTION>
AT DECEMBER 31,
----------------------
TYPE OF SECURITY 1992 1991
- ---------------- ---------- ----------
PERCENT OF PORTFOLIO
----------------------
<S> <C> <C>
U.S. Government Securities............................... 86.43% 58.14
U.S. Agency Obligations:
Mortgage-backed Securities............................... .06 21.67
Other.................................................... 5.35 6.15
State, County and Municipal Securities:
AAA.................................................... 3.26 5.48
AA..................................................... .57 .58
A-1.................................................... 1.46 1.22
A...................................................... 2.24 1.99
BAA-1.................................................. .04 .07
BAA.................................................... .01 .04
Nonrated............................................... .35 2.32
Other.................................................... .23 2.34
---------- ----------
100.00% 100.00
========== ==========
</TABLE>
Mortgage-backed securities of U.S. Government agencies totalled $405.7
million at the end of 1990 and were 32.3% of the investment portfolio. Such
securities were reduced to $343.8 million or 21.7% of investment securities a
year later and less than $1 million at the end of 1992. While such securities
have attractive yields, the speed of prepayments tends to increase as interest
rates decline. Throughout the second half of 1991 and early 1992, BB&T
Financial sold mortgage-backed securities in order to realize gains before
prepayment could occur. The mortgage-backed securities of BB&T Financial were
primarily originated through its subsidiaries and securitized to provide
marketability or added through its savings institution acquisitions.
In recognition of the potential for increased activity in its portfolio of
investment securities created by changing market factors, BB&T Financial in
September 1992 segregated its investment securities into two portfolios. One
portfolio consists of securities considered to be investment securities, which
are carried at amortized cost. The second portfolio includes securities which
are classified as "available for sale," which are reported at the lower of cost
or market. At the time of the change, the former included U.S. Government
securities, state and municipal bonds and U.S. Treasury securities, while the
latter included mortgage-backed securities, collateralized mortgage obligations
and U.S. Treasury securities. In the future, BB&T Financial will follow its
established guidelines with respect to credit quality and maturities in making
purchases for
64
<PAGE>
both portfolios, and its policy generally will be to specifically identify
securities as either investment or available for sale at the time of purchase.
Average deposits increased 9.6% in 1992, following increases of approximately
15.3% in 1991 and 4.6% in 1990. Virtually all of the increases in recent years
have been in interest-bearing deposits; however, noninterest-bearing deposits
did increase by $90.7 million or 15.6% in 1992, following four years of no
growth. The acquired savings institutions had approximately $689 million in
deposits (principally interest-checking, savings and retail certificates of
deposits) at the respective dates of acquisition. A positive element of the
growth in 1992 and 1991 was that substantially all of the increases were in
lower cost core deposits. The slower overall growth rate has been an enabling
factor to improving the funding mix, and, ultimately, net interest margins and
income.
Shareholders' equity grew 15.3% in 1992, 30.3% in 1991 and 9.9% in 1990. BB&T
Financial issued $12.6 million in equity to shareholders of Home Savings and
Loan Association Inc., Durham North Carolina in consummating that acquisition
in March 1991, and raised approximately $50.2 million of equity in August 1991
to complete the acquisitions of Gate City and Albemarle and $9.7 million in
June 1992 to complete the acquisition of Peoples. In recent years the return on
average equity has been in the 14-15% range and the dividend payout ratio has
been 31-33%. Thus, the retention of earnings has resulted in an annual
contribution of approximately 10% to the growth in equity. Also, the issuance
of new stock through dividend reinvestment and employee benefit plans generated
$19.0 million in equity in 1992 and $10.8 million in 1991.
65
<PAGE>
The following table sets forth certain information relating to average
balances, interest earned or paid, and average rates earned or paid for the
periods shown. Yields and costs are derived by dividing income or expense by
the average balance of assets or liabilities, respectively. Average balances
are derived from average daily balances.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED DECEMBER 31,
---------------------------------------------------------
1992 1991
---------------------------- ----------------------------
AVERAGE AVERAGE
AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/
BALANCE EXPENSE RATE BALANCE EXPENSE RATE
---------- -------- ------- ---------- -------- -------
($ IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Loans (1)(2)(3)......... $4,398,867 382,275 8.69% $3,813,131 393,953 10.33%
Securities (3)(4):
U.S. Government and
other................. 1,505,039 109,482 7.27 1,264,518 104,186 8.24
State and municipal.... 153,568 17,756 11.56 208,454 25,194 12.09
---------- -------- ---------- --------
Total investment
securities........... 1,658,607 127,238 7.67 1,472,972 129,380 8.78
Interest-bearing bank
balances............... 93 8 8.60 30,686 2,462 8.02
Federal funds sold...... 7,416 257 3.47 30,692 1,863 6.07
---------- -------- ---------- --------
Total interest-earning
assets............... 6,064,983 509,778 8.41 5,347,481 527,658 9.87
---------- -------- ---------- --------
Allowance for loan
losses................. (69,323) (54,176)
Cash and due from banks,
noninterest-bearing.... 220,018 198,526
Bank premises and
equipment.............. 74,300 61,926
Other assets............ 149,060 122,763
---------- ----------
Total assets.......... $6,439,038 $5,676,520
========== ==========
LIABILITIES AND
SHAREHOLDERS' EQUITY
Interest-bearing
deposits:
Savings................ $ 321,497 10,371 3.23% $ 244,987 11,603 4.74%
Interest checking...... 605,806 15,918 2.63 477,565 19,484 4.08
Money rate savings..... 740,271 23,427 3.16 670,946 34,171 5.09
Certificates of deposit
and other time
deposits.............. 2,999,692 153,295 5.11 2,908,053 198,630 6.83
---------- -------- ---------- --------
Total interest-bearing
deposits............. 4,667,266 203,011 4.35 4,301,551 263,888 6.13
Short-term borrowed
funds.................. 482,242 15,733 3.26 302,721 16,663 5.50
Long-term debt.......... 88,306 6,350 7.19 89,725 7,513 8.37
---------- -------- ---------- --------
Total interest-bearing
liabilities.......... 5,237,814 225,094 4.30 4,693,997 288,064 6.14
-------- --------
Demand deposits,
noninterest-bearing.... 573,418 481,394
Other liabilities....... 103,167 74,538
Shareholders' equity.... 524,639 426,591
---------- ----------
Total liabilities and
shareholders' equity $6,439,038 $5,676,520
========== ==========
Interest income and rate
earned................. $509,778 8.41% $527,658 9.87%
Interest expense and
rate paid.............. 225,094 4.30 288,064 6.14
-------- --------
Interest rate spread.... 4.11 3.73
NET INTEREST INCOME AND
NET YIELD ON AVERAGE
EARNING ASSETS......... $284,684 4.69% $239,594 4.48%
======== ===== ======== =====
</TABLE>
- --------
(1) Nonaccrual loans are included in average balances for yield computations.
(2) Loan income includes fees of $6,114,000, $3,694,000, $3,189,000,
$3,410,000, and $2,649,000 for the years of 1992-1988, respectively.
(3) Yields related to loans and securities exempt from both federal and state
income taxes, federal income taxes only, or state income taxes only are
stated on a taxable equivalent basis assuming tax rates of 38.62%, 35.65%
or 7%, respectively, for the years of 1990-1988, and 39.32%, 35.91% or
8.06%, respectively for 1991, and 39.27%, 35.89% or 7.98%, respectively for
1992.
(4) Includes investment securities and securities available for sale.
66
<PAGE>
<TABLE>
<CAPTION>
FISCAL YEAR ENDED DECEMBER 31,
- --------------------------------------------------------------------------------------
1990 1989 1988
- ---------------------------- ---------------------------- ----------------------------
AVERAGE AVERAGE AVERAGE
AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/
BALANCE EXPENSE RATE BALANCE EXPENSE RATE BALANCE EXPENSE RATE
------- -------- ------- ---------- -------- ------- ---------- -------- -------
($ IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$3,469,454 393,263 11.34% $3,471,961 406,655 11.71% $3,116,576 334,669 10.74%
987,564 88,940 9.01 952,353 83,097 8.73 723,262 57,611 7.97
223,786 27,505 12.29 225,485 27,347 12.13 243,310 29,339 12.06
- ---------- -------- ---------- -------- ---------- --------
1,211,350 116,445 9.61 1,177,838 110,444 9.38 966,572 86,950 9.00
92,974 7,837 8.43 70,261 6,445 9.17 66,966 5,195 7.76
3,470 253 7.29 5,228 428 8.19 4,838 405 8.37
- ---------- -------- ---------- -------- ---------- --------
4,777,248 517,798 10.84 4,725,288 523,972 11.09 4,154,952 427,219 10.28
- ---------- -------- ---------- -------- ---------- --------
(40,898) (37,256) (33,195)
221,007 212,054 208,424
59,729 56,493 51,325
107,487 102,811 80,103
- ---------- ---------- ----------
$5,124,573 $5,059,390 $4,461,609
========== ========== ==========
$ 213,960 10,747 5.02% $ 210,806 10,652 5.05% $ 214,090 10,810 5.05%
422,867 18,897 4.47 367,388 17,122 4.66 361,581 16,674 4.61
589,341 37,294 6.33 540,410 34,812 6.44 610,331 34,758 5.69
2,447,268 195,684 8.00 2,370,266 205,110 8.65 1,877,505 142,422 7.59
- ---------- -------- ---------- -------- ---------- --------
3,673,436 262,622 7.15 3,488,870 267,696 7.67 3,063,507 204,664 6.68
454,224 35,522 7.82 596,633 53,990 9.05 473,644 35,523 7.50
106,070 9,681 9.13 113,477 10,638 9.37 109,482 10,087 9.21
- ---------- -------- ---------- -------- ---------- --------
4,233,730 307,825 7.27 4,198,980 332,324 7.91 3,646,633 250,274 6.86
-------- -------- --------
473,941 475,398 475,815
59,800 61,021 48,498
357,102 323,991 290,663
- ---------- ---------- ----------
$5,124,573 $5,059,390 $4,461,609
========== ========== ==========
$517,798 10.84% $523,972 11.09% $427,219 10.28%
307,825 7.27 332,324 7.91 250,274 6.86
-------- -------- --------
3.57 3.18 3.42
$209,973 4.40% $191,648 4.06% $176,945 4.26%
======== ===== ======== ===== ======== =====
</TABLE>
67
<PAGE>
BALANCE SHEET MANAGEMENT
The business of banking is basically one of managing risks. In managing the
portfolios of assets and liabilities, the primary objective is to manage the
inherent credit risk and interest rate risk, in a context which also provides
ongoing profitability and meets customer needs. Prudent balance sheet
management also requires the maintenance of liquidity and a strong capital
position.
CREDIT RISK MANAGEMENT. A key component of BB&T Financial's balance sheet
management is the management of credit risk. In recent years, this represented
a particular risk, requiring a most concerted effort to minimize loss exposure.
Credit risk is inherent in the portfolios of both investment securities and
loans. However, substantially all credit risk taken by BB&T Financial is in the
loan portfolio.
LOAN PORTFOLIO MANAGEMENT. The Loan Policy Committee, which establishes loan
policy and reviews and approves larger credits, provides overall direction to
the administration of the loan portfolios. The Loan Administration Division is
responsible for the ongoing loan operations and oversees larger credits and
problem credits.
The loan review process is intended to ensure that sound and consistent
credit decisions are made. The loan function is administered by personnel who
have depth of experience and are provided with continuous training. Over the
years the methods for analyzing business financial performance and the ability
to repay loans has been refined. A detailed financial analysis is prepared
prior to the funding of larger business credits, and the analyses are updated
on a regular basis.
A key element in minimizing the risk of loss in a business loan portfolio is
the diversification of such risk. While the legal lending limit of the North
Carolina chartered bank is in excess of $95 million, BB&T operates with in-
house limits of $37.5 million or less. Additional lower limits are established
based on risk grades, the business or industry of the borrower, type of
collateral (non-real estate versus real estate) and other considerations,
including the ability of the borrower to meet obligations with funds generated
from normal operations. Currently, no borrower has loans and/or commitments
equal to the in-house limit. Although the ability of the borrower to repay is
the critical element in any lending decision, substantially all loans at BB&T
Financial, other than those of the very highest quality, are, in BB&T
Financial's view, well collateralized. Independent appraisals are required for
properties securing loans in excess of $100,000.
A vast majority of loans made by BB&T and BB&T-SC are to businesses with
operations headquartered in the two Carolinas; however, a limited number of
loans have been made to businesses which are domiciled in other states but have
North Carolina operations. BB&T Financial has not provided credit for highly
leveraged transactions, the energy sector or loans to lesser developed
countries and has not been a purchaser of loan participations.
The following table sets forth loans by regulatory classification, primarily
based on types of collateral rather than the loan purpose. Real estate mortgage
includes loans for land acquisition.
<TABLE>
<CAPTION>
AT DECEMBER 31,
----------------------------------------------------------------------------------------
1992 1991 1990 1989 1988
---------------- ---------------- ---------------- ---------------- ----------------
% OF % OF % OF % OF % OF
AMOUNT TOTAL AMOUNT TOTAL AMOUNT TOTAL AMOUNT TOTAL AMOUNT TOTAL
---------- ----- ---------- ----- ---------- ----- ---------- ----- ---------- -----
($ IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial and industri-
al..................... $ 902,572 19.9% $ 857,716 20.2% $ 879,556 25.7% $ 879,806 25.0% $ 820,761 24.4%
Real estate--construc-
tion................... 356,229 7.9 366,745 8.7 350,331 10.2 421,434 12.0 382,011 11.4
Real estate--mort-
gage(1)................ 2,804,084 61.9 2,535,299 59.8 1,726,404 50.4 1,711,431 48.7 1,696,378 50.5
Installment and other
loans to individuals... 464,987 10.3 476,858 11.3 469,831 13.7 504,235 14.3 461,703 13.7
---------- ----- ---------- ----- ---------- ----- ---------- ----- ---------- -----
$4,527,872 100.0% $4,236,618 100.0% $3,426,122 100.0% $3,516,906 100.0% $3,360,853 100.0%
========== ===== ========== ===== ========== ===== ========== ===== ========== =====
</TABLE>
- --------
(1) Included residential mortgage loans of $1.7 billion in 1992 and $1.5
billion in 1991.
Even though loan policies and procedures at a bank may provide the basis for
a quality portfolio with minimal risk, individual borrowers do encounter
problems which result in lower quality and loss at times.
68
<PAGE>
Less frequently, general deterioration of loan quality may result from
weaknesses in specific industries or the economy in general. This was the case
in 1990 and 1991, as serious difficulties were encountered in real estate
markets throughout the country and the economy experienced a period of
recession. As a result, many major banks reported large increases in
nonperforming assets which in turn required increases in their provisions and
allowances for loan losses.
BB&T Financial also experienced increases in both nonperforming assets and
actual losses in 1991 and 1990. Accordingly, the provisions and allowances for
loan losses were increased in those years. BB&T Financial intensified its loan
review processes in order to minimize credit problems in that difficult
environment, and there were considerable improvements in both nonperforming
assets and actual losses in 1992.
The following table provides an analysis of the composition of the real
estate loans with the greatest risk as of December 31, 1992 and 1991, based on
BB&T Financial's internal classification system. The table does not include
permanent mortgages for one-to-four family residences and owner-occupied
commercial properties.
<TABLE>
<CAPTION>
NONPERFORMING
LOANS
----------------
ACQUISITION
AND % OF
1992 PERMANENT CONSTRUCTION DEVELOPMENT TOTAL AMOUNT LOAN TYPE
- ---- --------- ------------ ----------- ---------- ------ ---------
($ IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
COMMERCIAL-NONOWNER OCCUPIED:
Multi-family................ $119,207 18,132 9,974 147,313 622 42%
Hotels/motels............... 80,713 5,727 -- 86,440 -- --
Shopping centers/malls...... 49,861 17,642 12,139 79,642 100 .13
Office buildings............ 85,612 10,255 11,536 107,403 -- --
Warehouse/distribution/light
industrial................. 44,140 7,083 17,209 68,432 914 1.34
Acquisition only............ -- -- 44,208 44,208 3,120 7.06
-------- ------- ------- ---------- ------ -----
Total commercial-nonowner
occupied.................. 379,533 58,839 95,066 533,438 4,756 .89
-------- ------- ------- ---------- ------ -----
RESIDENTIAL-CONSTRUCTION,
ACQUISITION, AND
DEVELOPMENT................. -- 142,608 175,872 318,480 3,860 1.21
-------- ------- ------- ---------- ------ -----
Total real estate.......... $379,533 201,447 270,938 851,918 8,616 1.01%
======== ======= ======= ========== ====== =====
TOTAL LOANS.................. $4,527,872 26,974 .60%
TOTAL REAL ESTATE/TOTAL
LOANS....................... 18.81% 31.94
1991
COMMERCIAL-NONOWNER OCCUPIED:
Multi-family................ $112,801 19,853 12,026 144,680 2,524 1.74%
Hotels/motels............... 71,342 8,204 -- 79,546 289 .36
Shopping centers/malls...... 48,974 10,294 17,343 76,611 330 .43
Office buildings............ 86,113 14,694 11,436 112,243 717 .64
Warehouse/distribution/light
industrial................. 45,410 5,946 19,905 71,261 2,276 3.19
Acquisition only............ -- -- 49,943 49,943 5,061 10.13
-------- ------- ------- ---------- ------ -----
Total commercial-nonowner
occupied.................. 364,640 58,991 110,653 534,284 11,197 2.10
-------- ------- ------- ---------- ------ -----
RESIDENTIAL-CONSTRUCTION,
ACQUISITION, AND
DEVELOPMENT................. -- 126,925 206,953 333,878 16,089 4.82
-------- ------- ------- ---------- ------ -----
Total real estate.......... $364,640 185,916 317,606 868,162 27,286 3.14%
======== ======= ======= ========== ====== =====
TOTAL LOANS.................. $4,236,618 57,201 1.35%
TOTAL REAL ESTATE/TOTAL
LOANS....................... 20.49% 47.70
</TABLE>
69
<PAGE>
NONPERFORMING LOANS AND ALLOWANCE FOR LOAN LOSSES. Loans are placed on
nonaccrual status when collection of interest and principal is doubtful,
generally when loans become 90 days past due. There are three negative
implications for earnings when a loan is placed in nonaccrual status. All
interest accrued but unpaid at the date the loan goes on nonaccrual status is
either deducted from interest income or written off as a loss. Secondly, future
accruals of interest are not made until it becomes certain that both loan
principal and interest can be paid. Finally, there may be actual losses which
necessitate additional provisions for loan losses charged against earnings.
For BB&T Financial, nonperforming loans (including restructured loans)
totalled $27.0 million on December 31, 1992, compared with $57.2 million at the
end of 1991 and $38.0 million at the end of 1990. Nonperforming loans equalled
.60% of loans at the end of 1992, down from 1.35% a year earlier and 1.11% at
the end of 1990. Net charge-offs were .48% of average loans outstanding in
1992, compared with .66% in 1991 and .40% in 1990. For the same three years,
the provisions charged against earnings as a percent of average loans
outstanding were .66%, 1.00% and .55%, respectively. In 1992, both the amount
of actual charge-offs and the provision for loan losses declined significantly
from 1991 levels, which were the highest in the history of BB&T Financial.
The most critical issue faced by the banking industry in recent years
occurred in real estate lending activities. Of the real estate loans included
in the previous table, $8.6 million or 1.01% were nonperforming at the end of
1992 and $27.3 million or 3.14% were nonperforming at the end of 1991. For
other classes of loans, nonperforming loans were .50% and .89% of such loans
outstanding at the end of 1992 and 1991, respectively. Other categories of
nonperforming business loans were diversified throughout the portfolio.
The following table sets forth information with respect to BB&T Financial's
nonperforming assets and past due loans for the periods indicated.
<TABLE>
<CAPTION>
AT DECEMBER 31,
------------------------------------
1992 1991 1990 1989 1988
------- ------ ------ ------ ------
($ IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Nonaccrual loans........................... $26,029 55,123 34,939 13,857 10,174
Restructured loans......................... 945 2,078 3,028 3,128 694
Foreclosed property........................ 19,864 23,364 9,875 4,422 4,701
------- ------ ------ ------ ------
Total nonperforming assets............... $46,838 80,565 47,842 21,407 15,569
======= ====== ====== ====== ======
Total nonperforming assets to:
Loans and foreclosed property............ 1.03% 1.89 1.39 .61 .46
Total assets............................. .70 1.29 .93 .41 .32
======= ====== ====== ====== ======
Accruing loans past due 90 days............ $11,628 14,155 7,823 11,249 7,273
======= ====== ====== ====== ======
</TABLE>
BB&T Financial maintains a watch list for credits with balances of $100,000
or greater and which are categorized in the highest risk grades. The amount of
loans on the watch list totalled $165.7 million, 3.66% of loans outstanding at
December 31, 1992, and $166.9 million, 3.94% of loans outstanding, a year
earlier. The $165.7 million includes $20.2 million in nonaccruing status and
$145.5 million, which are currently performing, but in the opinion of
management, represent other potential problem loans.
As a result of increased provisions for loan losses in recent years, the
allowance for loan losses increased to $70.4 million or 1.56% of loans
outstanding at the end of 1992. At the end of 1991 the allowance for loan
losses was $61.9 million or 1.46% of outstanding loans. The allowance for loan
losses was 2.61 times nonperforming loans at the end of 1992, up from 1.08
times nonperforming loans as of December 31, 1991, 1.12 times nonperforming
loans as of December 31, 1990 and 2.20 times at the end of 1989. The allowance
plus equity was 13.48 times nonperforming assets at the end of 1992, compared
with 6.81 a year earlier.
70
<PAGE>
The following tables set forth an analysis of the allowance for loan losses
and information regarding the allocation of the allowance for loan losses.
ANALYSIS OF ALLOWANCE FOR LOAN LOSSES
<TABLE>
<CAPTION>
FISCAL YEAR ENDED DECEMBER 31,
---------------------------------------------------
1992 1991 1990 1989 1988
---------- --------- --------- --------- ---------
($ IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
LOANS OUTSTANDING AT END OF
PERIOD.................... $4,524,665 4,233,429 3,423,810 3,512,768 3,356,844
AVERAGE LOANS OUTSTANDING.. 4,398,867 3,813,131 3,469,454 3,471,961 3,116,576
========== ========= ========= ========= =========
ALLOWANCE FOR LOAN LOSSES
Balance, beginning of
period.................... $ 61,932 42,649 37,387 34,022 30,003
Provision for loan losses.. 29,000 38,000 19,235 12,478 11,984
Adjustment for acquired
companies................. 825 6,408 -- 90 --
---------- --------- --------- --------- ---------
91,757 87,057 56,622 46,590 41,987
---------- --------- --------- --------- ---------
Loans charged off:
Business.................. 16,853 16,856 9,373 6,305 5,805
Consumer.................. 7,836 9,955 6,912 5,626 4,201
Mortgage.................. 445 590 80 103 2
---------- --------- --------- --------- ---------
Total loans charged off.. 25,134 27,401 16,365 12,034 10,008
---------- --------- --------- --------- ---------
Recovery of loans
previously charged off:
Business.................. 2,492 1,172 1,405 1,910 1,461
Consumer.................. 1,308 1,103 973 921 582
Mortgage.................. 2 1 14 -- --
---------- --------- --------- --------- ---------
Total recoveries......... 3,802 2,276 2,392 2,831 2,043
---------- --------- --------- --------- ---------
Net loans charged off...... 21,332 25,125 13,973 9,203 7,965
---------- --------- --------- --------- ---------
Balance, end of period..... $ 70,425 61,932 42,649 37,387 34,022
========== ========= ========= ========= =========
Net charge-offs to average
loans outstanding......... .48% .66 .40 .27 .26
Allowance for loan losses
to loans outstanding...... 1.56 1.46 1.25 1.06 1.01
Allowance for loan losses
times net charge-offs..... 3.30x 2.46 3.05 4.06 4.27
Allowance for loan losses
times nonperforming loans. 2.61 1.08 1.12 2.20 3.13
Allowance for loan losses
plus equity times
nonperforming assets...... 13.48 6.81 8.70 17.63 21.93
Earnings coverage of net
charge-offs(1)............ 6.19 4.39 6.49 7.87 8.04
</TABLE>
- --------
(1) Net income before taxes, securities gains or losses, and the provision for
loan losses divided by net charge-offs.
71
<PAGE>
ALLOCATION OF ALLOWANCE FOR LOAN LOSSES
<TABLE>
<CAPTION>
AT DECEMBER 31,
-----------------------------------
1992 1991 1990 1989 1988
------- ------ ------ ------ ------
(THOUSANDS)
<S> <C> <C> <C> <C> <C>
Commercial and industrial............. $17,606 12,387 9,383 9,980 8,406
Real estate-construction.............. 7,043 7,432 4,985 3,220 5,257
Real estate-mortgage.................. 28,169 23,534 13,780 12,643 10,137
Installment and other loans to
individuals.......................... 10,564 12,386 9,236 7,848 6,860
Unassigned portion of reserve......... 7,043 6,193 5,265 3,696 3,362
------- ------ ------ ------ ------
$70,425 61,932 42,649 37,387 34,022
======= ====== ====== ====== ======
</TABLE>
Management continually reviews the loan portfolio for signs of deterioration.
In making their evaluation of the portfolio, factors considered include the
individual strength of borrowers, the strength of the individual industries,
the value and marketability of collateral, specific market strengths and
weaknesses, and general economic conditions. Management believes that the
allowance for loan losses at December 31, 1992 is adequate to cover potential
loan losses inherent in the loan portfolio.
INTEREST RATE RISK MANAGEMENT. The primary assets of banks are portfolios of
investment securities and loans, while liabilities are primarily composed of
interest-bearing deposits and borrowed funds. Assets and liabilities have
varying maturities from one day to several years and the associated interest
rates may be fixed or variable. The objective in managing maturities and rates
is to optimize net interest income to the extent possible, while minimizing the
risk associated with significant, often unforeseen shifts in interest rates.
Sensitivity to interest rate changes is one of the manageable risks assumed
by banks. When assets and liabilities reprice at different intervals, earnings
become sensitive to changes in market interest rates. One measure of the risk
associated with changes in interest rates is the ratio of interest-sensitive
assets to interest-sensitive liabilities. At the end of 1992, the sensitivity
ratio was 1.10x over a 30 day period, but slightly negative for all intervals
of 31-180 days.
BB&T Financial uses financial hedging instruments to help manage interest
rate risk and reduce its exposure to sharp changes in market rates of interest.
Interest rate swap agreements provide a hedge against the adverse effects of
changing interest rates and, thereby, contribute to the stabilization of net
interest income. This risk management strategy contributed $18.2 million to
pre-tax earnings in 1992 and $7.8 million in 1991.
The following tables set forth information relative to maturities and
sensitivities to rate changes for various categories of assets and liabilities.
72
<PAGE>
INTEREST SENSITIVITY ANALYSIS
<TABLE>
<CAPTION>
AT DECEMBER 31, 1992
INTEREST SENSITIVE
-------------------------------------------------------------
1-30 31-60 61-90 91-180 181-365 TOTAL NONINTEREST
DAYS DAYS DAYS DAYS DAYS SENSITIVE SENSITIVE(1)
---------- -------- ------- -------- --------- --------- ------------
($ IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
EARNING ASSETS
Loans................... $2,856,295 183,937 31,930 140,538 256,205 3,468,905 1,055,760
Investment securities... 49,387 79,536 27,048 52,016 523,523 731,510 993,504
Short-term investments.. 600 -- -- -- -- 600 --
Interest rate swaps..... (500,000) (125,000) 100,000 (100,000) 275,000 (350,000) 350,000
---------- -------- ------- -------- --------- --------- ---------
Total earning assets.. $2,406,282 138,473 158,978 92,554 1,054,728 3,851,015 2,399,264
========== ======== ======= ======== ========= ========= =========
INTEREST-BEARING
LIABILITIES
Time deposits of
$100,000 or more....... $ 133,528 103,041 121,049 158,481 94,118 610,217 131,464
All other deposits...... 1,440,882 162,054 158,159 571,980 354,641 2,687,716 1,242,979
Short-term borrowed
funds.................. 609,683 -- -- -- -- 609,683 --
Long-term debt.......... -- 50,000 -- 124 -- 50,124 36,818
Interest rate swaps..... -- (50,000) (50,000) 100,000 -- -- --
---------- -------- ------- -------- --------- --------- ---------
Total interest-bearing
liabilities.......... $2,184,093 265,095 229,208 830,585 448,759 3,957,740 1,411,261
========== ======== ======= ======== ========= ========= =========
Interest sensitivity gap
per period............. $ 222,189 (126,622) (70,230) (738,031) 605,969 (106,725) 988,003
Cumulative interest
sensitivity gap........ 222,189 95,567 25,337 (712,694) (106,725) -- --
Cumulative ratio of
interest-sensitive
assets to interest-
sensitive liabilities.. 1.10x 1.04 1.01 .80 .97
</TABLE>
- --------
(1) Assets and liabilities which are not sensitive to interest changes in a
twelve-month period because of maturities or fixed interest rates.
73
<PAGE>
SECURITIES--MATURITY/YIELD SCHEDULE
<TABLE>
<CAPTION>
AT DECEMBER 31, 1992
---------------------------------
APPROXIMATE TAXABLE
MARKET EQUIVALENT
BOOK VALUE VALUE YIELD(1)
---------- ----------- ----------
($ IN THOUSANDS)
<S> <C> <C> <C>
U.S. Treasury:
Within 1 year............................... $ 692,192 699,925 5.91%
1 through 5 years........................... 798,723 808,468 5.57
---------- ---------
Total...................................... 1,490,915 1,508,393 5.72
---------- ---------
U.S. Government agencies and corporations:
Within 1 year............................... 11,865 12,095 7.67
1 through 5 years........................... 78,943 79,777 6.16
6 through 10 years.......................... 1,502 1,551 9.32
---------- ---------
Total...................................... 92,310 93,423 6.41
---------- ---------
State and municipal:
Within 1 year............................... 23,564 23,696 12.06
1 through 5 years........................... 56,380 59,203 10.75
6 through 10 years.......................... 44,897 48,261 10.08
Over 10 years............................... 12,076 13,166 10.53
---------- ---------
Total...................................... 136,917 144,326 10.73
---------- ---------
Mortgage-backed securities of U.S. Government
agencies.................................... 985 986 8.72
Other securities............................. 3,887 4,084 9.59
---------- ---------
$1,725,014 1,751,212 6.17
========== ========= =====
</TABLE>
- --------
(1) Yields related to securities exempt from both federal and state income
taxes, federal income taxes only, or state income taxes only are stated on
a taxable equivalent basis assuming tax rates of 39.27%, 35.89% or 7.98%,
respectively.
MATURITY SCHEDULE OF SELECTED LOANS
<TABLE>
<CAPTION>
AT DECEMBER 31, 1992
-----------------------------------------------
ONE
WITHIN THROUGH
ONE YEAR FIVE YEARS OVER FIVE YEARS TOTAL
---------- ---------- --------------- ---------
(THOUSANDS)
<S> <C> <C> <C> <C>
Commercial and industrial:
Fixed interest rates.......... $ 72,440 46,940 36,006 155,386
Floating interest rates....... 747,100 85 1 747,186
---------- ------ ------ ---------
Total........................ 819,540 47,025 36,007 902,572
---------- ------ ------ ---------
Real estate-construction:
Fixed interest rates.......... 17,196 20,988 661 38,845
Floating interest rates....... 317,384 -- -- 317,384
---------- ------ ------ ---------
Total........................ 334,580 20,988 661 356,229
---------- ------ ------ ---------
$1,154,120 68,013 36,668 1,258,801
========== ====== ====== =========
</TABLE>
LIQUIDITY. For BB&T Financial, the principal source of asset liquidity is
marketable investment securities, particularly those maturing within one year.
The objective in the management of the investment securities portfolio is to
maximize yields within a framework which emphasizes shorter maturities and a
managed assets/liabilities interest rate sensitivity position. Such a strategy
minimizes the possibility of earnings losses associated with sharp swings in
market rates of interest.
74
<PAGE>
Through a strategy of securitizing internally originated residential mortgage
loans, the average maturity in the investment portfolio was lengthened in 1989-
1991. The average maturity of the portfolio at the end of 1991 was two years,
nine months. By the end of 1992, the average maturity had been reduced to 1
year, 5 months principally due to the liquidation of mortgage-backed
securities. At the end of 1992, approximately 42% of the portfolio matured
within one year and approximately 96% matured within a five-year period.
The portfolio includes investments in obligations of the U.S. Treasury, and
Government agency obligations, mortgage-backed securities and higher grade
municipal securities. In addition to the liquidity provided by normal
maturities, liquidity is also provided by the marketability of the portfolio.
Asset liquidity is also provided by scheduling maturities within the loan
portfolio, although the probability of conversion is not so certain as with
investment securities. At the end of 1992 approximately 77% or $3.5 billion of
loans would mature or reprice within a one-year period.
Liability liquidity is provided by sizable core deposits and other sources of
funds generated from the normal customer base. Substantially all of the funds
utilized by the subsidiaries and BB&T Financial are generated from the normal
customer base.
In addition to the liquidity provided by the balance sheet, BB&T Financial
maintains a capacity to borrow additional funds when the need arises. BB&T
Financial has a strong credit rating. BB&T has established federal funds lines
with many major banks totalling approximately $1 billion. BB&T Financial issues
commercial paper under a master agreement backed by bank lines of credit in the
amount of $90 million. BB&T has a medium-term bank note program whereby it may
sell from time to time bank notes (unsecured, unsubordinated and uninsured
obligations) in an aggregated amount of up to the lesser of $500 million or 50%
of BB&T's capital stock and unimpaired surplus outstanding at any time.
The retention of earnings also is a major source of liquidity. For the years
1992-1990, funds provided from operations were $102.7 million, $86.8 million
and $78.1 million, respectively.
The following table sets forth certain information concerning BB&T
Financial's liquidity.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED DECEMBER 31,
-----------------------------------
1992 1991 1990 1989 1988
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Average loans to:
Average deposits....................... 83.94% 79.72 83.65 87.58 88.06
Average deposits and short-term bor-
rowed funds........................... 76.86 74.98 75.40 76.12 77.66
====== ====== ====== ====== ======
</TABLE>
EQUITY AND CAPITAL RESOURCES. Shareholders' equity increased to $561 million
at the end of 1992, compared with $487 million at the end of 1991 and $374
million on December 31, 1990. The ratio of shareholders' equity to year-end
assets was 8.38%, 7.81% and 7.24% for 1992, 1991 and 1990, respectively.
Shareholders' equity has grown 15.3% and 30.3% over the last two years as a
result of the retention of earnings and the issuance of new equity. In 1992
approximately $28.7 million was added to equity through the issuance of stock,
following additions of $73.7 million in 1991 and $2.6 million in 1990.
BB&T Financial has consistently generated additional equity through the
retention of earnings. The rate of internal capital generation was 10.0% in
1992, 9.4% in 1991 and 10.2% in 1990. The dividend payout ratios were 31.0% and
33.3%, respectively, for 1992 and 1991. The current dividend policy is to
maintain a normal payout ratio of 30-35% of earnings.
While management views the equity to asset ratio as the principal indicator
of capital strength, additional measures have been prescribed by BB&T
Financial's regulators. Bank holding companies, and their subsidiaries, are
subject to risk-based capital measures, which were fully implemented at the end
of 1992.
75
<PAGE>
The ratios measure the relationship of capital to a combination of balance
sheet and off-balance sheet credit risks. The values of both balance sheet and
off-balance sheet items are adjusted to reflect credit risks.
Tier 1 capital is required to be at least 4% of risk-weighted assets, and
total capital must be 8% of risk-weighted assets. The Tier 1 capital ratio for
BB&T Financial at the end of 1992 was 12.35%, and the total capital ratio was
15.24%.
In evaluating capital strength and adequacy, regulators, and their examiners,
also utilize a leverage capital ratio. This ratio measures the relationship of
Tier 1 capital to tangible assets and must be at least 3% for the strongest
banks. At the end of 1992, the leverage ratio for BB&T Financial was 8.24%. See
"SUPERVISION AND REGULATION OF BB&T FINANCIAL--Capital Adequacy Guidelines for
Bank Holding Companies." The following table sets forth information concerning
BB&T Financial's capital adequacy for the indicated periods.
<TABLE>
<CAPTION>
AT OR FOR THE FISCAL YEAR
ENDED DECEMBER 31,
----------------------------
1992 1991 1990 1989 1988
----- ----- ----- ---- ----
<S> <C> <C> <C> <C> <C>
Average equity to average assets.............. 8.15% 7.52 6.97 6.40 6.51
Equity to assets at year-end.................. 8.38 7.81 7.24 6.48 6.40
Risk-based capital ratios (fully phased-in
guidelines):
Tier 1 capital............................... 12.35 11.13 9.72 N/A N/A
Total capital................................ 15.24 14.33 13.04 N/A N/A
Leverage ratio................................ 8.24 7.76 7.06 N/A N/A
===== ===== ===== ==== ====
</TABLE>
STOCK PERFORMANCE. BB&T Financial Common Stock is traded over-the-counter and
quoted on the Nasdaq NMS under the symbol "BBTF." At the end of 1992, BB&T
Financial had approximately 15,663 shareholders of record and 26,311,915 shares
outstanding. Approximately 76% of the outstanding shares were owned by
individual investors.
The following table sets forth information with respect to BB&T Financial's
stock performance for the periods indicated.
<TABLE>
<CAPTION>
AT OR FOR THE FISCAL
YEAR ENDED DECEMBER 31,
-------------------------
1992 1991 1990 1989 1988
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Dividend payout percentage........................ 31.0% 33.3 31.9 32.4 32.2
Dividend yield (based on average high/low price
for the year).................................... 3.4 4.5 4.6 3.6 4.2
Price/earnings ratio (based on year-end stock
price and fully diluted earnings per share)...... 11.6x 9.0 6.7 9.6 8.7
Price/book ratio (end of year).................... 1.5 1.1 .9 1.3 1.2
==== ==== ==== ==== ====
</TABLE>
NINE MONTHS ENDED SEPTEMBER 30, 1993
The following discussion and analysis is intended to assist in understanding
BB&T Financial's results of operations and changes in financial position for
the nine months and third quarter ended September 30, 1993.
On February 24, 1993, BB&T Financial acquired First Fincorp, Inc. of Kinston,
North Carolina, and its wholly-owned subsidiary, First Financial Savings Bank,
Inc. in a transaction accounted for as a purchase. The merger was consummated
through the issuance of 673,148 shares of BB&T Financial Common Stock for all
of the outstanding common stock of Fincorp. The results reported for 1993
include the operations of First Fincorp subsequent to the date of acquisition.
On February 25, 1993, BB&T Financial completed the acquisition of Security
Financial Holding Company of Durham, North Carolina, and its wholly-owned
subsidiary, Security Federal Savings Bank, in a transaction accounted for as a
pooling-of-interests. The merger was consummated through the issuance of
1,408,178 shares of BB&T Financial Common Stock for all of the outstanding
common stock of Security. All financial information has been restated to
include the
76
<PAGE>
operations of Security as if the transaction had been completed as of the
beginning of the earliest period reported. On the respective dates of
acquisition, First Fincorp had total assets of approximately $322 million and
Security had total assets of approximately $316 million.
On May 18, 1993, BB&T Financial acquired Carolina Savings and Edenton
Savings in transactions accounted for as purchases. The results reported for
1993 include the operations of Carolina Savings and Edenton Savings subsequent
to the date of acquisition. On the date of the acquisitions, Carolina had
total assets of approximately $142 million and Edenton had total assets of
approximately $40 million.
The acquisitions of Carolina Savings and Edenton Savings involved their
conversions from mutual savings associations to stock savings associations
simultaneous with their acquisition by BB&T Financial. To complete the
conversions and acquisitions, BB&T Financial sold shares of its common stock
with the proceeds being invested in the acquired companies. BB&T sold
approximately 507,182 shares of its common stock with net proceeds of
approximately $15.3 million to complete the acquisitions of Carolina Savings
and Edenton Savings.
OVERVIEW. Net income for the nine months ended September 30, 1993 totalled
$69.8 million, compared with $59.1 million for the same period in 1992, an
increase of 18.2%. Primary net income per share for the period was $2.31
compared with $2.14, while, on a fully diluted basis, earnings per share were
$2.26 and $2.05, respectively.
Consolidated net income for the third quarter totalled $24.4 million, $.78
per share, compared with $20.0 million, $.71 per share for the same quarter of
1992. Fully diluted earnings per share were $.78 and $.68, respectively.
On an annualized basis, the return on average assets was 1.24% for the first
nine months of 1993, compared with 1.18% for the same period of 1992. For the
third quarter of 1993, the return on average assets was 1.22%, compared with
1.18% in the same quarter of 1992. The annualized returns on average
shareholders' equity were compared with 14.5% and 14.0%, respectively, for the
corresponding periods in 1992.
NET INTEREST INCOME. Net interest income for the first nine months of 1993
totalled $233.3 million. This represented an increase of $27.2 million or
13.2% over $206.1 million for the first nine months of 1992. For the quarter
ended September 30, 1993, net interest income increased $12.3 million or 17.8%
over the third quarter of 1992 for a total of $81.7 million.
The period 1991-93 generally has been characterized by steady and
significant declines in market rates of interest. Throughout most of that
period, reductions in the cost of funds preceded declines in yields on earning
assets. As a result, interest rate spreads and margins have been greater than
those which were recorded in the years immediately preceding 1991.
In 1993, short-term interest rates have stabilized with relatively minor
movements--either up or down-- but long-term rates have continued to fall.
Accordingly, there has been a continuing movement by customers to refinance
home mortgages. This has resulted in lower yields on home mortgages, but
greater profits from loan origination activities. The average taxable
equivalent yield on investment securities declined to 6.55% for the first nine
months of 1993 and 6.21% for the third quarter, compared with 7.97% and 7.41%
in the respective periods of 1992. Maturing securities have been replaced with
lower yielding maturities, and growth has been at lower prevailing rates.
Also, the older portfolios of tax-exempt state and municipal securities are
continuing to mature, and there are no alternative investments offering the
same high yields.
Average earning assets increased 11.9% for the first nine months of 1993 and
17.7% for the third quarter. Acquisitions accounted for as purchases were
partially responsible for the growth, but demand for loans has increased in
recent months. Also, BB&T Financial added approximately $666 million to its
securities portfolio (including both investment securities and securities
available for sale) in the first three quarters of 1993 to replace $539
million of securities that matured or were sold. The average maturity of BB&T
Financial's portfolio of investment securities has been shortened to one year,
seven months. BB&T Financial believes that it is prudent to maintain such a
position as interest rates approach secular lows.
77
<PAGE>
For both the first nine months and the third quarter of 1993, net interest
income and average earning assets increased at approximately the same rate. On
a taxable equivalent basis, the interest rate spread was 4.14% for the first
nine months in 1993 and 4.04% for the third quarter of 1993, compared with
4.04% and 4.00%, respectively, in the same periods in 1992. The taxable
equivalent net interest margin was 4.63% for the first nine months of 1993,
compared with 4.64% in 1992. For the third quarters of each year, the margins
were 4.52% and 4.58%, respectively. The average yield on earning assets
declined 88 basis points for the first three quarters of 1993 and 68 basis
points for the third quarter of 1993 from the 1992 yields. On the other hand,
the average cost of funds was down 98 basis points for the first nine months
of 1993, and 72 basis points in the third quarter of 1993.
BB&T Financial uses interest rate swaps as hedges to protect its earnings
against dramatic changes in market rates of interest. These hedges contributed
$14.4 million to net interest income in 1993, compared with $13.8 million for
the same period in 1992. The contributions from hedges were $4.6 million and
$4.3 million, respectively in the third quarters of each year.
PROVISION AND ALLOWABLE FOR LOAN LOSSES. BB&T Financial's subsidiaries
maintain allowances for loan losses to absorb potential future losses.
Provisions for loan losses are charged against earnings to maintain the
allowances at appropriate levels.
The provision for loan losses for the first nine months of 1993 was $13.3
million, which was approximately $10.3 million or 43.7% below the $23.5
million recorded in the first nine months of 1992. The provision of $3.8
million recorded in the third quarter of 1993 represented a decline of 47.8%
from $7.2 million in the three months ended September 30, 1992. The reduced
charges against earnings for possible losses have been achieved because of
significant improvements in asset quality and a resultant lower level of
actual charge-offs.
On an annualized basis, net charge-offs as a percent of average loans
outstanding were .17% for the first nine months of 1993 and .26% for the third
quarter of 1993. The ratios for the same periods in 1992 were .44% and .37%,
respectively. At the end of September 1993, nonperforming assets (nonaccrual
and restructured loans and foreclosed property) totalled $40.3 million or .50%
of total assets. This represents a significant improvement from the level of
nonperforming assets of $62.6 million, or .89% of total assets, at the end of
the third quarter of 1992 and $47.3 million, or .66%, at the end of 1992.
The allowance for loan losses of $84.0 million was 1.51% of loans
outstanding at the end of the third quarter in 1993. This compares with
allowances of $72.6 million, or 1.53% of loans outstanding, a year earlier and
$72.7 million, or 1.54% of outstanding loans, at the end of 1992. The
allowance for loan losses was 3.24 times nonperforming loans on September 30,
1993, up from 1.85 at the end of the third quarter in 1992 and 2.69 at the end
of 1992. In management's opinion, the allowance for loan losses on September
30 was adequate.
NONINTEREST INCOME. Noninterest income for the first three quarters of 1993
totalled $79.1 million, an increase of 17.8% 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 over 1992 for the first nine months of the
year with insurance commissions reporting the greatest percentage change.
Service charges on deposit accounts provide the largest amount of
noninterest income. Service charges on deposit accounts increased $4.1 million
of 18.8% to a total of $26.0 million for the first three quarters of 1993. For
the third quarter of 1993, the increase over the comparable quarter of 1992
was $1.7 million or 22.1%. The growth in service charges on deposit accounts
in recent quarters is partially due to increases in fee schedules, but growth
in the average balance of noninterest-bearing deposits has also been a
significant contributor. For the first nine months of 1993, the average
balance of noninterest-bearing demand deposits increased approximately $99.5
million or 17.7%. These noninterest-bearing deposits have also been a
significant contributor to sustaining interest margins and providing greater
amounts of net interest income.
Over the past several years, BB&T Financial has developed a significant
mortgage banking operation, with an emphasis on the origination and servicing
of single-family mortgages. This emphasis has been heightened and expanded by
recent acquisitions of thrifts. Income from mortgage banking activities
totalled
78
<PAGE>
$11.6 million for the first nine months of 1993, a 12.4% increase from the
total of $10.4 million in 1992. For the third quarter ended September 30, 1993,
mortgage banking income totalled $4.8 million, compared with $3.7 million a
year earlier, an increase of 29.8%. Income from the origination and sale of
mortgage loans totalled $9.1 million in the first three quarters of 1993
compared with $5.4 million in the first nine months of 1992. The volume of
mortgage loan originations has increased throughout 1992 and 1993, as home
mortgages have been refinanced to take advantage of lower interest rates.
Mortgage loan servicing fees increased to $7.3 million for the first nine
months of 1993, up from $6.6 million in the same period of 1992; however,
servicing income declined due to accelerated amortization of the mortgage loan
excess servicing asset necessitated by early payoffs. Amortization charged
against revenues totalled $5.5 million in the first nine months and $2.3
million in the third quarter compared with $2.3 million and $1.1 million,
respectively in 1992.
In recent years, BB&T Financial has made a concerted effort to build a
statewide network of independent insurance agencies, primarily through
acquisitions. BB&T Financial has acquired six independent agencies over the
past 12 months. General insurance commissions totalled $7.3 million for the
first three quarters of 1993, an increase of $2.5 million or 52.4% over the
$4.8 million recorded in the first nine months of the prior year. For the third
quarter of 1993, general insurance commissions totalled $2.7 million, compared
with $1.5 million in the quarter ended September 30, 1992. BB&T Financial's
insurance operations represent an increasingly important source of noninterest
income.
Trust activities have provided noninterest revenues for BB&T Financial for
many years. BB&T Financial offers both corporate and personal trust services.
BB&T Financial is placing an increased emphasis on employee benefit services
and, beginning in the fourth quarter of 1992, manages a proprietary family of
mutual funds. Other service charges, commissions and fees include $1.1 million
in fees from the sales of mutual funds for the first nine months of 1993,
compared with $314,000 in 1992. For the first nine months of 1993, income from
trust services increased $1.1 million or 16.2% to a total of $7.7 million. For
the third quarter of 1993, trust revenues totalled $2.8 million, compared with
$2.4 million in the year earlier quarter.
Declining market rates of interest have created gains in the investment
portfolio in recent years. At the end of September 1993, the market value of
investment securities (including those available for sale) exceeded the
carrying value by approximately $34 million. Gains on sales of securities
totalled $1.3 million for the first three quarters of 1993, compared with $4.7
million for the same period a year earlier, while for the third quarter of
1993, gains were only $82,000, compared with $705,000 in the same quarter of
1992.
Other operating income totalled $13.6 million for the first nine months of
1993, compared with $8.9 million a year earlier. The amortization of negative
goodwill, which was recorded in thrift acquisitions, totalling $3.3 million is
included in this category for 1993, compared with $2.5 million in 1992. Other
operating income also included a gain of approximately $1.3 million from the
sale of BB&T Financial's interest in a credit card processing company in the
second quarter of 1993 and $1.1 million earned on life insurance policies on
officers' lives.
NONINTEREST EXPENSE. Noninterest expense for the first three quarters of 1993
increased 19.4%. For the third quarter of 1993 the increase was 24.1%. The
rates of increase were unusually large because of the use of purchase
accounting in savings institution acquisitions.
Three categories of operating expense were particularly affected by the
acquisitions. Personnel costs were up 20.8% for the first nine months of 1993,
furniture and equipment expense was up 32.1% and net occupancy expense
increased 11.1%. Included in personnel costs were increases of 19.7% in
salaries and wages and 26.0% in other personnel expense. A change to the
accrual method of accounting for retiree health insurance benefits resulted in
an increased expense of $1.2 million for the first three quarters of 1993.
The premium paid to the FDIC for deposit insurance has been increased
significantly since 1989 to cover the cost associated with failed banks. The
rate has increased from $.8333 per thousand dollars of deposits in 1989 to the
current rate of $2.30. The cost of deposit insurance was $10.0 million in the
first three quarters of 1993, compared with $9.1 million for the comparable
period a year earlier. The rise was entirely related to growth and
acquisitions.
79
<PAGE>
The provisions for loan losses have been increased in recent years due to the
increased incidence of nonperforming loans and actual losses, but the reduction
in credit quality also had a significant impact on noninterest expense in 1992.
The expense of maintaining foreclosed property and the ultimate gain or loss on
the sale of such properties is included in noninterest expense. Improved asset
quality and intensive efforts to sell and/or recognize losses in 1992 have
combined to substantially reduce charges against earnings in 1993. For the
first three quarters of 1993, the cost and expense related to foreclosed
properties totalled $1.8 million, down from $4.9 million in the first nine
months of 1992.
FINANCIAL POSITION. BB&T Financial continues to be very liquid, although
short-term borrowed funds did increase to $917 million at the end of September
1993, compared with $632 million a year earlier and $610 million at the end of
1992. As interest rates have continued to decline, many investors who
traditionally purchased certificates of deposit have sought alternative
investment opportunities. Many have moved to other instruments, particularly
mutual funds. BB&T Financial has also intentionally used borrowed funds to
support its assets because of the greater spreads which are available. BB&T
Financial believes this strategy to be prudent, because its portfolios of
investment securities totalling approximately $2.0 billion represents
approximately 25% of its total assets, have an average maturity of one year,
seven months and are comprised almost entirely of obligations of the U.S.
Treasury and other investment grade securities. Also, the loan portfolio
includes approximately $385 million of home mortgage loans to be packaged for
sale to third party investors ($265 million were under forward contract at the
end of September 1993).
Short-term borrowed funds at September 30, 1993 included $172.8 million of
securities sold under agreements to repurchase, approximately $158.0 million of
master notes of BB&T and $586.6 million of federal funds purchased. BB&T had
unused federal funds lines of approximately $1.6 billion at September 30. BB&T
also had unused lines of credit totalling $55 million at the end of the third
quarter of 1993.
In the second quarter of 1993, BB&T put in place a program which will allow
it to issue $500 million of medium-term notes as needed to meet ongoing funding
and operational needs. These notes are rated A2/P1 by Moody's and A/A-1 by
Standard and Poor's. On September 30, 1993, BB&T had issued approximately $200
million of the notes to mature in 1996.
The traditionally strong equity and capital position of BB&T Financial and
its subsidiaries have been strengthened in recent years and continue to be very
good. The ratio of equity to assets at the end of September 1993 was 8.63%,
compared with 8.26% a year earlier. Equity has been generated from acquisitions
and the issuance of new shares, as well as the retention of earnings.
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 12.80% and a total capital ratio of 14.80% on
September 30, 1993. These ratios compare with 12.36% and 15.42%, respectively,
at the end of the third quarter of 1992. The minimum required Tier 1 risk-based
capital ratio is 4%, and the required total risk-based capital ratio is 8%.
IMPACT OF NEW ACCOUNTING STANDARDS
Effective January 1, 1993, BB&T Financial adopted the provisions of FAS 106,
"Employers' Accounting for Post Retirement Benefits Other Than Pensions," which
requires the accrual of nonpension post-retirement benefits over the employees'
active service period, defined as the date of employment up to the date of
employees' eligibility for such benefits. BB&T Financial provides health care
benefits to retirees and, prior to 1993, expensed those costs as incurred.
During the quarter ended March 31, 1993, BB&T Financial recorded and expensed
$412,000 to cover the estimated cost of retiree benefits other than pensions.
In the first quarter of 1992, BB&T Financial incurred and expensed $103,000 to
provide health care benefits to its retirees.
Effective January 1, 1993, BB&T Financial adopted the provisions of FAS 109,
"Accounting for Income Taxes," which requires the use of the asset and
liability method to account for income taxes. Prior to 1993, BB&T Financial
used the deferred method for accounting for income taxes. The adoption of the
provisions
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of FAS 109 did not have a material impact on either the financial position or
results of operations of BB&T Financial.
The FASB has issued FAS 112, "Employers' Accounting for Postemployment
Benefits," which requires accrual of a liability for all types of benefits paid
to former or inactive employees after employment but before retirement. The
periodic effect on net income, if any, has not been determined. Adoption of FAS
112 is required for fiscal years beginning after December 15, 1993.
The FASB has issued FAS 115, "Accounting for Certain Investments in Debt and
Equity Securities," which changes in the method of accounting and reporting for
debt and equity securities. Securities that are held to maturity would be
classified as such and reported at amortized cost. Securities for current
resale would be classified as trading securities and reported at fair value,
with unrealized gains and losses included in current earnings. Securities that
are not classified as trading securities or held-to-maturity securities would
be classified as securities available for sale and reported at fair value, with
unrealized gains and losses excluded from current earnings and reported as a
separate component of shareholders' equity. FAS 115 will be effective for
fiscal years beginning after December 15, 1993. BB&T will adopt the provisions
of FAS 115 on January 1, 1994. It is anticipated that the adoption will have no
material effects either on the financial condition or results of operations of
BB&T.
The FASB also has adopted FAS 114, "Accounting by Creditors for Impairment of
a Loan," which requires that creditors value all loans for which it is probable
that the creditor will be unable to collect all amounts due according to the
terms of the loan agreement based on the discounted expected future cash flows.
This discounting would be at the loan's effective interest rate. FAS 114 would
apply for fiscal years beginning after December 15, 1994.
SUPERVISION AND REGULATION OF BB&T FINANCIAL
The following description briefly discusses certain provisions of federal and
state laws and regulations and the potential impact of such provisions on BB&T
Financial and its subsidiaries. The discussion is only a summary and does not
purport to be a complete description of the applicable laws and regulations,
and summarizes only the laws and regulations as currently in effect.
GENERAL
As a bank holding company registered under the BHCA, BB&T Financial is
subject to the regulation of the Federal Reserve. Under the BHCA, BB&T
Financial's activities and those of its subsidiaries are limited to banking,
managing or controlling banks, furnishing services to or performing services
for its subsidiaries or engaging in any other activity which the Federal
Reserve determines to be so closely related to banking or managing or
controlling banks as to be a proper incident thereto. The BHCA prohibits BB&T
Financial from acquiring direct or indirect control of more than 5% of the
outstanding voting stock or substantially all of the assets of any bank or
merging or consolidating with another bank holding company without prior
approval of the Federal Reserve. The BHCA also prohibits BB&T Financial from
acquiring control of any bank operating outside the State of North Carolina
unless such action is specifically authorized by the statutes of the state in
which the bank to be acquired is located.
Additionally, the BHCA prohibits BB&T Financial from engaging in, or
acquiring ownership or control of, more than 5% of the outstanding voting stock
of any company engaged in a nonbanking business unless such business is
determined by the Federal Reserve to be so closely related to banking as to be
a proper incident thereto. The BHCA generally does not place geographic
restrictions on the activities of such nonbanking activities.
There are a number of obligations and restrictions imposed on bank holding
companies and their depository institution subsidiaries by federal law and
regulatory policy that are designed to reduce potential loss exposure to the
depositors of such depository institutions and to the FDIC insurance funds in
the event the depository institution becomes in danger of default or in
default. For example, to reduce the likelihood of receivership of an insured
depository institution subsidiary, a bank holding company is required to
guarantee
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the compliance of any insured depository institution subsidiary that may become
"undercapitalized" with the terms of any capital restoration plan filed by such
subsidiary with its appropriate federal banking agency up to the lesser of (i)
an amount equal to 5% of the subsidiary institution's total assets at the time
the institution became undercapitalized or (ii) the amount which is necessary
(or would have been necessary) to bring the institution into compliance with
all applicable capital standards as of the time such institution fails to
comply with such capital restoration plan. See "--Impact of the 1991 Banking
Law." Under a policy of the Federal Reserve with respect to bank holding
company operations, a bank holding company is required to serve as a source of
financial strength to its subsidiary depository institutions and to commit
resources to support such institutions in circumstances where it might not do
so absent such policy. The Federal Reserve under the BHCA also has the
authority to require a bank holding company to terminate any activity or to
relinquish control of a nonbank subsidiary (other than a nonbank subsidiary of
a bank) upon the Federal Reserve's determination that such activity or control
constitutes a serious risk to the financial soundness and stability of any bank
subsidiary of the bank holding company.
In addition, the "cross-guarantee" provisions of the Federal Deposit
Insurance Act, as amended ("FDIA") require insured depository institutions
under common control to reimburse the FDIC for any loss suffered or reasonably
anticipated by either the SAIF or the BIF as a result of the default of a
commonly controlled insured depository institution or for any assistance
provided by the FDIC to a commonly controlled insured depository institution in
danger of default. The FDIC may decline to enforce the cross-guarantee
provisions if it determines that a waiver is in the best interest of the SAIF
or the BIF or both. The FDIC's claim for damages is superior to claims of
stockholders of the insured depository institution or its holding company but
is subordinate to claims of depositors, secured creditors and holders of
subordinated debt (other than affiliates) of the commonly controlled insured
depository institutions.
BB&T Financial is subject to the obligations and restrictions described
above, and BB&T, BB&T-SC, Mutual Savings, Citizens of Newton, Old Stone and
Citizens of Mooresville are, and after the Acquisition, Home Savings will be,
subject to the cross-guarantee provisions of the FDIA. However, management of
BB&T Financial currently does not expect that any of these provisions will have
any impact on operations.
BB&T Financial also is a savings and loan holding company registered under
the HOLA by virtue of its ownership of Old Stone and thus is subject to the
supervision and regulation of the OTS. At least until the merger or other
consolidation of Old Stone with and into BB&T, BB&T Financial will continue to
be a savings and loan holding company.
As a result of BB&T Financial's ownership of BB&T and its indirect ownership
of BB&T-SC, BB&T Financial is registered under the bank holding company laws of
North Carolina and South Carolina, respectively. Accordingly, BB&T Financial
and its subsidiaries also are subject to regulation and supervision by the
North Carolina Commissioner of Banks ("Commissioner") and South Carolina
banking authorities. As a result of BB&T Financial's ownership of Citizens of
Newton, Mutual Savings and Citizens of Mooresville, BB&T Financial also is
registered under the savings institutions holding company laws of North
Carolina and, thereby, is subject to regulation and supervision by the
Administrator.
CAPITAL ADEQUACY GUIDELINES FOR BANK HOLDING COMPANIES
The Federal Reserve has adopted capital adequacy guidelines for bank holding
companies and banks that are members of the Federal Reserve System and thus
subject to its regulation.
Bank holding companies are required to comply with the Federal Reserve's
risk-based capital guidelines. Under these guidelines the minimum ratio of
total capital to risk-weighted assets (including certain off-balance sheet
activities, such as standby letters of credit) is 8%. At least half of the
total capital is required to be "Tier 1 capital," principally consisting of
common stockholders' equity, noncumulative perpetual preferred stock and a
limited amount of cumulative perpetual preferred stock, less certain goodwill
items. The remainder ("Tier 2 capital") may consist of a limited amount of
subordinated debt, certain hybrid capital instruments and other debt
securities, perpetual preferred stock and a limited amount of the general loan
loss allowance. In addition to the risk-based capital guidelines, the Federal
Reserve has adopted a minimum Tier
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1 (leverage) capital ratio, under which a bank holding company must maintain a
minimum level of Tier 1 capital to average total consolidated assets of at
least 3% in the case of a bank holding company which has the highest regulatory
examination rating and is not contemplating significant growth or expansion.
All other bank holding companies are expected to maintain a ratio of at least
100 to 200 basis points above the stated minimum.
The following table sets forth BB&T Financial's regulatory capital position
at September 30, 1993 on a historical basis as well as a pro forma basis
assuming consummation of the Acquisition. See "PRO FORMA COMBINED CONDENSED
FINANCIAL STATEMENTS." For a discussion of BB&T's historical and pro forma
capital positions as of September 30, 1993, see "--BB&T and BB&T-SC."
<TABLE>
<CAPTION>
AT SEPTEMBER 30, 1993
----------------------------------
HISTORICAL PRO FORMA
---------------- ----------------
($ IN THOUSANDS)
<S> <C> <C> <C> <C>
Shareholders' Equity........................ $ 698,370 8.63% $ 715,944 8.66%
========== ===== ========== =====
REGULATORY CAPITAL
Tier 1 risk-based:
Actual.................................... $ 686,080 12.80% $ 703,654 12.94%
Required.................................. 214,352 4.00 217,445 4.00
---------- ----- ---------- -----
Excess.................................... $ 471,728 8.80% $ 486,209 8.94%
========== ===== ========== =====
Total risk-based:
Actual.................................... $ 793,275 14.80% $ 810,849 14.92%
Required.................................. 428,703 8.00 434,890 8.00
---------- ----- ---------- -----
Excess.................................... $ 364,572 6.80% $ 375,959 6.92%
========== ===== ========== =====
Leverage:
Actual.................................... $ 686,080 8.64% $ 703,654 8.65%
Required.................................. 238,246 3.00 243,973 3.00
---------- ----- ---------- -----
Excess.................................... $ 447,834 5.64% $ 459,681 5.65%
========== ===== ========== =====
Total risk-based assets..................... $5,358,791 $5,436,131
========== ==========
Total assets.............................. $8,089,293 $8,264,776
========== ==========
</TABLE>
The Federal Deposit Insurance Corporation Improvement Act of 1991 (the "1991
Banking Law") required each federal banking agency, including the Federal
Reserve, to revise its risk-based capital standards to ensure that those
standards take adequate account of interest rate risk, concentration of credit
risk and the risks of nontraditional activities, as well as reflect the actual
performance and expected risk of loss on multi-family mortgages. The Federal
Reserve, the FDIC and the Office of the Comptroller of the Currency have issued
a joint advance notice of proposed rulemaking, and have issued a revised
proposal soliciting comments on a proposed framework for implementing these
revisions. Under the proposal, an institution's assets, liabilities and off-
balance sheet positions would be weighed by risk factors that approximate the
instruments' price sensitivity to a 100 basis point change in interest rates.
Institutions with interest rate risk exposure in excess of a threshold level
would be required to hold additional capital proportional to that risk. The
notice also asked for comments on how the risk-based capital guidelines of each
agency may be revised to take account of concentration and credit risk and the
risk of nontraditional activities. Due to the preliminary nature of the
proposal, BB&T Financial cannot assess at this point the impact the proposal
would have on the capital requirements of BB&T Financial or its subsidiary
banks.
BB&T AND BB&T-SC
BB&T is organized as a North Carolina chartered banking corporation and is
subject to various statutory requirements and to rules and regulations
promulgated and enforced by the Commissioner and the FDIC. BB&T-SC is organized
as a South Carolina chartered banking corporation and is subject to various
statutory
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requirements and to rules and regulations promulgated and enforced by South
Carolina banking agencies and the FDIC.
North Carolina chartered banks, such as BB&T, are subject to legal
limitations on the amount of dividends they are permitted to pay. Prior
approval of the Commissioner is required if the total of all dividends declared
by BB&T in any calendar year exceeds its net profits (as defined by statute)
for that year combined with its retained net profits (as defined by statute)
for the preceding two calendar years, less any required transfers to surplus.
Under the FDIA, insured depository institutions, such as BB&T and BB&T-SC, are
prohibited from making capital distributions, including the payment of
dividends, if, after making such distribution, the institution would become
"undercapitalized" (as such term is used in the statute). Based on its
subsidiaries' current financial condition, BB&T Financial does not expect that
this provision will have any impact on BB&T Financial's ability to obtain
dividends from its insured depository institutions.
As state-chartered, FDIC-insured institutions which are not members of the
Federal Reserve System, BB&T and BB&T-SC are subject to capital requirements
imposed by the FDIC. The FDIC requires state-chartered banks to comply with
risk-based capital standards substantially similar to those required by the
Federal Reserve. See "--Capital Adequacy Guidelines for Bank Holding
Companies." The FDIC also requires state-chartered banks to maintain a minimum
leverage ratio similar to that adopted by the Federal Reserve. Under the FDIC's
leverage capital requirement, state nonmember banks such as BB&T and BB&T-SC
that (i) receive the highest rating during the examination process and (ii) are
not anticipating or experiencing any significant growth are required to
maintain a minimum leverage ratio of 3% of Tier 1 capital to total assets; all
other banks are required to maintain a minimum ratio of 100 to 200 basis points
above the stated minimum, with an absolute minimum leverage ratio of not less
than 4%. As of September 30, 1993, the leverage ratio of BB&T-SC was 8.67%.
The following table sets forth BB&T's regulatory capital position as of
September 30, 1993 on a historical basis as well as a pro forma basis assuming
consummation of the Acquisition and the Merger. See "PRO FORMA COMBINED
CONDENSED FINANCIAL STATEMENTS." For a discussion of the historical and pro
forma regulatory capital positions of BB&T Financial, see "--Capital Adequacy
Guidelines for Bank Holding Companies."
<TABLE>
<CAPTION>
AT SEPTEMBER 30, 1993
----------------------------------
HISTORICAL PRO FORMA
---------------- ----------------
($ IN THOUSANDS)
<S> <C> <C> <C> <C>
Shareholders' Equity........................ $ 662,062 8.70% $ 679,636 8.72%
========== ===== ========== =====
REGULATORY CAPITAL
Tier 1 risk-based:
Actual.................................... $ 649,886 13.16% $ 667,460 13.31%
Required.................................. 197,460 4.00 200,554 4.00
---------- ----- ---------- -----
Excess.................................. $ 452,426 9.16% $ 466,906 9.31%
========== ===== ========== =====
Total risk-based:
Actual.................................... $ 735,794 14.91% $ 753,368 15.03%
Required.................................. 394,920 8.00 401,107 8.00
---------- ----- ---------- -----
Excess.................................. $ 340,874 6.91% $ 352,261 7.03%
========== ===== ========== =====
Leverage:
Actual.................................... $ 649,886 8.69% $ 667,460 8.72%
Required.................................. 224,340 3.00 229,604 3.00
---------- ----- ---------- -----
Excess.................................. $ 425,546 5.69% $ 437,856 5.72%
========== ===== ========== =====
Total risk-based assets..................... $4,936,498 $5,013,838
========== ==========
Total assets............................ $7,619,430 $7,794,913
========== ==========
</TABLE>
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As institutions with deposits insured by the BIF, BB&T and BB&T-SC also are
subject to insurance assessments imposed by the FDIC. Under current law, the
insurance assessment to be paid by BIF-insured institutions shall be as
specified in a schedule required to be issued by the FDIC that specifies, at
semiannual intervals, target reserve ratios designed to increase the FDIC
insurance funds' reserve ratios to 1.25% of estimated insured deposits (or
such higher ratio as the FDIC may determine in accordance with the statute) in
15 years. Further, the FDIC is authorized to impose one or more special
assessments in any amount deemed necessary to enable repayment of amounts
borrowed by the FDIC from the U.S. Department of the Treasury. See "--Impact
of the 1991 Banking Law." Effective January 1, 1993, the FDIC implemented a
risk-based assessment schedule, having assessments ranging from 0.23% to 0.31%
of an institution's average assessment base. The actual assessment to be paid
by each BIF member is based on the institution's assessment risk
classification, which is determined based on whether the institution is
considered "well capitalized," "adequately capitalized" or "undercapitalized,"
as such terms have been defined in applicable federal regulations adopted to
implement the prompt corrective action provisions of the 1991 Banking Law (see
"--Impact of the 1991 Banking Law"), and whether such institution is
considered by its supervisory agency to be financially sound or to have
supervisory concerns. As a result of the current provisions of federal law,
the assessment rates on deposits could increase over the next 15 years over
present levels. Based on the current financial condition and capital levels of
BB&T Financial's bank subsidiaries, BB&T Financial does not expect that the
current BIF risk-based assessment schedule will have a material adverse effect
on the earnings of its bank subsidiaries. See "--Impact of the 1991 Banking
Law." BB&T's future deposit insurance premium expenses, however, may be
affected by changes in the SAIF assessment rate. See "--Savings Institution
Acquisitions."
BB&T and BB&T-SC also are subject to examination by the FDIC and state bank
examiners. In addition, BB&T and BB&T-SC are subject to various other state
and federal laws and regulations, including state usury laws, laws relating to
fiduciaries, consumer credit and equal credit laws, fair credit reporting laws
and laws relating to branch banking. Further, insured state-chartered banks
are prohibited from engaging as a principal in activities that are not
permitted for national banks, unless: (i) the FDIC determines that the
activity would pose no significant risk to the appropriate deposit insurance
fund, and (ii) the bank is, and continues to be, in compliance with all
applicable capital standards. BB&T Financial does not believe that these
restrictions have a material adverse effect on its current operations.
IMPACT OF THE 1991 BANKING LAW
The 1991 Banking Law provided the federal banking agencies with broad powers
to take prompt corrective action to resolve problems of insured depository
institutions. The extent of these powers depends upon whether the institutions
in question are "well capitalized," "adequately capitalized,"
"undercapitalized," "significantly undercapitalized" or "critically
undercapitalized." Under uniform regulations defining such capital levels
issued by each of the federal banking agencies, a bank is considered "well
capitalized" if it has (i) a total risk-based capital ratio of 10% or greater,
(ii) a Tier 1 risk-based capital ratio of 6% or greater, (iii) a leverage
ratio of 5% or greater and (iv) is not subject to any order or written
directive to meet and maintain a specific capital level. An "adequately
capitalized" bank is defined as one that has (i) a total risk-based capital
ratio of 8% or greater, (ii) a Tier 1 risk-based capital ratio of 4% or
greater and (iii) a leverage ratio of 4% or greater (or 3% or greater in the
case of a bank with a composite CAMEL rating of 1). A bank is considered (A)
"undercapitalized" if it has (i) a total risk-based capital ratio of less than
8%, (ii) a Tier 2 risk-based capital ratio of less than 4% or (iii) a leverage
ratio of less than 4% (or 3% in the case of a bank with a composite CAMEL
rating of 1); (B) "significantly undercapitalized" if the bank has (i) a total
risk-based capital ratio of less than 6%, or (ii) a Tier 1 risk-based capital
ratio of less than 3% or (iii) a leverage ratio of less than 3% and (C)
"critically undercapitalized" if the bank has a ratio of tangible equity to
total assets equal to or less than 2%.
The 1991 Banking Law also amended the prior law with respect to the
acceptance of brokered deposits by insured depository institutions to permit
only a "well capitalized" depository institution to accept brokered deposits
without prior regulatory approval. Under FDIC regulations, "well capitalized"
banks may accept brokered deposits without restriction, "adequately
capitalized" banks may accept brokered deposits with a waiver from the FDIC
(subject to certain restrictions on payments of rates), while
"undercapitalized" banks may not accept brokered deposits. The regulations
provide that the definitions of "well capitalized," "adequately capitalized"
and "undercapitalized" are the same as the definitions adopted by the agencies
to implement the corrective action provisions of the 1991 Banking Law
(described in the previous paragraph). BB&T Financial does not believe that
these regulations have a material adverse effect on its operations.
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To facilitate the early identification of problems, the 1991 Banking Law
requires the federal banking agencies to review and, under certain
circumstances, prescribe more stringent accounting and reporting requirements
than those required by generally accepted accounting principles. The FDIC
issued a final rule effective July 2, 1993 implementing those provisions. The
rule, among other things, requires that management report on the institution's
responsibility for preparing financial statements and establishing and
maintaining an internal control structure and procedures for financial
reporting and compliance with designated laws and regulations concerning safety
and soundness, and that independent auditors attest to and report separately on
assertions in management's reports concerning compliance with such laws and
regulations, using FDIC-approved audit procedures.
The 1991 Banking Law further requires the federal banking agencies to develop
regulations requiring disclosure of contingent assets and liabilities and, to
the extent feasible and practicable, supplemental disclosure of the estimated
fair market value of assets and liabilities. The 1991 Banking Law further
requires annual examinations of all insured depository institutions by the
appropriate federal banking agency, with some exceptions for small, well-
capitalized institutions and state chartered institutions examined by state
regulators. Moreover, the 1991 Banking Law, as modified by the Federal Housing
Enterprises Financial Safety and Soundness Act, requires the federal banking
agencies to set operational and managerial, asset quality, earnings and stock
valuation standards for insured depository institutions and depository
institution holding companies (including bank holding companies such as BB&T
Financial), as well as compensation standards (but not dollar levels of
compensation) for insured depository institutions that prohibit excessive
compensation, fees or benefits to officers, directors, employees and principal
stockholders. The federal banking agencies have issued a joint advance notice
of proposed rulemaking soliciting comments on all aspects of the implementation
of these standards in accordance with the 1991 Banking Law, including whether
the compensation standards should apply to depository institution holding
companies.
ACQUISITIONS OF SAVINGS INSTITUTIONS
The FDIA authorizes the merger or consolidation of any BIF member with any
SAIF member (such as savings associations and most savings banks), the
assumption of any liability by any BIF member to pay any deposits of any SAIF
member or vice versa, or the transfer of any assets of any BIF member to any
SAIF member in consideration for the assumption of liabilities of such BIF
member or vice versa, provided that certain conditions are met and in the case
of any acquiring, assuming or resulting depository institution which is a BIF
member, such institution continues to make payment of SAIF assessments on the
portion of liabilities attributable to any acquired, assumed or merged SAIF-
insured institution. BB&T Financial anticipates merging or otherwise
consolidating Home Savings and any other savings institution located in North
Carolina that BB&T Financial has acquired or may acquire, including Citizens of
Newton, Mutual Savings, Old Stone, Citizens of Mooresville, Scotland Savings
and Asheville Savings with and into BB&T under these provisions, and BB&T will
continue to make payment of assessments to SAIF on the portion of liabilities
attributable to its savings institution acquisitions. As of September 30, 1993,
BB&T paid assessments to the SAIF on $ billion of its deposits, all of which
are attributable to the savings institutions it previously has acquired. See
"DESCRIPTION OF BB&T FINANCIAL--Savings Institution Acquisitions and
Operations." The FDIC has established a risk-based assessment system for SAIF
insured institutions which currently is the same as for BIF-insured
institutions. See "--BB&T and BB&T-SC." The FDIA provides that the SAIF
assessment rate may not be less than 0.23% of insured deposits for the period
from January 1, 1991 through December 31, 1993. The minimum rate may be
decreased to not less than 0.18% for the period January 1, 1994 through
December 31, 1997. After December 31, 1997, the SAIF assessment rate will be a
rate determined by the FDIC to be appropriate to increase the SAIF's reserve
ratio to 1.25% of insured deposits or such higher percentage as the FDIC
determines to be appropriate, but the assessment rate may not be less than
0.15%. As a result, depending on, among other things, recently enacted
legislation to fund the SAIF, the SAIF assessment could increase substantially
in the future. Accordingly, BB&T's future deposit insurance premium expense
will be affected by changes in the SAIF assessment rate.
For information concerning the potential effects of pending congressional
legislation on acquisitions of savings institutions, see "CERTAIN
CONSIDERATIONS RELATING TO THE OFFERINGS--Potential Effects of Pending
Legislation."
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DESCRIPTION OF CAPITAL STOCK OF BB&T FINANCIAL
GENERAL
BB&T Financial's authorized capital stock consists of two classes,
represented by 50,000,000 shares of BB&T Financial Common Stock, $2.50 par
value, of which shares were issued and outstanding and
shares were reserved for issuance as of and 4,000,000 shares of nonvoting
preferred stock, $2.50 par value, with no such shares issued or outstanding.
BB&T Financial's Amended Articles of Incorporation authorize the Board of
Directors, without shareholder approval, to fix the preferences, limitations
and relative rights of the preferred stock and to establish series of such
preferred stock and determine the variations between each series. If any shares
of preferred stock are issued, the rights of holders of BB&T Financial Common
Stock will be subject to the rights and preferences conferred to holders of
such preferred stock.
DIVIDEND RIGHTS
The holders of BB&T Financial Common Stock are entitled to share ratably in
dividends when and as declared by its Board of Directors out of funds legally
available therefor. One of the principal sources of income to BB&T Financial is
dividends from its subsidiaries. For a description of certain restrictions on
the payment of dividends by banks, see "SUPERVISION AND REGULATION OF BB&T
FINANCIAL--BB&T and BB&T-SC."
VOTING RIGHTS
A holder of BB&T Financial Common Stock has one vote for each share held on
any matter presented for consideration by the shareholders. Under North
Carolina law, the right of cumulative voting in the election of directors is
denied to shareholders of publicly held corporations such as BB&T Financial.
PREEMPTIVE RIGHTS
A holder of BB&T Financial Common Stock does not have any preemptive or
preferential right to purchase or to subscribe for additional shares of BB&T
Financial Common Stock or any other securities that BB&T Financial may issue.
ASSESSMENT AND REDEMPTION
The shares of BB&T Financial Common Stock presently outstanding are, and
those shares of BB&T Financial Common Stock issuable upon consummation of the
Conversion will be when issued, fully paid and nonassessable. Such shares do
not have any redemption provisions.
LIQUIDATION RIGHTS
In the event of liquidation, dissolution or winding up of BB&T Financial,
whether voluntary or involuntary, the holders of BB&T Financial Common Stock
will be entitled to share ratably in any of its net assets or funds which are
available for distribution to its shareholders after the satisfaction of its
liabilities or after adequate provision is made therefor, subject to the rights
of the holders of any preferred stock outstanding at the time.
TRANSFER AGENT
The Transfer Agent and Registrar for BB&T Financial Common Stock is BB&T.
CERTAIN PROVISIONS WHICH MAY HAVE AN ANTI-TAKEOVER EFFECT
Certain provisions of the Amended Articles of Incorporation and By-laws of
BB&T Financial and North Carolina law, and certain other arrangements, some of
which are described below, may discourage an attempt to acquire control of BB&T
Financial which a majority of its shareholders might determine to be in their
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best interest or in which shareholders might receive a premium over the current
market price for their shares. These provisions also may render the removal of
a BB&T Financial director or of the entire BB&T Financial Board of Directors
more difficult and may deter or delay corporate changes of control which have
not received the requisite approval of the Board of Directors.
REMOVAL OF DIRECTORS. Under BB&T Financial's Amended Articles of
Incorporation, approval by the vote of at least two-thirds of the outstanding
shares of BB&T Financial Common Stock entitled to vote is required for the
removal of any director or the entire Board of Directors.
AUTHORIZED PREFERRED STOCK. BB&T Financial's Amended Articles of
Incorporation authorize 4,000,000 shares of nonvoting preferred stock. The
Board of Directors of BB&T Financial may, subject to applicable law and the
rules of the NASD for Nasdaq NMS companies, authorize the issuance of preferred
stock at such times, for such purposes and for such consideration as it may
deem advisable without further shareholder approval. The issuance of preferred
stock under certain circumstances may have the effect of discouraging an
attempt by a third party to acquire control of BB&T Financial by, for example,
authorizing the issuance of a series of preferred stock with rights and
preferences designed to impede the proposed transaction. A series of preferred
stock also could be used for a shareholder rights plan, which may be adopted
without shareholder approval. Such a plan, if adopted, could deter attempts by
third parties to acquire a significant number of shares of BB&T Financial
Common Stock without the prior approval of the Board of Directors of BB&T
Financial.
NORTH CAROLINA SHAREHOLDER PROTECTION LEGISLATION. The North Carolina
Shareholder Protection Act and the Control Share Acquisition Act both apply to
BB&T Financial. These statutes are designed to protect shareholders against
certain changes in control and to provide shareholders with the opportunity to
vote on whether to accord voting rights to a 20% or more shareholder. The
effect of these statutes may be to deter or delay changes in control which are
opposed by the BB&T Financial Board of Directors or shareholders.
SUPERMAJORITY VOTING PROVISIONS. BB&T Financial's Amended Articles of
Incorporation require the affirmative vote of two-thirds of the outstanding
shares entitled to vote to approve a merger, consolidation, or other business
combination, unless the transaction is approved, prior to consummation, by two-
thirds of the members of BB&T Financial's Board of Directors. This provision
could tend to make the acquisition of BB&T Financial more difficult to
accomplish without the cooperation or favorable recommendation of BB&T
Financial's Board of Directors.
AMENDMENTS TO ARTICLES OF INCORPORATION. BB&T Financial's Amended Articles of
Incorporation require approval by holders of at least two-thirds of the
outstanding shares entitled to vote in order to amend certain provisions of the
Amended Articles of Incorporation. Those provisions require holders of at least
two-thirds of its outstanding shares to approve (i) the removal of a director
or the entire Board of Directors, (ii) a merger, consolidation or other
business combination not approved by two-thirds of the Board of Directors, and
(iii) an amendment or repeal of the By-laws. Any other amendment of the Amended
Articles of Incorporation requires the affirmative vote of the holders of a
majority of the shares entitled to vote on such amendment.
AMENDMENTS TO BYLAWS. BB&T Financial's Bylaws may be amended by either the
vote of a majority of its Board of Directors or by the affirmative vote of the
holders of at least two-thirds of the outstanding BB&T Financial Common Stock
entitled to vote.
EMPLOYEE STOCK OWNERSHIP PLANS. BB&T Financial has established employee
stock ownership plans for the benefit of the employees of Gate City, Albemarle,
Peoples, Carolina Savings, Edenton Savings, Mutual Savings and Citizens of
Mooresville upon their acquisitions by BB&T Financial. These plans hold
shares of BB&T Financial Common Stock. The plans, as well as the Home Savings
ESOP, are or will be plans established as subparts of BB&T's Savings and Thrift
Plan, which holds an additional shares of BB&T Financial Common Stock. The
Home Savings ESOP is expected to hold approximately [68,293] shares of BB&T
Financial Common Stock. Under plan terms, participants in the Savings and
Thrift Plan, including the Home Savings ESOP and the plans established in 1991,
1992 and 1993 have and will have the right to
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direct the trustee as to the voting of the shares held in their accounts on all
matters, including the election of directors. Each employee stock ownership
plan provides that the trustee is required, subject to applicable law, to vote
the shares as to which participant directions are not received and as to shares
not allocated to participant accounts in the same proportion as the allocated
shares as to which directions are received. Plan terms also would require the
trustee of each employee stock ownership plan to follow participant
instructions as to the tendering of any shares held in participant accounts in
the event of a tender offer. Shares allocated to participant accounts as to
which instructions are not received and unallocated shares are, again subject
to applicable law, tendered pursuant to the same procedures as to which shares
would be voted. As a result of these so-called "pass-through" provisions, any
third-party attempt to acquire control of BB&T Financial by means of a proxy
contest or tender offer may require the support of the plan participants. The
BB&T Financial employee stock ownership plans established and to be established
thus may tend to discourage such attempts to the extent that participants
oppose third-party attempts to acquire control and shareholder approval or
support is required for such attempts.
THE SHARES OF BB&T FINANCIAL COMMON STOCK OFFERED HEREBY ARE NOT DEPOSITS AND
ARE NOT INSURED BY THE FDIC OR ANY OTHER GOVERNMENTAL AGENCY.
OPINIONS
The validity of the shares of BB&T Financial Common Stock offered by BB&T
Financial by means of this Prospectus/Proxy Statement is being passed upon for
BB&T Financial by Jerone C. Herring, Esquire, Vice President and Secretary of
BB&T Financial. As of the date of this Prospectus/Proxy Statement, Mr. Herring
beneficially owned shares of BB&T Financial Common Stock and held options
exercisable within 60 days of such date to acquire shares of BB&T Financial
Common Stock. Certain other legal matters will be passed upon for BB&T
Financial by Arnold & Porter, Washington, D.C., special counsel to BB&T
Financial. Certain tax matters will be passed upon for BB&T Financial by KPMG
Peat Marwick, tax advisors to BB&T Financial. Certain legal matters will be
passed upon for Trident Securities by Housley Goldberg & Kantarian, P.C.,
Washington, D.C., counsel to Trident Securities. Certain legal matters will be
passed upon for Home Savings by Brooks, Pierce, McLendon, Humphrey & Leonard,
L.L.P., Greensboro,North Carolina, special counsel to Home Savings.
EXPERTS
The consolidated financial statements of BB&T Financial and its subsidiaries
as of December 31, 1992 and 1991 and for each of the years in the three-year
period ended December 31, 1992 incorporated by reference herein have been
incorporated by reference herein in reliance upon the report of KPMG Peat
Marwick, independent certified public accountants, incorporated by reference
herein and upon the authority of said firm as experts in accounting and
auditing.
The consolidated financial statements of Old Stone and subsidiaries as of and
for the year ended December 31, 1992, incorporated by reference herein have
been incorporated by reference herein in reliance upon the report of KPMG Peat
Marwick, independent certified public accountants, incorporated by reference
herein, and upon the authority of said firm as experts in accounting and
auditing.
The consolidated financial statements of Home Savings as of and for the year
ended September 30, 1993, incorporated herein by reference, have been audited
by McGladrey & Pullen, independent auditors, as indicated in their report, and
have been incorporated by reference herein upon the authority of that firm as
experts in auditing and accounting.
The consolidated financial statements of Citizens of Newton as of September
30, 1992 and for the year ended September 30, 1992, incorporated herein by
reference, have been audited by McGladrey & Pullen,
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independent auditors, as indicated in their report, and have been incorporated
by reference herein upon the authority of that firm as experts in auditing and
accounting.
The audited consolidated financial statements of Security Financial Holding
Company as of December 31, 1992 and 1991 and for each of the three years in the
period ended December 31, 1992 incorporated in this Prospectus/Proxy Statement
by reference to the Current Report on Form 8-K of BB&T dated August 6, 1993
have been so incorporated in reliance on the report of Price Waterhouse,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
The consolidated financial statements of Asheville Federal Bank, FSB and
subsidiary (now Asheville Savings Bank, SSB) as of December 31, 1992 and 1991
and for the years then ended incorporated in this prospectus by reference from
BB&T's Current Report on Form 8-K dated August 6, 1993 have been audited by
Deloitte & Touche, independent auditors, as stated in their report, which is
incorporated herein by reference, and have been so incorporated in reliance
upon the report of such firm given upon their authority as experts in
accounting and auditing.
The consolidated financial statements of L.S.B. Bancshares, Inc. of South
Carolina as of December 31, 1992 and 1991 and for each of the three years ended
in the period ended December 31, 1992, incorporated herein by reference from
BB&T's Current Report on Form 8-K dated January 7, 1993, have been so
incorporated by reference in reliance on the report of Donald G. Jones and
Company, P.A., independent accountants, given on the authority of said firm as
experts in auditing and accounting.
Home Savings and BB&T Financial have relied upon an opinion prepared by
Trident Financial as to the Appraised Value of Home Savings. Trident Financial
is an affiliate of Trident Securities, which is acting as a sales agent in the
Offerings. Trident Financial also acted as financial advisor to Home Savings in
connection with the Conversion Merger.
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NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS/PROXY
STATEMENT IN CONNECTION WITH THE OFFERINGS COVERED BY THIS PROSPECTUS/PROXY
STATEMENT. IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY BB&T FINANCIAL CORPORATION OR ANY
SELLING AGENT. THIS PROSPECTUS/PROXY STATEMENT DOES NOT CONSTITUTE AN OFFER TO
SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY OF THE SECURITIES OFFERED
HEREBY IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO
MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS/PROXY
STATEMENT NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
AN IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN
THIS PROSPECTUS/PROXY STATEMENT OR IN THE AFFAIRS OF BB&T FINANCIAL CORPORA-
TION OR HOME SAVINGS BANK OF ALBEMARLE, S.S.B. SINCE ANY OF THE DATES AS OF
WHICH INFORMATION IS FURNISHED OR INCORPORATED HEREIN OR SINCE THE DATE HERE-
OF.
----------------
TABLE OF CONTENTS
<TABLE>
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PAGE
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<S> <C>
Available Information..................................................... 5
Incorporation of Certain Documents by Reference........................... 5
Summary................................................................... 6
Certain Considerations Relating to the Offerings.......................... 17
Description of BB&T Financial............................................. 19
Management of BB&T Financial.............................................. 21
The Offerings............................................................. 24
Anticipated Subscriptions for Shares of BB&T Financial Common Stock by
Home Savings' Directors and Executive Officers in the Offerings.......... 40
Market Price and Dividends................................................ 41
Use of Proceeds........................................................... 42
Capitalization............................................................ 43
Pro Forma Combined Condensed Financial Statements......................... 44
Selected Consolidated Financial Data of BB&T Financial.................... 54
Management's Discussion and Analysis of Financial Condition and Results of
Operations of BB&T Financial............................................. 56
Supervision and Regulation of BB&T Financial.............................. 81
Description of Capital Stock of BB&T Financial............................ 87
Opinions.................................................................. 89
Experts................................................................... 89
</TABLE>
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BB&T FINANCIAL
CORPORATION
AN ESTIMATED 800,000 SHARES OF
COMMON STOCK
----------------
PROSPECTUS
----------------
TRIDENT SECURITIES, INC.
JANUARY , 1994
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<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF REGISTRANT OF ISSUANCE AND DISTRIBUTION
The following sets forth the estimated expenses to be paid by the
Registrant in connection with the issuance and distribution of the securities
being registered:
<TABLE>
<S> <C>
Securities and Exchange Commission
registration fee............................. 34,540
Printing, engraving and postage expenses........ 1,142,000 (1)
Legal fees and expenses......................... 350,000 (1)(2)
Accounting fees and expenses.................... 125,000 (1)
Blue sky fees and expenses (including legal
fees and disbursements)...................... 55,000 (1)
Miscellaneous expenses.......................... 200,000 (2)
---------
Total........................................... 1,906,540
=========
</TABLE>
==================================
(1) In connection with the acquisition of Mutual Savings Bank of Rockingham
County, S.S.B., Scotland Savings Bank, S.S.B., Citizens Savings Bank,
S.S.B., Home Savings Bank of Albemarle, S.S.B. and Asheville Savings Bank,
S.S.B.
(2) Legal fees in connection with the preparation of the Registration
Statement and prospectuses for the offerings.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
A. The Registrant is incorporated under the laws of North Carolina. The
North Carolina Business Corporation Act ("North Carolina BCA") contains
provisions prescribing the extent to which directors and officers shall or may
be indemnified. The following is a summary of these provisions:
1. Subject to certain exceptions, a corporation may indemnify an individual
made a party to a proceeding because he is or was a director against liability
incurred in the proceeding if (i) he conducted himself in good faith; and (ii)
he reasonably believed (a) in the case of conduct in his official capacity with
the corporation, that his conduct was in its best interests and (b) in all
other cases, that his conduct was at least not opposed to its best interests;
and (iii) in the case of any criminal proceeding, he had no reasonable cause to
believe his conduct was unlawful. Moreover, unless limited by its articles of
incorporation, a corporation must indemnify a director who was wholly
successful, on the merits or otherwise, in the defense of any proceeding in
which he was a party because he is or was a director of the corporation against
reasonable expenses incurred by him in connection with the proceeding. Expenses
incurred by a director in defending a proceeding may be paid by the corporation
in advance of the final disposition of such proceeding as authorized by the
board of directors in the specific case or as authorized or required under any
provision in the articles of incorporation or bylaws or by any applicable
resolution or contract upon receipt of an undertaking by or on behalf of a
director to repay such amount unless it shall ultimately be determined that he
is entitled to be so indemnified by the corporation against such expenses. A
director may also apply for court-ordered indemnification under certain
circumstances.
2. Unless a corporation's articles of incorporation provide otherwise, (i)
an officer of a corporation is entitled to mandatory indemnification and is
entitled to apply for court-ordered indemnification to the same extent as a
director; (ii) the corporation may indemnify or advance expenses to an officer,
employee, or agent of a corporation to the same extent as to a director; and
(iii) a corporation may also indemnify or advance expenses to an officer,
employee, or agent who is not a director to the extent, consistent with public
policy, that may be provided by its articles of incorporation, bylaws, general
or specific action of its board of directors, or contract.
3. In addition and separate and apart from the indemnification rights
discussed above, a corporation may, in its articles of incorporation or bylaws,
or by contract or resolution, indemnify or agree to indemnify any one of its
directors, officers, employees, or agents against liability and expenses in any
proceeding (including without limitation a proceeding brought by or on behalf
of the corporation itself) arising out of their status as
<PAGE>
such or their activities in any of the foregoing capacities; provided, however,
that a corporation may not indemnify or agree to indemnify a person against
liability or expenses he may incur on account of his activities which were at
the time taken known or believed by him to be clearly in conflict with the best
interests of the corporation. A corporation may likewise and to the same extent
indemnify or agree to indemnify any person who, at the request of the
corporation, is or was serving as a director, officer, partner, trustee,
employee, or agent of another foreign or domestic corporation, partnership,
joint venture, trust or other enterprise or as a trustee or administrator under
an employee benefit plan. Any such provision for indemnification may also
include provisions for recovery from the corporation of reasonable cost,
expenses, and attorneys' fees in connection with the enforcement of rights to
indemnification and may further include provisions establishing reasonable
procedures for determining and enforcing the rights granted therein.
B. The Registrant's Articles of Incorporation provide for the
indemnification of directors to the fullest extent authorized by North Carolina
law as it exists or may be hereafter amended. A director shall not be
personally liable for any monetary damages relating to a breach of duty as a
director to the corporation, its shareholders or otherwise.
C. Article IX of the Registrant's Bylaws provides for indemnification of
Registrant's directors, officers, employee or agents against certain expenses,
including attorney's fees, and payments made in satisfaction of judgments,
money decrees, fines and penalties for which they may become liable in such and
other fiduciary capacities, exclusive of indemnification for certain activities
involving criminal misconduct or clearly in conflict with the best interest of
the Registrant.
D. The Registrant has purchased liability insurance for its directors and
certain of its officers covering certain liabilities which may be incurred by
such officers and directors of the Registrant in connection with the
performance of their duties.
ITEM 16. EXHIBITS
The following are filed as exhibits to this Registration Statement.
<TABLE>
<CAPTION>
Exhibit No. Description
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<S> <C>
1.1 A form of Sales Agency Agreement between BB&T
Financial Corporation and Trident Securities, Inc. (relating to
the Conversion Merger of Mutual Savings Bank of Rockingham
County, S.S.B.) (previously filed).
</TABLE>
<PAGE>
<TABLE>
<S> <C>
1.2 A form of Sales Agency Agreement between BB&T Financial
Corporation and Trident Securities, Inc., dated as of
November __, 1993 (relating to the Conversion Merger of Scotland
Savings Bank, S.S.B.)(previously filed).
1.3 A form of Sales Agency Agreement between BB&T Financial
Corporation and Trident Securities, Inc., dated as of
November __, 1993 (relating to the Conversion Merger of Citizens
Savings Bank, S.S.B.)(previously filed).
1.4 A form of Sales Agency Agreement between BB&T Financial
Corporation and Trident Securities, Inc., dated as of _________,
1994 (relating to the Conversion Merger of Home Savings Bank of
Albemarle, S.S.B.).
2.1 Agreement and Plan of Reorganization dated February 26, 1993 by
and between Mutual Savings Bank of Rockingham County, SSB and
BB&T Financial Corporation (incorporated by reference herein from
Exhibit (2)(c) to Registrant's quarterly report on Form 10-Q for
the quarter ended March 31, 1993).
2.2 Agreement and Plan of Reorganization dated April 26, 1993 by and
between Scotland Savings Bank, SSB and BB&T Financial Corporation
(incorporated by reference herein from Exhibit (2)(e) to
Registrant's quarterly report on Form 10-Q for the quarter ended
March 31, 1993).
2.3 Agreement and Plan of Reorganization dated April 28, 1993 by and
between Citizens Savings Bank, SSB and BB&T Financial Corporation
(incorporated by reference herein from Exhibit (2)(f) to
Registrant's quarterly report on Form 10-Q for the quarter ended
March 31, 1993).
2.4 Agreement and Plan of Reorganization dated May 27, 1993 by and
between Home Savings Bank of Albemarle, SSB and BB&T Financial
Corporation (incorporated by reference herein from Exhibit (2)(b)
of Registrant's quarterly report on Form 10-Q for the quarter
ended June 30, 1993).
2.5 Agreement and Plan of Reorganization dated June 22, 1993 by and
between Asheville Savings Bank, SSB and BB&T Financial
Corporation (incorporated by reference herein from Exhibit (2)(c)
of Registrant's quarterly report on Form 10-Q for the quarter
ended June 30, 1993).
2.6 Plan of Conversion adopted by Mutual Savings Bank of Rockingham
County, S.S.B. on February 26, 1993 and amended on July 21, 1993
and August 4, 1993 (previously filed).
2.7 Plan of Conversion adopted by Scotland Savings Bank, S.S.B. on
April 26, 1993 and amended on __________, 1993 (previously
filed).
2.8 Plan of Conversion adopted by Citizens Savings Bank, S.S.B. on
April 28, 1993 and amended on October 25, 1993 (previously
filed).
2.9 Plan of Conversion adopted by Home Savings Bank of Albemarle,
SSB on May 27, 1993 and amended on December 13, 1993 and December
21, 1993.
</TABLE>
<PAGE>
<TABLE>
<S> <C>
2.10 Plan of Conversion adopted by Asheville Savings Bank, SSB on
June 22, 1993 and amended on _______________ (to be filed by
amendment).
4.1 Specimen stock certificate for BB&T Financial's common stock,
$2.50 par value (incorporated by reference herein from the
identified exhibit to BB&T Financial registration statement on
Form S-14 (File No. 2-68274) as filed and declared effective on
August 5, 1980).
4.2 Excerpts from Registrant's By-laws (Article II, Sections 8 and 9)
relating to rights of holders of Registrant's common stock
(incorporated by reference herein from the identified exhibit to
the Registrant's registration statement on Form S-8 (File No.
2-91779) as filed and declared effective on July 10, 1984).
4.3 Excerpts from Registrant's Amended Articles of Incorporation
(Articles IV, X, and XII) (incorporated by reference herein from
the identified exhibit to the Registrant's registration statement
on Form S-4 (File No. 33-37893) as filed and declared effective
on February 7, 1991).
5.1 Opinion of Jerone C. Herring, Esquire, Vice President and
Secretary to BB&T Financial Corporation, regarding the legality
of the securities to be registered hereby (previously filed).
8.1 Opinion of KPMG Peat Marwick, dated July 8, 1993, tax advisors
to BB&T Financial Corporation, regarding certain federal income
tax consequences of the Mutual Savings Conversion Merger
(previously filed).
8.2 Opinion of KPMG Peat Marwick, dated October 29, 1993, tax
advisors to BB&T Financial Corporation, regarding certain federal
income tax consequences of the Scotland Savings Conversion
Merger (previously filed).
8.3 Opinion of KPMG Peat Marwick, dated October 29, 1993, tax
advisors to BB&T Financial Corporation, regarding certain federal
income tax consequences of the Citizens Savings Conversion
Merger (previously filed).
8.4 Opinion of KPMG Peat Marwick, dated January 3, 1994, tax
advisors to BB&T Financial Corporation, regarding certain federal
income tax consequences of the Home Savings Conversion Merger.
23.1 Consent of KPMG Peat Marwick, dated July 8, 1993 (BB&T Financial)
(previously filed).
23.2 Consent of Trident Financial Corporation, dated July 9, 1993
(previously filed).
23.3 Consent of Jerone C. Herring, Esquire, Vice President and
Secretary of BB&T Financial Corporation included as part of
Exhibit 5.1 (previously filed).
23.4 Consent of KPMG Peat Marwick, dated July 8, 1993, relating to
their opinion included in Exhibit 8.1 (previously filed).
</TABLE>
<PAGE>
<TABLE>
<S> <C>
23.5 Consent of McGladrey & Pullen dated August 6, 1993 (Home Savings)
(previously filed).
23.6 Consent of McGladrey & Pullen dated August 6, 1993 (Citizens of
Newton) (previously filed).
23.7 Consent of Price Waterhouse dated August 6, 1993 (Security
Financial Holding Company) (previously filed).
23.8 Consent of Deloitte & Touche dated August 6, 1993 (Asheville
Savings) (previously filed).
23.9 Consent of KPMG Peat Marwick dated August 6, 1993 (Old Stone)
(previously filed).
23.10 Consent of KPMG Peat Marwick, dated October 29, 1993 (BB&T
Financial) (previously filed).
23.11 Consent of Trident Financial Corporation, dated October 29, 1993
(previously filed).
23.12 Consent of Jerone C. Herring, Esquire, Vice President and
Secretary of BB&T Financial Corporation, dated October 29, 1993,
relating to his opinion included in Exhibit 5.1 (previously
filed).
23.13 Consent of KPMG Peat Marwick, dated October 29, 1993, relating
to their opinion included in Exhibit 8.2 (previously filed).
23.14 Consent of McGladrey & Pullen dated October 29, 1993 (Home
Savings) (previously filed).
23.15 Consent of McGladrey & Pullen dated October 29, 1993 (Citizens
of Newton) (previously filed).
23.16 Consent of Price Waterhouse dated October 29, 1993 (Security
Financial Holding Company) (previously filed).
23.17 Consent of Deloitte & Touche dated October 29, 1993 (Asheville
Savings) (previously filed).
23.18 Consent of KPMG Peat Marwick dated October 29, 1993 (Old Stone)
(previously filed).
23.19 Consent of KPMG Peat Marwick, dated October 29, 1993 (BB&T
Financial) (previously filed).
23.20 Consent of KPMG Peat Marwick, dated October 29, 1993, relating
to their opinion included in Exhibit 8.3 (previously filed).
23.21 Consent of KPMG Peat Marwick dated January 5, 1994, relating
to their opinion included in Exhibit 8.4.
23.22 Consent of KPMG Peat Marwick dated January 10, 1994 (BB&T
Financial Corporation).
23.23 Consent of KPMG Peat Marwick dated January 4, 1994 (Old Stone).
23.24 Consent of Jerone C. Herring, Esquire, Vice President and
Secretary of BB&T Financial Corporation, dated January 10, 1994,
relating to his opinion included in Exhibit 5.1.
23.25 Consent of McGladrey & Pullen dated January 5, 1994 (Home
Savings).
23.26 Consent of McGladrey & Pullen dated January 5, 1994 (Citizens
of Newton).
23.27 Consent of Price Waterhouse dated January 4, 1994 (Security
Financial Holding Company).
23.28 Consent of Deloitte & Touche dated January 10, 1994 (Asheville
Savings).
23.29 Consent of David G. Jones and Company, P.A. dated January 6,
1994 (L.S.B. Bancshares, Inc. of South Carolina).
23.30 Consent of Trident Financial Corporation, dated January 4,
1994.
24.1 Powers of Attorney from certain signatory directors and officers
of BB&T Financial Corporation (previously filed).
</TABLE>
<PAGE>
ITEM 17. UNDERTAKINGS
ITEM 512 OF REGULATION S-K.
The undersigned Registrant hereby undertakes:
1. To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set
forth in the registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement;
provided, however, that (i) and (ii) would not apply if the information
required by sections (i) and (ii) is contained in a periodic report filed by
the Registrant pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934 that is incorporated by reference into this Registration Statement.
2. That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
3. To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of the
offering.
4. The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
<PAGE>
5. Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the provisions set forth in response to Item 15
hereof, or otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question of whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
6. For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
7. For the purpose of determining any liability under the Securities Act of
1933, each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements of filing on Form S-3 and has duly caused this Post-Effective
Amendment No. 2 to the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Wilson, State of North
Carolina, on January 10, 1994.
BB&T FINANCIAL CORPORATION
By: Jerone C. Herring
/s/ Jerone C. Herring
-----------------------
Jerone C. Herring,
Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 2 to the Registration Statement has been signed by
the following persons in the capacities indicated on January 10, 1994.
<TABLE>
<CAPTION>
NAME CAPACITY
<S> <C>
* Chairman of the Board of
- ------------------- Directors and Chief Executive Officer
John A. Allison IV (Principal Executive Officer)
* Treasurer (Principal
- ------------------- Financial and Accounting Officer)
Scott E. Reed
* Director
- -------------------
Joseph B. Alala, Jr.
* Director
- -------------------
W. Watson Barnes
* Director
- -------------------
Paul B. Barringer
Director
- -------------------
Robert L. Brady
</TABLE>
<PAGE>
<TABLE>
<S> <C>
* Director
- ------------------
W.G. Clark III
* Director
- ------------------
Jesse W. Corbett, Jr.
* Director
- ------------------
W.R. Cuthbertson, Jr.
* Director
- ------------------
Fred H. Deaton, Jr.
* Director
- ------------------
Joe L. Dudley, Sr.
* Director
- ------------------
Tom D. Efird
* Director
- ------------------
O. William Fenn, Jr.
* Director
- ------------------
James E. Heins
* Director
- ------------------
Raymond A. Jones, Jr.
* Director
- ------------------
Kelly S. King
* Director
- ------------------
David R. LaFar, III
* Director
- ------------------
J. Ernest Lathem, M.D.
</TABLE>
<PAGE>
<TABLE>
<S> <C>
* Director
- ------------------
James H. Maynard
* Director
- ------------------
Dorothy G. Owen
* Director
- ------------------
W.H. Parks
* Director
- ------------------
A. Winniett Peters
* Director
- ------------------
Richard L. Player, Jr.
* Director
- ------------------
S.B. Tanner III
Director
- ------------------
Larry J. Waggoner
* Director
- ------------------
Henry G. Williamson, Jr.
* Director
- ------------------
William B. Young, M.D.
</TABLE>
*By: Jerone C. Herring
/s/Jerone C. Herring
----------------------
Jerone C. Herring,
Attorney-in-fact
<PAGE>
EXHIBIT INDEX
-------------
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
1.4 A form of Sales Agency Agreement between BB&T Financial
Corporation and Trident Securities, Inc., dated as of __________,
1994 (relating to the Conversion Merger of Home Savings Bank of
Albemarle, S.S.B.).
2.9 Plan of Conversion adopted by Home Savings Bank of Albemarle,
S.S.B. on May 27, 1993, December 13, 1993 and December 21, 1993.
8.4 Opinion of KPMG Peat Marwick, dated January 3, 1994, tax
advisors to BB&T Financial Corporation, regarding certain federal
income tax consequences of the Home Savings Conversion Merger.
23.21 Consent of KPMG Peat Marwick dated January 5, 1994, relating to
their opinion included in Exhibit 8.4.
23.22 Consent of KPMG Peat Marwick dated January 10, 1994 (BB&T
Financial Corporation).
23.23 Consent of KPMG Peat Marwick dated January 4, 1994 (Old Stone).
23.24 Consent of Jerone C. Herring, Esquire, Vice President and
Secretary of BB&T Financial Corporation, dated January 10, 1994,
relating to his opinion included in Exhibit 5.1.
23.25 Consent of McGladrey & Pullen dated January 5, 1994 (Home
Savings).
23.26 Consent of McGladrey & Pullen dated January 5, 1994 (Citizens
of Newton).
23.27 Consent of Price Waterhouse dated January 4, 1994 (Security
Financial Holding Company).
23.28 Consent of Deloitte & Touche dated January 10, 1994 (Asheville
Savings).
23.29 Consent of David G. Jones and Company, P.A. dated January 6,
1994 (L.S.B. Bancshares, Inc. of South Carolina).
23.30 Consent of Trident Financial Corporation, dated January 4,
1994.
</TABLE>
<PAGE>
Exhibit 1.4
BB&T FINANCIAL CORPORATION
(a North Carolina corporation)
Common Stock
($2.50 Par Value)
AGENCY AGREEMENT
January __, 1994
TRIDENT SECURITIES, INC.
4601 Six Forks Road, Suite 400
Raleigh, North Carolina 27609
Dear Sirs:
BB&T FINANCIAL CORPORATION, a North Carolina corporation (the "Company"),
hereby confirms its agreement with Trident Securities, Inc. (the "Agent"), with
respect to the issuance and sale by the Company of up to an estimated _______
shares (the "Shares") of common stock, $2.50 par value per share, of the Company
(the "Common Stock"), and with respect to the solicitation by the Agent of
offers to purchase shares of Common Stock as described in Section 2 hereof.
Prior to the date hereof, a Plan of Conversion dated as of May 27, 1993, as
amended on December 13, 1993 (the "Plan") was adopted by Home Savings Bank of
Albemarle S.S.B., Albemarle, North Carolina ("Home Savings"). Home Savings will
convert from a North Carolina chartered mutual savings bank to a North Carolina
chartered stock savings bank pursuant to the Plan, and the Company will acquire
all the shares of capital stock to be issued by Home Savings in such conversion
(the "Home Savings Common Stock"), all in accordance with the provisions of an
Agreement and Plan of Reorganization dated as of May 27, 1993 between the
Company and Home Savings (the "Conversion Agreement"). Collectively, the
transactions contemplated by the Plan and the Conversion Agreement are herein
sometimes collectively referred to as the "Conversion Merger" and the
acquisition of Home Savings by the Company pursuant to the Conversion Agreement
is sometimes referred to as the "Acquisition."
In accordance with the Plan and pursuant to the Conversion Agreement, the
Company is offering to certain depositors and borrowers of Home Savings as of
certain record dates nontransferable rights to subscribe for the Shares in a
subscription offering (the "Subscription Offering"). An employee stock
ownership plan and trust established for the benefit of the Home Savings'
employees (the "ESOP") will have first priority to purchase Shares in the
Subscription Offering equal to 1% of the Common Stock anticipated to be
outstanding at the opening of business on the day following the effective date
of the Conversion Merger. In the Subscription Offering, persons holding a
Qualifying Deposit in Home Savings as of the Eligibility Record Date ("Eligible
Member Subscribers") will receive nontransferable rights to subscribe
("Subscription Rights") for a whole number of Shares in a minimum aggregate
dollar amount of $500 and a maximum aggregate dollar amount of $100,000 (or
$200,000 in the case of Eligible Member Subscribers with multiple account
relationships or with a single account with more than $25,000 on deposit at Home
Savings in either case as of the Eligibility Record Date) upon either (or both)
of the following prices and terms, in the Eligible Member Subscriber's
discretion: (x) the 85% Price, as defined in the Plan, subject to the
restriction that shares purchased at the 85% Price may not be transferred by
sale, gift or otherwise for a period of six months from the Closing Date, except
in the case of the death of the Subscriber; and/or (y) the 95% Price, as defined
in the Plan, with no restriction on transfer. An
1
<PAGE>
Eligible Member Subscriber with only one account relationship of less than
$25,000 may purchase in the Subscription Offering an additional number of Shares
having an aggregate purchase price of up to $100,000 at the BB&T Market Price,
as defined in the Plan, up to an aggregate of not more than $200,000. In
addition, members of Home Savings eligible to vote at the special meeting of
members to consider and vote upon the Plan ("Voting Members") who are not also
Eligible Member Subscribers will receive Subscription Rights for a whole number
of Shares in a minimum aggregate dollar amount of $500 and a maximum aggregate
dollar amount of $200,000 at the BB&T Market Price, as defined in the Plan.
Concurrently with the Subscription Offering, and subject to the priorities
granted by the Plan, the Company intends to offer any Shares not sold in the
Subscription Offering to (i) natural persons residing in Stanley County, North
Carolina, (ii) IRA, Keogh and similar retirement accounts established by or for
the benefit of individuals described in clause (i), and (iii) corporations,
partnerships, and similar entities headquartered in Stanley County, North
Carolina (collectively, "Community Offering Residents") in a community offering
("Community Offering"). Each Community Offering Resident will be eligible to
purchase up to $200,000 of BB&T Common Stock at the 95% Price, as defined in the
Plan. The Subscription Offering and the Community Offering are collectively
referred to herein as the "Offerings." Under the Plan, no minimum number of
Shares need be sold in the Offerings in order to consummate the Conversion
Merger and Acquisition. It is anticipated that Shares not sold in the
Subscription Offering or the Community Offering will not be sold in a public
offering or otherwise pursuant to the Plan. It is understood, however, that the
Administrator of the Savings Institutions Division of the North Carolina
Department of Commerce (the "Administration") may condition final approval of
the Conversion Merger on the sale of a minimum number of Shares. The Shares
actually sold in the Offerings are referred to herein as the "Conversion Stock."
Each prospective investor subscribing to purchase Shares in the Subscription
Offering and each prospective investor subscribing to purchase Shares in the
Community Offering will be required to execute and deliver, through the Agent, a
stock order form (a "Stock Order Form"), in each case in the form delivered with
the Prospectus hereinafter referred to.
The respective obligations of the Company and Home Savings to consummate the
transactions contemplated by the Conversion Agreement, including the Offerings,
are subject to the satisfaction (or, in some cases, waiver) of certain
conditions in the Conversion Agreement, including (i) receipt of certain
required regulatory approvals, (ii) approval of the Plan by the Voting Members,
(iii) receipt of an opinion from KPMG Peat Marwick with respect to certain tax
matters, (iv) material performance by Home Savings of all obligations and
compliance with all covenants required by the Conversion Agreement, (v) that the
Company shall not have determined in good faith that there has been a material
adverse change in the condition or operations of Home Savings since September
30, 1992, and (vi) that the average closing price of the Common Stock reported
on the National Association of Securities Dealers Automated Quotation System
National Market System ("NASDAQ/NMS") for the ten trading days prior to the
Closing Date not be less than $25.00 per share. Subsequent to the Conversion
Merger and Acquisition, the Company intends to merge Home Savings (the "Bank
Merger") with and into Branch Banking and Trust Company, a North Carolina
commercial bank wholly owned by the Company ("BB&T-NC"). Regulatory approval of
the Bank Merger is not a condition precedent to the obligations of the parties
hereunder.
The Company has filed with the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the "1933 Act"), a
registration statement on Form S-3 (File No. 33-49749) for the registration of
3,215,400 shares of Common Stock and has filed Post-Effective Amendment No. 2 to
such Registration Statement, dated December __, 1993, containing a prospectus
relating to the Offerings. Such Post-Effective Amendment No. 2 has been
declared effective under the 1933 Act by the Commission on January __, 1994 (the
"Effective Time"). Such Post-Effective Amendment at the Effective Time, and the
prospectus relating to the Offerings constituting a part thereof (including, in
the case of such Post-Effective Amendment No. 1, and of such prospectus, all
exhibits thereto and all documents incorporated or deemed incorporated by
reference therein pursuant to Item 12 of Form S-3 under the 1933 Act and all
exhibits to such documents), as from time to time amended or supplemented
pursuant to the Securities Exchange Act of 1934, as amended (the "1934 Act"),
the rules and regulations of the Commission thereunder (the "1934 Act
Regulations"), the 1933 Act, the rules and regulations of the Commission
(including the forms prescribed therein) thereunder (the "1933 Act Regulations")
or otherwise, are referred to herein as the "Registration Statement," and the
"Prospectus," respectively, except that
2
<PAGE>
if the prospectus which is used in the Offerings differs from the prospectus for
the Offerings on file at the Commission at the Effective Time (whether or not
such revised prospectus is required to be filed by the Company pursuant to Rule
424(b) of the 1933 Act Regulations), the term "Prospectus," shall refer to such
revised prospectus from and after the time it is first used in the Offerings but
shall in no event include any part of Annex I, Annex II or Annex III thereto,
which Annexes (as stated in the Prospectus) were not filed as part of the
Registration Statement and do not constitute part of the Prospectus.
The Company desires to engage the Agent to assist the Company in selling the
Shares in the Offerings, and the Agent desires to accept such engagement, on the
following terms and conditions.
SECTION 1. REPRESENTATIONS AND WARRANTIES. The Company represents and
warrants to the Agent as follows:
(a) At the Effective Time, the Registration Statement and the Prospectus
complied in all material respects with the requirements of the 1933 Act and
the 1933 Act Regulations and the Registration Statement did not contain an
untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading; and, at the Effective Time (unless the term "Prospectus" refers
to a prospectus used in the Offerings which differs from the prospectus
relating to such offerings on file with the Commission at the Effective Time,
in which case at the time such prospectus is first used in such offerings),
and at Closing Time (as defined in Section 2 hereof), the Prospectus and
Annexes thereto and any supplemental sales literature authorized in writing
by Scott E. Reed, Senior Executive Vice President and Treasurer of the
Company, or Jerome C. Herring, Vice President and Secretary of the Company
(each, an "Authorized Officer"), for use in connection with the Offerings to
which such prospectus relates (when read in conjunction with such
prospectus), did not or will not, as the case may be, contain an untrue
statement of a material fact or omit to state a material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading; provided, however, that the
representations and warranties in this subsection shall not apply to the
information, if any, in the Prospectus regarding the Agent, made in reliance
upon, and in conformity with information furnished in writing to the Company
by the Agent under the heading "The Offerings -- Plan of Distribution" and on
the front cover page of the Prospectus (any such information being herein
called the "Agent's Information").
(b) Each time a post-effective amendment to the Registration Statement
became or becomes, as the case may be, effective, the Registration Statement
and the Prospectus, complied or will comply, as the case may be, in all
material respects with the requirements of the 1933 Act and the 1933 Act
Regulations, and the Registration Statement did not or will not, as the case
may be, contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading; and the Prospectus, each time a
post-effective amendment to the Registration Statement relating to the
Offerings became or becomes, as the case may be, effective (unless the term
"Prospectus" refers to a prospectus which has been provided to the Agents by
the Company for use in the Offerings which differs from the Prospectus on
file at the Commission at the time such post-effective amendment to the
Registration Statement became or becomes, as the case may be, effective, in
which case at the time it is first provided to the Agent for such use) and at
Closing Time, will not contain an untrue statement of a material fact or omit
to state a material fact necessary in order to make the statements therein,
in the light of the circumstances under which they were made, not misleading;
provided, however, that the representations and warranties in this subsection
shall not apply to the Agent's Information.
(c) Each document incorporated or deemed incorporated by reference into
the Prospectus and the Registration Statement pursuant to Item 12 of Form S-3
under the 1933 Act ("Incorporated Information"), at the time it was or
hereafter is filed with the Commission, complied or will comply, as the case
may be, in all material respects with the requirements of the 1934 Act and
the 1934 Act Regulations, and, when read together and with the other
information in the Prospectus (and in any supplemental sales literature
authorized in writing by an Authorized Officer, in connection with the
Offerings) at the Effective Time, at the time each post-effective amendment
was or hereafter is declared effective, during the time a Prospectus is
required to be delivered by the 1933 Act, and at Closing Time,
3
<PAGE>
did not or will not, as the case may be, contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein, in the light of the
circumstances under which they are made, not misleading.
(d) In order to effect the Company's acquisition of Home Savings pursuant
to Section 3(a)(2) of the Bank Holding Company Act of 1956, as amended (the
"BHCA"), and the regulations for bank holding companies promulgated by the
Board of Governors of the Federal Reserve System (the "Federal Reserve
Board") thereunder (the "BHCA Regulations") and pursuant to Article 3 of
Chapter 54C of the North Carolina General Statutes (the "NCGS") and the rules
and regulations for North Carolina savings institution holding companies
promulgated by the Administrator thereunder (the "NCGS Holding Company
Regulations"), the Company has caused to be filed a FR Y-2 Application, dated
December __, 1993 (the "BHCA Application"), with the Federal Reserve Board
and an Acquisition Application, dated December __, 1993 (the "Acquisition
Application"), with the Administrator (collectively, the "Holding Company
Applications") seeking authorization for the Company to acquire the Home
Savings Common Stock in the Acquisition. The Conversion Application (as
defined in Section (iii) of Exhibit A hereto) has been approved by the
Administrator. At or prior to Closing Time, each Holding Company Application
has been approved by the Federal Reserve Board and by the Administrator, as
the case may be.
(e) None of the Administrator, the Commission nor any states securities or
blue sky authority ("State Commissioner") has, by order or otherwise,
prevented or suspended the use of the Prospectus, the Annexes thereto or any
supplemental sales literature authorized in writing by an Authorized Officer
for use in connection with the Offerings, which prospectus, annex or
literature was actually used in the Offerings.
(f) At Closing Time, the conditions precedent to the Conversion Merger in
accordance with the Plan, the Conversion Agreement, and all other applicable
laws, regulations, decisions and orders, including all material terms,
conditions, requirements and provisions precedent to the Conversion Merger
and Acquisition imposed upon the Company by the Federal Reserve Board and the
Administrator shall be completed in all material respects other than those
which the Federal Reserve Board, or the Administrator, as the case may be,
expressly permit to be completed after the effective time of the Conversion
Merger and Acquisition or which the Company has waived pursuant to Section 3
hereof. At Closing Time, the Company shall have no notice or knowledge that
any person shall have sought to obtain review of the final action of the
Administrator or the Federal Reserve Board in approving the Plan or the
Acquisition.
(g) The accountants who certified the financial statements and supporting
schedules of the Company included or incorporated by reference in the
Registration Statement were and are (A) independent public accountants as
required by the 1933 Act and the 1933 Act Regulations (including Commission
Regulation S-X); and such accountants are, with respect to the Company and
its subsidiaries, (B) independent within the meaning of Rule 101 of the Code
of Professional Conduct of the American Institute of Certified Public
Accountants and its interpretations and rulings, and (C) independent auditors
within the meaning of the rules, regulations, resolutions and practice of the
Administrator relating to North Carolina savings banks and their holding
companies.
(h) The financial statements of the Company included or incorporated by
reference in the Registration Statement and in the Prospectus comply as to
form in all material respects with the applicable accounting requirements of
the 1933 Act, the 1933 Act Regulations, the 1934 Act and the 1934 Act
Regulations (including Rule 3-05 of Commission Regulation S-X) and no other
financial statements of the Company are required to be included in the
Registration Statement or the Prospectus, and said financial statements
present fairly the financial position of the Company and its subsidiaries on
a consolidated basis as of the dates indicated and the results of their
operations for the periods specified; except as otherwise stated in the
Registration Statement or in the Prospectus, such financial statements have
been prepared in conformity with generally accepted accounting principles
applied on a consistent basis and such financial statements are consistent in
all material respects with financial statements and other reports filed by
the Company and its subsidiaries with the Commission and the Federal Reserve
4
<PAGE>
Board except to the extent that the accounting principles employed in such
filings conform to the requirements of such regulatory authorities and not
necessarily to generally accepted accounting principles; the supporting
schedules included or incorporated by reference in the Registration Statement
and in the Prospectus present fairly the information required to be stated
therein; and the pro forma financial statements of the Company and its
subsidiaries, Home Savings, Old Stone Bank of North Carolina, a Federal
Savings Bank, High Point, North Carolina and its subsidiaries ("Old Stone"),
Mutual Savings Bank of Rockingham County, Inc., S.S.B. and its subsidiaries
("Mutual Savings") Citizens Savings Bank, S.S.B., Inc., Newton, North
Carolina and its subsidiaries ("Citizens of Newton"), Scotland Savings Bank,
S.S.B., Laurinburg, North Carolina ("Scotland"), Citizens Savings Bank, Inc.,
S.S.B., Mooresville, North Carolina and its subsidiaries ("Citizens
Savings"), Asheville Savings Bank, SSB, Asheville, North Carolina and its
subsidiaries ("Asheville Savings") and L.S.B. Bancshares, Inc. and its
subsidiaries, Lexington, South Carolina ("L.S.B."), all of which are recent
or pending acquisitions (collectively, "Pending Acquisitions") included or
incorporated by reference in the Registration Statement and in the Prospectus
comply as to form in all material respects with the applicable requirements
of Commission Regulation S-X and reflect all adjustments necessary to
summarize fairly the pro forma financial position of the Company, Home
Savings, and the institutions involved in the Pending Acquisitions and their
respective subsidiaries at the dates indicated and the pro forma results of
their operations for the periods specified. It is understood and agreed that
the Company has relied upon the audited and unaudited financial statements of
Home Savings, and the institutions involved in the Pending Acquisitions in
preparing such pro forma financial statements, and the Company makes no
representation or warranty as to the accuracy or adequacy of such financial
statements.
(i) Since the respective dates as of which information is given in the
Registration Statement and the Prospectus, except as otherwise stated herein
or as otherwise disclosed or incorporated by reference in the Prospectus
pursuant to Item 12 of Form S-3 under the 1933 Act, (A) there has not been
any material adverse change, or any development that could reasonably be
expected to result in a material adverse change, in the condition, financial
or otherwise, or the earnings or business affairs of the Company or of the
Company and its subsidiaries considered as one enterprise, whether or not
arising in the ordinary course of business, (B) there have not been any
transactions entered into by the Company or any of its subsidiaries, other
than those in the ordinary course of business, which are material to the
Company or to the Company and its subsidiaries considered as one enterprise
and (C) except for regular dividends on the Common Stock, there has been no
dividend or distribution of any kind declared, paid or made by the Company on
any class of its capital stock, and (D) there has not been any change in the
capital stock of the Company except for open-market stock repurchases, the
issuance of shares of Common Stock upon the completion of a Pending
Acquisition, the exercise of outstanding options or other issuances under
Company plans, the conversion of outstanding securities or pursuant to the
dividend reinvestment plan.
(j) The Company and its subsidiaries possess such licenses, permits and
other governmental and regulatory authorizations as are currently required
for the conduct of their respective businesses; all such licenses, permits
and other governmental and regulatory authorizations are in full force and
effect, and the Company and its subsidiaries are in all material respects
complying therewith; neither the Company nor any of its subsidiaries has
received notice of any proceeding or action relating to the revocation or
modification of any such license, permit or other governmental or regulatory
authorization which, singly or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, might have a Material Adverse
Effect. For purposes of this Agreement, "Material Adverse Effect" means any
material adverse effect or any development that could reasonably be expected
to result in a material adverse effect on the conduct of the business or on
the condition, financial or otherwise, or the earnings or business affairs of
the Company or of the Company and its subsidiaries considered as one
enterprise.
(k) The authorized, issued and outstanding capital stock of the Company is
as set forth on the dates indicated in the Prospectus under the captions
"Capitalization" and "Description of Capital Stock of BB&T Financial;" the
issued and outstanding shares of the Common Stock have been duly and validly
authorized and issued and are fully paid and non-assessable; the Shares have
been duly and validly authorized for issuance and, when issued and delivered
by the Company pursuant to the Plan against payment of the consideration
calculated as set forth in the Plan, will be duly and validly issued and
fully
5
<PAGE>
paid and non-assessable and will be issued to purchasers free and clear
(except for any pledge made in connection with the financing obtained by the
ESOP to purchase Shares in the Subscription Offering) of any security
interest, mortgage, pledge, lien, encumbrance or claim; the issuance of the
Shares is not subject to preemptive or other similar rights, except to the
extent that Subscription Rights under the Plan may be deemed to be preemptive
rights; and the terms and provisions of the Common Stock and the other
capital stock of the Company conform in all material respects to the
descriptions hereof contained or incorporated by reference in the Prospectus.
(l) Upon consummation of the Conversion Merger, the liquidation account
for the benefit of eligible account holders of Home Savings will be duly
established in accordance with the requirements of the North Carolina
Conversion Law and Regulations; and, in the event of a complete liquidation
of Home Savings or any successor thereto, including without limitation,
BB&T-NC, each eligible account holder who continues to maintain a deposit
account in Home Savings and, following the Bank Merger, in BB&T-NC, will be
entitled to receive a liquidation distribution to the extent specified in the
North Carolina Conversion Law and Regulations, from the liquidation account
at such institution in the amount of the then current adjusted subaccount
balance for each of such eligible account holder's deposit accounts and then
held before any liquidation distribution may be made to the holders of shares
of capital stock of such institution.
(m) The Company (A) is duly registered as a bank holding company under the
BHCA and the BHCA Regulations and the North Carolina Bank Holding Company Act
of 1984 ("NCBHCA") and regulations thereunder and as a savings institution
holding company under the NCGS and the NCGS Holding Company Regulations, and
(B) within 90 days of consummation of the acquisition of Old Stone, will be
duly registered as a savings and loan holding company under the Home Owners'
Loan Act ("HOLA") and regulations thereunder; the Company has been duly
incorporated and is validly existing and in good standing as a corporation
under the laws of the State of North Carolina, with full corporate power and
authority to own, lease and operate its properties and to conduct its
business as provided in the Prospectus and the Incorporated Information; and
the Company is duly qualified as a foreign corporation to transact business
and in good standing in each jurisdiction in which such qualification or good
standing is required, whether by reason of the ownership or leasing of
property or the conduct of business, except where the failure to so qualify
or be in good standing would not have a Material Adverse Effect.
(n) Each subsidiary of the Company has been duly incorporated and is
validly existing and in good standing as a corporation under the laws of the
jurisdiction of its incorporation, has full corporate power and authority to
own, lease and operate its properties and to conduct its business as provided
in the Prospectus and the Incorporated Information, and is duly qualified to
transact business and in good standing in each jurisdiction in which such
qualification or good standing is required, whether by reason of the
ownership or leasing of property or the conduct of business, except where the
failure to so qualify or be in good standing, would not have a Material
Adverse Effect. The deposits of BB&T-NC, Branch Banking and Trust Company of
South Carolina ("BB&T-SC") and each other commercial bank, savings bank or
savings and loan association subsidiary of the Company are insured by the
FDIC to the fullest extent allowable under applicable law, and no proceedings
for the termination or revocation of such insurance are pending or, to the
knowledge of the Company, threatened; the activities of each subsidiary of
the Company are permitted to subsidiaries of a bank holding company, a
savings and loan holding company (if the Company is a savings and loan
holding company) and a savings institution holding company or to
state-chartered banks by the laws administered by and the rules, regulations,
resolutions and practices of the Federal Reserve Board, the FDIC, the North
Carolina Commissioner of Banks (the "Commissioner"), the OTS, the
Administrator and the South Carolina Board of Financial Institutions (the "SC
Board"), as the case may be, except in each case for any lack of permission
that, singularly or taken in the aggregate, would not have a Material Adverse
Effect; all of the issued and outstanding capital stock of each subsidiary of
the Company has been duly authorized and validly issued, is fully paid and
non-assessable and is owned by the Company directly or indirectly, fee and
clear of any security interest, mortgage, pledge, lien, encumbrance or claim.
6
<PAGE>
(o) The Company has taken all corporate action necessary to execute,
deliver and perform this Agreement and the Conversion Agreement, and this
Agreement and the Conversion Agreement have been duly executed by and are
valid and binding agreements of the Company enforceable in accordance with
their terms, except as enforcement may be limited by applicable bankruptcy,
reorganization, insolvency, moratorium or similar laws affecting creditors'
rights generally and by judicial limitations on the right of specific
performance and except as the enforceability of the indemnification and
contribution provisions may be limited by applicable securities laws.
(p) Neither the Company nor any of its subsidiaries is in violation of its
charter or by-laws or in default in the performance or observance of any
obligation, agreement, covenant or condition contained in any contract,
license, indenture, mortgage, loan agreement, note, lease or other agreement
or instrument to which the Company or any of its subsidiaries is a party or
by which it or any of them may be bound or to which any of the property or
assets of the Company or any of its subsidiaries is subject, which violation
or default would have a Material Adverse Effect. The execution, delivery and
performance of this Agreement and the Conversion Agreement, the issuance and
delivery of the Conversion Stock and the consummation of the transactions
contemplated herein, therein and thereby will not conflict with or constitute
a breach of, or default under, or result in the creation or imposition of any
lien, charge or encumbrance upon any property or assets of the Company or any
of its subsidiaries pursuant to any contract, indenture, mortgage, loan
agreement, note, lease or other agreement or instrument to which the Company
or any of its subsidiaries is a party or by which any of them may be bound or
to which any of the property or assets of the Company or any of its
subsidiaries is subject, nor will such action result in any violation of the
provisions of the charter or by-laws of the Company or any of its
subsidiaries or any law, rule, or regulation, or administrative, court,
arbitration decree or holding, which breach, default, creation, imposition or
violation would have a Material Adverse Effect.
(q) The Company and each of its subsidiaries have good and marketable
title to all properties and assets for which ownership is material to the
business of the Company and its subsidiaries considered as one enterprise and
to those properties and assets described or referred to in the Prospectus as
owned by them, free and clear of all liens, charges, encumbrances or
restrictions; and all of the leases and subleases material to the business of
the Company and its subsidiaries considered as one enterprise under which the
Company or any of its subsidiaries holds properties, including those
described or referred to in the Prospectus, are valid and binding and the
Company is in compliance therewith.
(r) Neither the Company nor any of its subsidiaries is in violation of any
written order, memorandum of understanding, capital or other directive,
agreement or understanding with, or resolutions (collectively, for purposes
hereof, a "Directive") requested by the Federal Reserve Board, the OTS, the
Commissioner, the FDIC, the Administrator or any other bank or savings and
loan regulatory agency which may have jurisdiction over the Company or its
subsidiaries to make any material change in the method of conducting its
business; the Company and its subsidiaries have conducted and are conducting
their businesses so as to comply in all material respects with all applicable
statutes and regulations (including, without limitation, all regulations,
decisions, directives and orders of the Federal Reserve Board, the OTS, the
Commissioner, the FDIC, the Administrator and any other bank or savings and
loan regulatory agency which may have jurisdiction over the Company or its
subsidiaries); there is no charge, investigation, action, suit or proceeding
before or by any court or governmental, regulatory or arbitration agency,
body or authority, domestic or foreign, now pending or, to the knowledge of
the Company, threatened against the Company or any of its subsidiaries which
is required to be disclosed in the Registration Statement and the Prospectus
(other than as disclosed therein), or which would have a Material Adverse
Effect, or which would materially and adversely affect the properties or
assets thereof or which would materially and adversely affect the performance
of this Agreement or the Conversion Agreement, the issuance and delivery of
the Conversion Stock or the consummation of the transactions herein, therein
or thereby contemplated; all pending legal or governmental proceedings to
which the Company or any of its subsidiaries is a party or of which any of
their respective properties or assets is the subject which are not described
or referred to in the Prospectus, including ordinary routine litigation
incidental to their business, are, considered in the aggregate, not material,
and there are no contracts, indentures, mortgages, loan agreements, notes,
leases or other agreements or instruments required by
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the 1933 Act or by the 1933 Act Regulations to be described or incorporated
by reference in the Prospectus or described, filed or incorporated by
reference as exhibits to the Registration Statement which have not been so
described, filed or incorporated by reference.
(s) The Company and each of its subsidiaries have filed all necessary
federal, state and foreign income, franchise, intangible and other tax
returns and have paid all taxes shown as due thereon (or obtained appropriate
extensions); except for matters described or referred to in the Prospectus,
there are no tax deficiencies which have been asserted or threatened against
the Company or any of its subsidiaries which, individually or in the
aggregate, might have a Material Adverse Effect; the federal income tax
returns of the Company have been audited and settled by the Internal Revenue
Service ("IRS") for all years to and including the fiscal year ending
December 31, 1987 and there is no liability for federal income tax asserted
against the Company or any of its subsidiaries for that or any prior year and
the Company has not been requested by the IRS to extend the statute of
limitations for any tax year.
(t) The Company maintains insurance of the type and in the amounts
generally deemed adequate for its business and consistent with insurance
maintained by similar companies in similar businesses, including, but not
limited to, general liability insurance, product liability insurance and
insurance covering all material real and personal property owned or leased by
the Company against theft, damage, destruction, acts of vandalism and all
other risks customarily insured against, all of which insurance is in full
force and effect.
(u) The Company and each of its subsidiaries are in compliance in all
material respects with the applicable financial record keeping and reporting
requirements of the Currency and Foreign Transaction Reporting Act of 1970,
as amended, and the regulations and rules thereunder.
(v) The Common Stock is and, upon issuance, the Conversion Stock will be
designated by the National Association of Securities Dealers, Inc. ("NASD")
as a NASDAQ/NMS security; the Company is in compliance with the NASDAQ/NMS
Listing Agreement and no proceedings to terminate the designation of the
Common Stock as a NASDAQ/NMS security are pending or threatened and the
Company is not aware of any basis for such proceedings.
(w) No approval, authorization, consent or other order of any public
board, body or authority is required for the execution and delivery by the
Company of this Agreement or the Conversion Agreement, the issuance of the
Conversion Stock or the consummation of the Conversion Merger and the
Acquisition, except that no representation is made with respect to any
approval or qualification required under any state securities or blue sky
laws.
(x) No labor dispute by the employees of the Company or any subsidiary
thereof, exists or, to the knowledge of the Company, is threatened which
might be expected to have a Material Adverse Effect.
(y) The Prospectus includes or incorporates by reference, if and to the
extent required, appropriate disclosure of the material effects that
compliance with federal, state and local provisions which have been enacted
or adopted, regulating the discharge of materials into the environment or
otherwise relating to the protection of the environment, may have upon the
capital expenditures, earnings and competitive position of the Company and
its subsidiaries, consistent with Commission Regulation S-K, Item 101(c)(xii)
and with published Commission interpretations thereof.
(z) The summary and selected consolidated financial and statistical data,
and the tables in the Prospectus fairly present the information contained
therein, and are consistent with and derived from, the Company financial
statements incorporated or deemed incorporated by reference in the
Registration Statement and in the Prospectus. The financial and statistical
information required by Commission Industry Guide 3 "Statistical Disclosure
by Bank Holding Companies" to be included in the Prospectus or any filings
incorporated therein by reference, present fairly the information set forth
therein, and is in compliance with the 1933 Act, the 1934 Act, the 1933 Act
and/or 1934 Act Rules and Regulations and
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said Guide 3, and such data are consistent with the Company financial
statements set forth or incorporated in the Registration Statement and the
Prospectus.
(aa) The Company is not an "investment company" nor a company "controlled"
by an "investment company," within the meaning of the Investment Company Act
of 1940, as amended (the "1940 Act").
Any certificate signed by any officer of the Company and delivered to the Agent
or to counsel for the Agent pursuant to the terms of this Agreement which makes
specific reference to this Agreement shall be deemed a representation and
warranty by the Company to the Agent as to the matters covered thereby.
SECTION 2. APPOINTMENT AS AGENT; OFFERING AND SALE OF CONVERSION STOCK;
CLOSING
(a) On the basis of the representations and warranties herein contained and
subject to the terms and conditions herein set forth, the Agent is hereby
appointed as exclusive agent of the Company in the Offerings for the purpose of
facilitating the sale of Conversion Stock for the account of the Company. The
Agent will be paid in respect of any purchases of the Conversion Stock solicited
by such Agent in the manner referred to in paragraph (g) of this Section. The
Community Offering shall commence simultaneously with the Subscription Offering
on the day that the Prospectus is first made available to the Agent by the
Company for delivery in connection with the Offerings. The Offerings shall
continue until 5:00 P.M., Eastern Standard Savings Time, on February 10, 1994,
or such later date as is determined by the Company or until the Offerings are
otherwise terminated in accordance with the Conversion Agreement and the Plan
(the "Offering Termination Date").
Subject to the performance by the Company of all of its obligations to be
performed hereunder, and to the completeness and accuracy of all of the
representations and warranties contained herein or acquired hereby, the Agent
hereby accepts such agency and agrees on the terms and conditions herein set
forth to act as agent for the Company in facilitating sales of Conversion Stock
in the Offerings. The Agent's agency hereunder, which is coupled with an
interest and, therefore, is not terminable by the Company without such Agent's
permission, except as otherwise expressly so provided in this Section 2 and
Section 9 hereof, shall continue until the Offering Termination Date. Any
termination of an Agent's agency or of this Agreement in compliance with Section
9 hereof shall be without obligation on the Agent's part or on the part of the
Company except as provided in Section 4 hereof, and except that the rights to
indemnification and contribution provided in Section 6 and Section 7 hereof,
respectively, shall continue after such termination of this Agency Agreement.
(b) If the Conversion Merger is not consummated either because of the failure
to satisfy a condition precedent under Article V of the Conversion Agreement or
because of a termination under Article VI of the Conversion Agreement, then all
funds received by the Company from subscribers and other prospective purchasers
shall be (i) returned with interest and without deduction of any escrow or other
fee or expense as described in the Prospectus, or (ii) if made by authorized
withdrawal direction from a deposit account at Home Savings, released from such
direction as described in the Prospectus; and the Agent's agency and this
Agreement shall terminate without obligation on such Agent's part or on the part
of the Company except as provided in this Section 2 and Section 4 hereof and
except that the rights to indemnification and contribution provided in Sections
6 and 7 hereof, respectively, shall continue after such termination of this
Agency Agreement.
(c) If the Offerings are not terminated as described in paragraph (b) of this
Section and if the conditions in Section 5 hereof are satisfied or waived, then,
at the time and on the date determined by the Company, but within 15 business
days after the Offering Termination Date unless otherwise agreed to by the
parties hereto, the Conversion Stock shall be issued and sold and the Conversion
Merger and Acquisition shall be consummated.
(d) The Company has used its best efforts to ensure that appropriate
arrangements have been made for placing the funds received from subscriptions
for Shares or other offers to purchase Shares in a special segregated
interest-bearing deposit account held by Home Savings for the benefit of each
subscriber in the Subscription Offering and until the Closing Time with
provision for delivery to the Company upon issuance of the Conversion Stock, or
provision for refund if the Offerings are terminated without issuance of the
Conversion Stock. The Company agrees to issue or have issued the Conversion
Stock sold in the Offerings at Closing Time
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against payment therefor by release of funds from the special individual
interest-bearing deposit accounts referred to above and to deliver or arrange
for the delivery of certificates for such Conversion Stock in such authorized
denominations and registered in such names as may be indicated on the Order
Forms or otherwise directly to the purchasers thereof as promptly as practicable
after the Closing Time with provision for refund of any unfilled subscription
orders with interest and without deduction of any escrow or other fee or expense
as described in the Prospectus.
(e) Payment of the purchase price for the shares of Conversion Stock shall be
made at such place as shall be agreed upon by the Agent and the Company, at such
time and on such business day as shall be determined pursuant to paragraph (c)
of this Section (such time and date of payment being herein called "Closing
Time").
(f) The Agent shall receive in immediately available funds at the Offering
Termination Date, a nonrefundable financial advisory fee of $70,000, which is
the balance of the advisory fee of $105,000 set forth in a letter agreement,
dated June 24, 1993, among the Company, Home Savings and the Agent (the "Agent
Engagement Letter"), which remains unpaid as of the date hereof.
(g) The Agent shall receive in immediately available funds at Closing Time as
compensation for its services hereunder, in addition to the financial advisory
fee specified in paragraph (f) of this Section and any expenses payable pursuant
to Section 4 hereof and the provisions of Sections 6 and 7 hereof, one and
three-quarters percentum (1.75%) of the aggregate dollar amount of all shares of
Conversion Stock sold in the Offerings, excluding any such Conversion Stock sold
to directors and executive officers and any stock benefit plans including the
ESOP and restricted stock plans of the Company and Home Savings, and such
directors' and officers' "associates" (as defined in the Plan) or to any stock
benefit plans including the ESOP and any restricted stock plans.
SECTION 3. COVENANTS. The Company hereby covenants and agrees with the Agent
as follows:
(a) The Company will use its best efforts to cause any supplemental sales
literature authorized in writing by an Authorized Officer for use in connection
with the Offerings to be authorized for use in final form by the Administrator
and will notify the Agent immediately and confirm the notice in writing (i) when
any post-effective amendment to the Registration Statement (and any other
amendment thereto) relating to the Offerings has been declared effective by the
Commission, (ii) of the transmittal to the Commission for filing of any
amendment or supplement to the Prospectus or any document that will be
incorporated by reference in the Prospectus, (iii) of the receipt of any
comments from the Administrator, the Commission or any State Commissioner with
respect to the transactions contemplated by this Agreement, (iv) of any request
by the Federal Reserve Board, FDIC, the Administrator, the Commission or any
State Commissioner for any amendment or supplement to the Conversion
Application, the Registration Statement or the Prospectus as the case may be, or
for additional information, commitments or conditions to any of the transactions
contemplated herein, therein or thereby, (v) of the issuance by the FDIC, the
Administrator, the Commission or any State Commissioner or court of competent
jurisdiction of any order suspending any of the Subscription Offering, and/or
the Community Offering, or the use of the Prospectus or the threat of any such
action by any such entity, (vi) of the issuance by the Commission of any stop
order suspending the effectiveness of the Registration Statement or any action
by the Commission under Sections 21B or 21C of the 1934 Act against the Company
or of the initiation or threat of any proceedings for that purpose, and (vii) of
the receipt of any notification with respect to the suspension of the
qualification of the Shares for offering or sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose. The Company will
make reasonable efforts to prevent the issuance of any order referred to in
clauses (v), (vi) or (vii) above and, if any such order shall at any time be
issued, to obtain the lifting thereof at the earliest possible moment.
(b) The Company will give the Agent notice of its intention or, to the extent
possible, the intent of Home Savings to file or prepare any amendments or
supplement to the Conversion Application, or the Registration Statement or any
amendment or supplement to a Prospectus (whether, in the case of the
Registration Statement and the Prospectus, by the filing of Incorporated
Information pursuant to the 1934 Act, the 1933 Act or otherwise and, in the case
of a Prospectus, including any revised prospectus which the Company proposes for
use by the Agent in connection with the Community Offering from the Prospectus
then being so
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used by the Agent), and the Company will furnish the Agent with copies of any
such amendment or supplement a reasonable amount of time prior to such proposed
filing or use, as the case may be, and will not file any such amendment or
supplement or use any such prospectus to which the Agent or counsel for the
Agent shall reasonably object in writing.
(c) The Company shall cause Home Savings to deliver to the Agent as many
conformed copies as the Agent may reasonably request of the Conversion
Application, with exhibits. In addition, the Company will deliver to the Agent
such number of conformed copies of the Registration Statement as originally
filed and of each amendment thereto relating to the Offerings (including
exhibits filed therewith or incorporated by reference therein and documents
incorporated by reference in the Prospectus) as the Agent may reasonably
request.
(d) The Company will furnish to the Agent, from time to time during the
period when a Prospectus relating to the Offerings is required to be delivered
under the 1933 Act, the number of copies of the Prospectus (as amended or
supplemented) as the Agent may reasonably request for the purposes contemplated
by the 1933 Act or the 1933 Act Regulations.
(e) During the period when a Prospectus relating to the Offerings is required
to be delivered, the Company will comply, at its own expense, with all
requirements imposed upon it by the Administrator, by the applicable rules and
regulations of and laws administered by the Administrator, including the North
Carolina Conversion Law and Regulations, and by the Commission under the 1933
Act, the 1933 Act Regulations, the 1934 Act and the 1934 Act Regulations
(including, without limitation, Rule 10b-6 under the 1934 Act), insofar as
necessary to permit the continuance of sales or dealing in shares of Common
Stock during such period in accordance with the provisions hereof and the
Prospectus. The Company will not take, directly or indirectly, any action
designed to, or that might be reasonably expected to, cause or result in
stabilization or manipulation of the price of the Common Stock.
(f) If any event shall occur or condition exist as a result of which it is
necessary, in the opinion of counsel for the Agent, to amend or supplement the
Prospectus in order to make the Prospectus not misleading in the light of the
circumstances existing at the time it is delivered to a purchaser or to amend or
supplement the Registration Statement or the Prospectus (including in each case
the Incorporated Information) in order to comply with the requirements of the
1933 Act or the 1933 Act Regulations, the Company will forthwith amend or
supplement the Prospectus (in form and substance satisfactory to counsel for the
Agent), whether by filing Incorporated Information pursuant to the 1933 Act, the
1934 Act or otherwise, so that, as so amended or supplemented, the Prospectus
will not contain an untrue statement of material fact or omit to state a
material fact necessary in order to make the statements therein, in the light of
the circumstances existing at the time the Prospectus is delivered to an
offeree, not misleading and the Registration Statement and the Prospectus will
comply with such requirements.
(g) The Company will endeavor, in cooperation with the Agent, to qualify the
Shares for offering and sale under the applicable securities laws of such
jurisdictions as the Company shall determine consistent with the Plan and all
applicable laws and regulations, and will maintain such qualifications in effect
for so long as is required for the distribution of the Conversion Stock;
provided, however, that the Company shall not be obligated to file any general
consent to service of process or to qualify to do business in any jurisdiction
in which it is not so qualified. In each jurisdiction where any of the Shares
shall have been qualified as above provided, the Company will file such
statements and reports in each year as are or may be reasonably required by the
laws of such jurisdiction.
(h) During the period when a Prospectus is required to be delivered under the
1933 Act, the Company will timely file all documents required to be filed by it
with the Commission pursuant to Sections 13(a), 13(c), 14 or 15 of the 1934 Act.
For so long as the Common Stock is registered under the 1934 Act, the Company
will furnish to its stockholders after the end of each fiscal year such reports
and other information as are required to be furnished to its stockholders under
the 1934 Act (including full consolidated financial statements of the Company
and its subsidiaries, certified by independent public accountants).
(i) During the period commencing on the date of this Agreement and ending on
the fourth anniversary hereof, the Company will furnish to the Agent, a paper
copy of each report of the Company furnished
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generally to stockholders of the Company or furnished to or filed with the
Commission under the 1934 Act or any national securities exchange or system on
which any class of securities of the Company is listed at the time such report
is delivered to stockholders of the Company, the Commission or such exchange or
system, as the case may be.
(j) The Company will use the net proceeds from the sale of the Conversion
Stock, in all material respects as described in the Prospectus under the caption
"Use of Proceeds", and consistent with any resolutions, orders and approvals of
the Conversion Merger and Acquisition by the Administrator or other regulatory
authorities.
(k) The Company shall not deliver the Conversion Stock until each and every
condition set forth in Section 5 hereof has been satisfied, unless such
condition is waived in writing by the Agent.
(l) Other than as permitted by the North Carolina Conversion Law and
Regulations, the 1933 Act and the 1933 Act Regulations, the Company shall not
distribute any prospectus, offering circular or other offering material in
connection with the offering and sale of the Conversion Stock.
(m) The Company will make generally available to its security holders (within
the meaning of Rule 158 under the 1933 Act) as soon as practicable, but not
later than 60 days after the close of the period covered thereby, an earnings
statement (in form complying with the provisions of said Rule 158) covering a
twelve-month period beginning not later than the first day of the Company's
fiscal quarter next following the effective date (as defined in said Rule 158)
of the Registration Statement and each post-effective amendment thereto.
(n) The Company will take such actions as are necessary to register the
Conversion Stock for quotation on the NASDAQ/NMS; during the period that the
Company has a class of securities traded in the over-the-counter market and
quoted on NASDAQ/NMS, the Company will file with the NASD all documents and
notices required by the NASD of issuers with securities quoted on the NASDAQ/NMS
and will not take any action which would cause the NASD to terminate the
designation of the Common Stock as a NASDAQ/NMS security.
(o) The Company shall advise the Agent, if necessary, as to the allocation of
the Conversion Stock in the event of an oversubscription of the Subscription
and/or the Community Offerings, and in such event shall cooperate with and
provide and cause Home Savings to provide the Agent with accurate and complete
written instructions for allocating the shares of Conversion Stock in accordance
with the Plan. The Agent shall be entitled to rely on such written instructions
and shall be held harmless by the Company and have no liability in respect to
its reliance thereon, including, without limitation, liability related to the
denial, in whole or in part, or the grant of a subscription unless such
liability is based on the Agent's failure to follow such written instructions
through negligence or willful misconduct.
(p) As between the Company and the Agent, the Company shall have sole
responsibility for determining, in accordance with the Plan and the North
Carolina Conversion Law and Regulations, the status of persons and entities,
whether as Members, eligible account holders, other members, supplemental
account holders, Community Offering Residents or otherwise (as defined in the
Plan and the North Carolina Conversion Law and Regulations) for purposes of
determining their right to receive Subscription Rights and their eligibility to
purchase or priority in purchasing shares of Conversion Stock.
SECTION 4. PAYMENT OF EXPENSES. The Company agrees to pay all out-of-pocket
expenses incident to the performance of its obligations under this Agreement
including, but not limited to, (i) the preparation, issuance and delivery of
certificates for the Conversion Stock to the purchasers, (ii) the reasonable
fees and disbursements of the counsel and accountants of the Company and the
Agent, (iii) the qualification of the Shares under securities laws in accordance
with the provisions of Section 3(g), including filing fees and the fees and
disbursements of counsel in connection therewith and in connection with the
preparation of the Blue Sky Survey, (iv) the printing and delivery to the Agent
in such quantities as the Agent shall reasonably request of copies of the
Registration Statement and all amendments thereto, the Prospectus and Annexes
thereto, each amendment or supplement to any of the foregoing and the other
documents prepared in connection with the Conversion Merger, and (v) the
printing and delivery to the Agent in such quantities as the Agent may
reasonably request
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of copies of the Blue Sky Survey and this Agreement. Notwithstanding the
foregoing, the provisions of the Conversion Agreement shall govern the
respective obligations of the Company and Home Savings with respect to the
foregoing between themselves.
If this Agreement is terminated by the Agent in accordance with the provisions
of Section 5 or Section 9(a), the Company shall reimburse the Agent upon demand
for all of its out-of-pocket expenses, including, but not limited to, the
reasonable fees and disbursements of counsel for the Agent in accordance with
the terms of the Agent Engagement Letter.
SECTION 5. CONDITIONS OF AGENT'S OBLIGATIONS. The obligations of the Agent
hereunder are subject to the accuracy of the representations and warranties of
the Company and Home Savings contained herein or in an Exhibit hereto or in any
certificate delivered pursuant hereto as of the date hereof and Closing Time, to
the performance by the Company of its obligations hereunder, and to the
following further conditions:
(a) Any supplemental sales literature authorized in writing by an
Authorized Officer for use in connection with the Offerings shall have been
approved orally or in writing for use in final form by the Administrator not
later than 6:30 P.M. on the date hereof, or at such later time and date as
may be approved by the Agent. At Closing Time, no stop order suspending the
effectiveness of the Registration Statement shall have been issued under the
1933 Act, no actions shall have been taken under Sections 21B or 21C of the
1934 Act against the Company nor shall have any proceedings therefor been
initiated or threatened by the Commission and no order suspending the
Subscription Offering, the Community Offering, or the use of the Prospectus
and Annexes thereto (or such supplemental sales literature) shall have been
issued or proceedings therefore initiated or threatened by the Administrator
or any other agency, body or authority.
(b) At Closing Time, the Agents shall have received:
(1) The favorable opinion, dated as of Closing Time, of Jerone C.
Herring, Esq., Vice President, Secretary and General Counsel of the
Company, in form and substance satisfactory to counsel for the Agent, to
the effect that:
(i) The Company has been duly incorporated and is validly
existing and in good standing as a corporation under the laws of the
State of North Carolina.
(ii) The Company has corporate power and authority to own,
lease and operate its properties to conduct its business as described
in the Prospectus.
(iii) The Company is duly registered as (A) a bank holding
company under the BHCA and the BHCA Regulations, the NCBHCA and
regulations thereunder, (B) a savings institution holding company
under the NCGS and the NCGS Holding Company Regulations and (C) if
applicable, a savings and loan holding company under the HOLA and the
regulations thereunder,
(iv) The Company is duly qualified as a foreign corporation to
transact business and is in good standing in each jurisdiction in
which such qualification or good standing is required, whether by
reason of the ownership or leasing of property or the conduct of
business, except where the failure to so qualify or be in good
standing would not have a Material Adverse Effect.
(v) Each of BB&T-NC, BB&T-SC, BB&T Financial Corporation of
South Carolina, each other commercial bank, savings bank or savings
and loan subsidiary of the Company and any other subsidiary whose
assets or results of operations are material to the Company (a
"Material Subsidiary") has been duly incorporated and is validly
existing and in good standing as a corporation under the laws of the
jurisdiction of its incorporation, has corporate power and authority
to own, lease and operate its properties and to conduct its business
as provided in the Prospectus and the
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Incorporated Information, and is duly qualified to transact business
and is in good standing in each jurisdiction in which such
qualification or good standing is required, whether by reason of the
ownership or leasing of property or the conduct of business, except
where the failure to so qualify or be in good standing would not have
a Material Adverse Effect; the activities of each Material Subsidiary
of the Company are in all material respects permitted to subsidiaries
of a bank holding company, a savings institution holding company and,
if applicable, a savings and loan holding company by the laws
administered by and the rules, regulations, resolutions and practices
of the Federal Reserve Board, the FDIC, the Commissioner, the OTS, the
Administrator and the SC Board, as the case may be. The deposits of
BB&T-NC, BB&T-SC and each other commercial bank, savings bank or
savings and loan association subsidiary of the Company are insured by
the FDIC to fullest extent allowable under applicable law, and no
proceedings for the termination or revocation of such insurance are
pending or, to such counsel's knowledge, threatened.
(vi) Each Material Subsidiary of the Company is a direct or
indirect subsidiary of the Company; all of the issued and outstanding
capital stock of each subsidiary of the Company has been duly
authorized and validly issued, is fully paid and non-assessable, and
is owned by the Company (or by a wholly-owned subsidiary of the
Company) of record, free and clear of any security interest, mortgage,
pledge, lien, encumbrance or claim.
(vii) The authorized, issued and outstanding capital stock of the
Company is as set forth at the dates indicated in the Prospectus under
the caption "Description of Capital Stock of BB&T Financial --
General;" the issued and outstanding shares of Common Stock have been
duly and validly authorized and issued and are fully paid and
non-assessable; the Conversion Stock has been duly and validly
authorized for issuance and, when issued and delivered by the Company
pursuant to the Plan against payment of the consideration calculated
as set forth in the Plan, will be duly and validly authorized for
issuance and, when issued, fully paid and non-assessable and will not
be subject to any security interest, mortgage, pledge, lien,
encumbrance or claim (except for any pledge made in connection with
the financing by the ESOP for the purchase of the Shares); and the
issuance of the Conversion Stock is not subject to preemptive rights,
except to the extent that subscription rights under the Plan may be
deemed to be preemptive rights.
(viii) The Acquisition Application has been approved by the
Administrator, and, at the date of such approval, and at all times
subsequent thereto up to and including the Closing Time, the
Acquisition Application complied as to form in all material respects
with the applicable requirements of the NCGS and the NCGS Holding
Company Regulations.
(ix) This Agreement and the Conversion Agreement have been duly
authorized, executed and delivered by, and are valid and binding
agreements of, the Company enforceable in accordance with their terms,
except as enforcement may be limited by applicable bankruptcy,
reorganization, insolvency, moratorium or similar laws affecting
creditors' rights generally and by judicial limitations on the right
of specific performance and except as the enforceability of the
indemnification and contribution provisions may be limited by
applicable securities laws.
(x) No approval, authorization, consent or other order of any
public board, body or authority is required in connection with the
execution and delivery of this Agreement or the Conversion Agreement,
the issuance of the Conversion Stock, or the consummation of the
Conversion Merger and Acquisition except as have been obtained, and
except as may be required under the securities or Blue Sky laws of
various jurisdictions.
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(xi) Each document filed pursuant to the 1934 Act and
incorporated by reference in the Prospectus complied when filed as to
form in all material respects with the 1934 Act and the 1934 Act
Regulations; no actions have been taken by the Commission against the
Company under Sections 21B or 21C of the 1934 Act nor, to such
counsel's knowledge, have any such actions threatened by the
Commission.
(xii) The information in the Registration Statement and the
Prospectus under the captions "Supervision and Regulation of BB&T
Financial" and "Description of Capital Stock of BB&T Financial" and in
the Company's latest annual report on Form 10-K filed with the
Commission under the headings "Description of Business -- Regulation"
and "Legal Proceedings" to the extent such information constitutes
matters of federal or state law or legal conclusions with respect
thereto, has been reviewed by such counsel and is accurate in all
material respects.
(xiii) The terms and provisions of the Common Stock conform in all
material respects to the description thereof contained in the
Prospectus, and the form of certificate used to evidence the shares of
Conversion Stock is in due and proper form for the enforcement of the
rights and limitations of rights pertaining to the Common Stock which
are set forth in the Amended Articles of Incorporation of the Company
and under the laws of the State of North Carolina.
(xiv) To the best of such counsel's knowledge after due inquiry,
there is no charge, investigation, action, suit or proceeding before
or by any court, governmental, regulatory or arbitration agency, body
or authority, domestic or foreign, now pending or, to the knowledge of
such counsel, threatened against the Company or any of its
subsidiaries which is required to be disclosed in the Registration
Statement and the Prospectus (other than as disclosed therein), or
which would have a Material Adverse Effect, or would materially and
adversely affect the properties or assets of BB&T taken as a whole or
which would materially and adversely affect the performance of this
Agreement or the Conversion Agreement, the issuance and delivery of
the Conversion Stock or the consummation of the transactions herein,
therein or thereby contemplated; all pending legal, governmental or
regulatory proceedings to which the Company or any of its subsidiaries
is a party or of which any of their respective properties or assets is
the subject which are not described in the Registration Statement and
the Prospectus, including ordinary routine litigation incidental to
their business, are, considered in the aggregate, not material.
(xv) To the best of such counsel's knowledge after due inquiry,
there are no contracts, indentures, mortgages, loan agreements, notes,
leases or other agreements or instruments required by the 1933 Act or
by the 1933 Act Regulations to be described or incorporated by
reference in the Prospectus or to be described, filed or incorporated
by reference as exhibits of the Registration Statement which have not
been so described, filed or incorporated by reference, and, to such
counsel's knowledge, no material default exists in the due performance
or observance by the Company of any obligation, agreement, covenant or
condition contained in any note, lease or other agreement or
instrument so described, filed or incorporated by reference.
(xvi) The Company has fulfilled its obligations required to effect
the Conversion Merger and Acquisition in all material respects in
accordance with the applicable requirements of North Carolina law and
regulations, the Conversion Agreement and all other applicable
regulations, and published decisions and orders thereunder, including
all material applicable terms, conditions, requirements and conditions
precedent to the Conversion Merger and Acquisition imposed upon the
Company by the Federal Reserve Board and the Administrator.
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(xvii) No order has been issued by the Administrator, the Commission
or any State Commissioner to suspend the consummation of the
Offerings, and no action for any such purposes has been instituted or,
to such counsel's knowledge, threatened by the Administrator, the
Commission or any State Commissioner; and to such counsel's knowledge,
no person has sought to obtain judicial review or reconsideration of
the final action of the Administrator or the Federal Reserve Board in
approving the Plan, the Conversion Merger, the Acquisition, or
otherwise.
(xviii) The Company and its subsidiaries possess such licenses,
permits and other governmental and regulatory authorizations as are
currently required for the conduct of their respective businesses,
except for such licenses, permits and other governmental and
regulatory authorizations which if not so obtained would not have a
Material Adverse Effect; and all such material licenses, permits and
other governmental and regulatory authorizations are in full force and
effect, and the Company and its subsidiaries are in all material
respects complying therewith.
(xix) Neither the Company nor any of its Material Subsidiaries is
in violation of its charter or by-laws or, to the best of such
counsel's knowledge after due inquiry, in default in the performance
or observance of any obligation, agreement, covenant or condition
contained in any material contract, indenture, mortgage, loan
agreement, note, lease or other agreement or instrument to which any
of the property or assets of the Company or any of their property may
be bound or to which any of the property or assets of the Company or
any of its Material Subsidiaries is subject, which violation or
default would have a Material Adverse Effect; the execution, delivery
and performance of this Agreement and the Conversion Agreement by the
Company, the issuance and delivery of the Conversion Stock pursuant to
the Plan and the consummation by the Company of the transactions
contemplated herein, therein and thereby have been duly authorized by
all necessary corporate action by the Company and will not conflict
with or constitute a breach of, or default under, or result in the
creation or imposition of any material lien, charge or encumbrance
upon any property or assets of the Company or any of its Material
Subsidiaries pursuant to any contract, indenture, mortgage, loan
agreement, note, lease or other agreement or instrument to which the
Company or any of its Material Subsidiaries is a party or by which any
of them may be bound or to which any of the property or assets of the
Company or any of its Material Subsidiaries is subject, nor will such
action result in any violation of the provisions of the charter or
by-laws of the Company or any of its Material Subsidiaries or any law,
rule or regulation, or administrative, court or arbitration decree or
decision, which breach, rule or regulation, or administrative, court
or arbitration decree or decision, which breach, default, creation,
imposition or violation would have a Material Adverse Effect.
(2) The favorable opinion, dated as of the Closing Time, of Arnold &
Porter, special counsel for the Company, in form and substance satisfactory to
counsel for the Agent, to the effect that:
(i) The Company is duly registered as a bank holding company under
the BHCA and the BHCA Regulations, and, if applicable, as a savings
and loan holding company under the HOLA and the regulations
thereunder.
(ii) The BHCA Application has been approved by the Federal Reserve
Board and at the date of such approval, the BHCA Application complied
as to form in all material respects with the applicable requirements
of the BHCA and the BHCA Regulations, with such modifications and
revisions as were agreed to by the Federal Reserve Bank of Richmond
acting pursuant to delegated authority.
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(iii) This Agreement has been duly authorized, and delivered by
the Company; provided that such counsel need express no opinion as to
the enforceability of this Agreement.
(iv) The Registration Statement has become effective under the
1933 Act and, to the best of such counsel's knowledge, no stop order
suspending the effectiveness of the Registration Statement under the
1933 Act has been issued and no proceedings with respect thereto are
pending or threatened by the Commission.
(v) No approval, authorization, consent or order of or filing
with the OTS, the FDIC, the Federal Reserve Board, the Office of the
Comptroller of the Currency, the Commission or any other federal
regulatory commission, board, body, authority or agency, is required
to be obtained or made by the Company in connection with the execution
and delivery by the Company of this Agreement or the Conversion
Agreement, the issuance of the Conversion Stock or the consummation of
the Conversion Merger and the Acquisition, other than registration of
the Shares under the 1933 Act, and any other approval, authorization,
consent, order or filing which has already been obtained or made
(other than any approvals required in connection with the Bank
Merger); provided, however, no opinion need be expressed with respect
to any approval or qualification required under any state securities
or blue sky laws.
(vi) Considered in light of such counsel's understanding of the
applicable law (including the requirements of Form S-3 and the
character of the Prospectus) and such counsel's experience in its
practice thereunder, the Registration Statement (other than documents
incorporated by reference, any financial statements and other
financial and statistical information, as to all of which such counsel
need express no opinion or belief), complied in all material respects
as to form with the requirements of the 1933 Act and the 1933 Act
Regulations as in effect on the date of the effectiveness of the
Registration Statement.
(vii) The descriptions of federal laws, rules and regulations of
the United States contained in the Registration Statement and the
Prospectus under the caption "The Offerings -- Certain Federal Income
Tax Consequences" and "Supervision and Regulation of BB&T Financial"
constituted accurate summaries thereof in all material respects as of
the date of the Prospectus.
(viii) The terms and provisions of the Shares conform in all
material respects to the description thereof in the Prospectus under
the caption "Description of Capital Stock of BB&T Financial."
(ix) To such counsel's knowledge, without independent inquiry,
there are no actions, suits or proceedings pending or threatened
against the Company before or by any federal, state or local
governmental, regulatory, or arbitral commission, board, body,
authority or agency (A) which are required to be disclosed by the 1933
Act and the 1933 Act Regulations in the Prospectus but are not so
described, or (B) which, if determined adversely to BB&T, would have a
Material Adverse Effect, or (C) of which such counsel is aware, which
in such counsel's opinion is reasonably likely to result in a
judgment, decree or order having a material adverse effect on the
consummation of the Conversion Merger and Acquisition or the
transactions contemplated by this Agreement.
(x) To such counsel's knowledge, without independent inquiry,
there are no contracts, indentures, mortgages, loan agreements, notes,
leases or other agreements or instruments required by Item 601(b)(10)
of Commission Regulation S-K to be filed or incorporated by reference
as an exhibit to the Registration Statement which have not been so
filed or incorporated (provided, however, that for the purposes of
this
17
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paragraph (x), the exhibits required by the Registration Statement
shall be deemed to be those required by a registration statement on
Form S-3, and no opinion would be given by such counsel as to whether
any requirements for exhibits in any report, registration statement,
declaration or form incorporated by reference in the Registration
Statement have been complied with in such report, Registration
Statement, declaration or form).
(xi) To such counsel's knowledge, no order has been issued by the
Federal Reserve Board or the Commission to suspend the Offerings; to
such counsel's knowledge without independent investigation, no action
for any such purposes has been instituted or threatened by the Federal
Reserve Board or the Commission; and to such counsel's knowledge
without independent investigation, no person has sought to obtain
judicial review of the final action of the Administrator in connection
with his approval of the Plan or otherwise.
(3) The favorable opinion, dated as of the Closing Time, of Brooks,
Pierce, McLendon, Humphrey & Leonard, L.L.P., special counsel for Home Savings,
in form and substance satisfactory to counsel for the Agent, to the effect that:
(i) Home Savings is a North Carolina chartered stock savings bank
duly organized and validly existing under the laws of the State of
North Carolina, and is duly qualified to transact business and is in
good standing in each jurisdiction where such qualification is
required, except where failure to so qualify or be in good standing
would not have a material adverse effect on the business or operations
of Home Savings, with full corporate power and authority to own, lease
and operate its properties and to conduct its business as described in
the Prospectus and Annexes thereto (the Prospectus and Annexes thereto
collectively referred to as the "Proxy Statement"); Home Savings is in
good standing under the laws of the State of North Carolina and under
the income, franchise and intangible tax laws of the State of North
Carolina (to the extent the State of North Carolina provides
certificates generally as to such matters); Home Savings is a member
in good standing of the Federal Home Loan Bank of Atlanta; Home
Savings' deposits are insured by SAIF to the fullest extent allowable
under applicable law, and no proceedings for the termination or
revocation of such insurance are pending or, to such counsel's
knowledge, threatened; Home Savings does not have any direct or
indirect subsidiaries.
(iii) The Conversion Agreement has been duly executed and delivered
by Home Savings, and the Plan has been duly adopted by Home Savings
and its Voting Members, and the Conversion Agreement is a valid and
binding agreement of Home Savings enforceable in accordance with its
terms, except as enforcement may be limited by applicable bankruptcy,
reorganization, insolvency, moratorium or similar laws affecting
creditors' rights generally and by judicial limitations on equitable
remedies and except as the enforceability of the indemnification and
contribution provisions may be limited by applicable securities laws.
(iv) The shares of Home Savings Common Stock issued to the Company
pursuant to the Plan and the Conversion Agreement have been duly and
validly issued and are fully paid and non-assessable, free and clear
of any security interest, mortgage, pledge, lien, encumbrance or claim
created, permitted or suffered by Home Savings.
(v) To such counsel's knowledge and based upon an Officers'
Certificate, there is no charge, investigation, action, suit or
proceeding before or by any court, governmental, regulatory or
arbitration agency, body or authority, domestic or foreign, now
pending or threatened against Home Savings which is required to be
disclosed in the Registration Statement, the Prospectus and/or the
Proxy Statement (other than as disclosed therein), or which would have
a material adverse effect on the business or
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operations of Home Savings, or which would materially and adversely
affect the properties or assets thereof or which would materially and
adversely affect the performance of the Plan, the Conversion Agreement
or this Agreement, the issuance and delivery of Home Savings Common
Stock or the Conversion Stock or the consummation of the transactions
herein, therein or thereby contemplated; all pending legal,
governmental, regulatory or arbitration proceedings to which Home
Savings is a party or of which any of its properties or assets is the
subject which are not described in the Registration Statement, the
Prospectus or the Proxy Statement, including ordinary routine
litigation incidental to their businesses, are, considered in the
aggregate, not material.
(vi) To such counsel's knowledge and based upon an Officers'
Certificate, there are no contracts, indentures, mortgages, loan
agreements, notes, leases or other agreements or instruments to which
Home Savings or any of its subsidiaries is a party which are required
by the 1933 Act or by the 1933 Act Regulations to be described or
incorporated by reference in the Prospectus, to be described or
otherwise disclosed in the Proxy Statement or any exhibits thereto or
described, filed or incorporated by reference as exhibits to the
Registration Statement which have not been so described, filed or
incorporated by reference, and, to such counsel's knowledge, no
default exists or which, upon notice, the lapse of time or both, would
exist in the due performance or observance of any material obligation,
agreement, covenant or condition contained in any contract, indenture,
mortgage, loan agreement, note, lease or other agreement or instrument
so described, filed or incorporated by reference.
(vii) The Plan, the Conversion Agreement, and all other agreements
relating to the Conversion Merger and Acquisition have been duly
authorized, approved and adopted by the board of directors of Home
Savings, and, to such counsel's knowledge and based upon an Officers'
Certificate, the Administrator's approval of the Plan and the
Conversion Merger and Acquisition remain in full force and effect and
have not been modified in any material respect; the Plan has been duly
approved and adopted by the eligible voting members of Home Savings;
to such counsel's knowledge, Home Savings has conducted the Conversion
Merger and Acquisition in all material respects in accordance with
applicable requirements of the North Carolina Conversion Law and
Regulations, the Plan, the Conversion Agreement and all other
applicable regulations, and published decisions and orders thereunder,
including all material applicable terms, conditions, requirements and
conditions precedent to the Conversion Merger and Acquisition imposed
upon Home Savings by the Administrator; to such counsel's knowledge
and based upon an Officers' Certificate, Home Savings has performed
all its covenants and agreements contained in the Plan and the
Conversion Agreement, and satisfied the conditions precedent to the
Conversion Merger and Acquisition in all material respects in
accordance with the Plan, the Conversion Agreement, the applicable
North Carolina Conversion Law and Regulations (including the
Administrator's interpretations thereunder), and all other applicable
laws, regulations, decisions and orders, including all material terms,
conditions, requirements and provisions precedent to the Conversion
Merger and Acquisition imposed upon Home Savings by the Administrator,
other than those which the Administrator, expressly permits to be
completed after consummation of the Conversion Merger and Acquisition;
to such counsel's knowledge, no order has been issued by the
Administrator, the Commission or any State Commissioner to suspend the
Conversion Merger and Acquisition, the Subscription Offering, the
Community Offering; and no action for any such purpose has been
instituted or, to such counsel's knowledge, threatened by the
Administrator, the Commission or any State Commissioner; and to such
counsel's knowledge, no person has sought to obtain judicial review or
reconsideration of the final action of the Administrator in approving
the Plan.
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(viii) Home Savings possesses such licenses, permits and other
governmental and regulatory authorizations as are currently required
for the conduct of its businesses, except for such licenses, permits
and other governmental and regulatory authorizations which if not so
obtained would not have a material adverse effect on the business or
operations of Home Savings, and all such material licenses, permits
and other governmental and regulatory authorizations are in full force
and effect, and, to such counsel's knowledge, Home Savings is in all
material respects complying therewith.
(ix) Home Savings is not in violation of its charter, by-laws or,
to such counsel's knowledge, in default in the performance or
observance of any obligation, agreement, covenant or condition
contained in any contract, indenture, mortgage, loan agreement, note,
lease or other agreement or instrument to which Home Savings is a
party or to which Home Savings or any of the property or assets of
Home Savings is subject, which violation or default would have a
material adverse effect on the business or operations of Home Savings;
the execution and delivery of the Plan and the Conversion Agreement by
Home Savings, the issuance and delivery to the Company of Home Savings
Common Stock and the consummation of the transactions contemplated
herein, therein and thereby have been duly authorized by all necessary
corporate action by Home Savings and, to such counsel's knowledge and
based upon an Officer's Certificate, will not conflict with or
constitute a breach of, or default under, or result in the creation or
imposition of any lien, charge or encumbrance upon any property or
assets of Home Savings pursuant to any contract, indenture, mortgage,
loan agreement, note, lease or other agreement or instrument to which
Home Savings is a party or by which any of them may be bound, or to
which any of the property or assets of Home Savings is subject (other
than certain insurance policies now held for the benefit of Home
Savings, its officers, directors and others which will be cancelled as
a result of the consummation of the transactions contemplated by the
Conversion Agreement and the Plan), nor will such action result in any
violation of the provisions of the charter or by-laws of Home Savings
or any applicable law, rule or regulation, or court, administrative or
arbitration decree or decision, which breach, default, creation,
imposition or violation might have a material adverse effect on the
business or operations of Home Savings.
(xi) The Conversion Application has been approved by the
Administrator; and at the date of such approval, such Application
complied as to form in all material respects with the applicable
requirements of the North Carolina Conversion Law and Regulations,
with such modifications as were in such counsel's opinion appropriate
for the nature of the transactions described in such Applications.
As used in this subsection 5(b)(3), the phrase "knowledge" means the
conscious awareness of counsel for Home Savings. Where used in this
subsection 5(b)(3), an "Officer's Certificate" shall mean a certificate of
an executive officer of Home Savings, acceptable to counsel to the Agent,
which is dated as of the date of the opinion, and upon which certificate
Home Savings' counsel has relied in giving its opinion and nothing to the
contrary has come to the knowledge of Home Savings' counsel.
(4) The favorable opinion, dated as of Closing Time, of Housley
Goldberg & Kantarian, P.C., counsel for the Agent, with respect to the
matters set forth in clauses (i), (vii) (with respect to the issuance of
the Conversion Stock only) and (ix) (with respect to this Agreement only)
of subsection (b)(1) and clause (iv) of subsection (b)(2) of this Section.
In rendering such opinion, Housley Goldberg & Kantarian, P.C. may rely on
the opinions of Jerome C. Herring, Esq. or counsel to Home Savings as to
matters of North Carolina law as such counsel deems proper in the exercise
of its judgment.
In giving their opinions, each counsel specified in this Section 5(b) shall
additionally state that nothing has come to such counsel's attention that would
lead such counsel to believe that the Registration Statement
20
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(except as to financial statements, notes to financial statements, financial
tables and other financial and statistical data contained therein and Agent's
information as to which counsel need not comment), at the Effective Time (or if
an amendment to the Registration Statement has been filed by the Company with
the Commission subsequent to the Effective Time, then at the time of the
effectiveness of the most recent such amendment), contained an untrue statement
of a material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not misleading or that the
Prospectus, at the date thereof or at Closing Time, contained or contains an
untrue statement of a material fact or omitted or omits to state a material fact
necessary in order to make the statement therein, in the light of the
circumstances under which they were made, not misleading.
Jerone C. Herring, Esq., Arnold & Porter, Brooks, Pierce, McLendon, Humphrey &
Leonard, L.L.P. and Housley Goldberg & Kantarian, P.C. may rely (i) upon
certificates of appropriate government or regulatory officials, (ii) as to
matters of fact, upon certificates and written statements of officers and
employees of and accountants for the Company, or any of its subsidiaries, or
Home Savings, and (iii) as to matters of law as to which such counsel is not
qualified to opine, on one or more opinions of local counsel in form and
substance satisfactory to counsel to the Agent. In addition, Jerone C. Herring,
Esq. may rely on one or more opinions of counsel in form and substance
satisfactory to counsel to the Agent with respect to the incorporation and
activities of any savings association or savings bank subsidiary of the Company.
(c)(1) At Closing Time, there shall not have been, since the date
hereof or since the respective dates as of which information is given in
the Registration Statement and the Prospectus, any material adverse
change or any development that could reasonably be expected to result in
a material adverse change in the condition, financial or otherwise, or in
the earnings or business affairs of the Company, or of the Company and
its subsidiaries considered as one enterprise, whether or not arising in
the ordinary course of business, and the Agent shall have received a
certificate of the Chairman and the principal financial or accounting
officer of the Company, dated as of Closing Time, to the effect that (i)
there has been no such material adverse change or development; (ii) the
representations and warranties in Section 1 hereof are true and correct
with the same force and effect as though expressly made at and as of
Closing Time; (iii) the Company has complied with all agreements and
satisfied all conditions on its part to be performed or satisfied at or
prior to Closing Time; (iv) no stop order suspending the effectiveness of
the Registration Statement has been issued and, to such persons'
knowledge, no proceedings for the purpose have been initiated or
threatened by the Commission; and (v) no order suspending any of the
Offerings has been issued and, to such persons' knowledge, no proceedings
for that purpose have been initiated or threatened by the Commission, the
Administrator or any State Commissioner and no person has sought to
obtain reconsideration or judicial review of the action of the
Administrator in approving the Plan in accordance with the North Carolina
Conversion Law and Regulations or of the Federal Reserve Board or the
Administrator in approving the Acquisition.
(2) On the date hereof and at Closing Time there shall not have been,
since the date hereof (in the case of Closing Time) or since the
respective dates as of which information is given in the Registration
Statement and the Prospectus, any material adverse change or any
development that could reasonably be expected to result in a material
adverse change in the condition, financial or otherwise, or in the
earnings or business affairs of Home Savings, whether or not arising in
the ordinary course of business, and the Agent shall have received a
certificate of the President and the principal financial or accounting
officer of Home Savings, dated the date hereof or as of Closing Time, as
the case may be, to the effect that (i) there has been no such material
adverse change or development; (ii) the representations and warranties in
Exhibit A hereto are true and correct with the same force and effect as
though expressly made at and as of the date hereof or Closing Time, as
the case may be; and (iii) to such persons' knowledge, no order
suspending any of the Offerings have been issued and no proceedings for
that purpose have been initiated or threatened by the Administrator or
any other agency, body or authority and no person has sought to obtain
reconsideration or judicial review of the action of the Administrator in
approving the Plan in accordance with the North Carolina Conversion Law
and Regulations.
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(d) At the time of the execution of this Agreement, the Agent shall
have received from KPMG Peat Marwick a letter dated such date, in form
and substance satisfactory to the Agent, to the effect that (i) they are
with respect to the Company and its subsidiaries independent public
accountants within the meaning of the 1933 Act and the 1933 Act
Regulations; (ii) it is their opinion that the consolidated financial
statements and supporting schedules audited by them and included or
incorporated by reference in the Registration Statement and the
Prospectus comply as to form in all material respects with the applicable
accounting requirements of the 1933 Act, the 1933 Act Regulations, the
1934 Act and the 1934 Act Regulations (including Commission Regulation
S-X); (iii) based upon limited procedures set forth in detail in such
letter, nothing has come to their attention which causes them to believe
that (A) the unaudited consolidated interim financial statements and
supporting schedules of the Company and its subsidiaries included or
incorporated by reference in the Registration Statement and the
Prospectus do not comply as to form in all material respects with the
applicable accounting requirements of the 1933 Act, the 1933 Act
Regulations, the 1934 Act and the 1934 Act Regulations (including
Commission Regulation S-K, Item 301 with respect to the selected
financial data of the Company), or that any material modifications should
be made to such statements for them to be in conformity with generally
accepted accounting principles applied on a basis substantially
consistent with that of the audited consolidated financial statements of
the Company and its subsidiaries included or incorporated by reference in
the Registration Statement and the Prospectus, (B) at a specified date
not more than five days prior to the date of this Agreement, there have
been any changes in the capital stock or consolidated long-term debt of
the Company and its consolidated subsidiaries or any increases in
consolidated short-term borrowed funds of the Company or any decreases in
consolidated total assets or stockholders' equity of the Company and
subsidiaries, in each case as compared with the amounts shown in the June
30, 1993 consolidated financial statements of the Company or, during the
period from June 30, 1993 to a specified date not more than five days
prior to the date of this Agreement, there were any decreases, as
compared with the corresponding period of the preceding year, in
consolidated interest income, net interest income, income before income
taxes or net income of the Company and its subsidiaries, except in all
instances for increases or decreases which the Registration Statement and
the Prospectus disclose have occurred or may occur or increases or
decreases which are disclosed in such letter, and (C) the unaudited pro
forma consolidated condensed financial statements included or
incorporated by reference in the Registration Statement and the
Prospectus do not comply as to form in all material respects with the
applicable accounting requirements of Rule 11-02 of Commission Regulation
S-X and that the pro forma adjustments have not been properly applied to
the historical amounts in the compilation of those statements; (iv) in
addition to the examination referred to in their opinion and the limited
procedures referred to in clause (iii) above, they have carried out
certain specified procedures, not constituting an audit, with respect to
certain amounts, percentages and financial information which are derived
from the accounting, financial and other records of the Company and its
subsidiaries, Home Savings, and the entities involved in the Pending
Acquisitions and the respective subsidiaries thereof together with any
other subsidiaries, which are included or incorporated by reference in
the Registration Statement and the Prospectus and which are specified by
the Agent, and have found such amounts, percentages and financial
information to be in agreement with the relevant accounting, financial
and other records of the Company and its subsidiaries.
(e) At Closing Time, the Agent shall have received from KPMG Peat
Marwick a letter, dated as of Closing Time, to the effect that they
reaffirm the statements made in the letter furnished pursuant to
subsection (d) of this Section (except that the specified date referred
to shall be a date not more than five days prior to Closing Time) and
stating that they have updated their opinion to the Boards of Directors
of the Company and Home Savings included as an exhibit to the
Registration Statement as to certain income tax consequences of the
Conversion Merger and Acquisition.
(f) At Closing Time, the Agent shall have received a letter from
Trident Financial Corporation ("Trident Financial"), dated as of Closing
Time, (i) confirming that Trident
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Financial is independent of the Company, Home Savings and their
respective subsidiaries and is experienced and expert in the area of
corporate appraisals within the meaning of Rule .0717(a) of the North
Carolina Conversion Law and Regulations, (ii) stating that the appraisal
prepared by Trident Financial with regard to Home Savings complies in all
material respects with the applicable requirements of the North Carolina
Conversion Law and Regulations, and (iii) further stating that their
opinion of the pro forma market value of Home Savings expressed in its
appraisal as of October 18, 1993 and as most recently updated, remains in
effect.
(g) At Closing Time, counsel for the Agent shall have been furnished
with such documents, certificates and opinions as such counsel may
reasonably require which confirm the satisfactory completion of all
conditions to the Conversion Merger and Acquisition and for the purpose
of enabling them to pass upon the sale of the Conversion Stock to be
issued and sold in the Offerings as herein contemplated and related
proceedings or in order to evidence the accuracy or completeness of any
of the representations or warranties, or the fulfillment of any of the
conditions, herein contained; and all proceedings taken by the Company in
connection with the sale of the Conversion Stock to be issued and sold in
the Offerings as herein contemplated shall be reasonably satisfactory in
form and substance to the Agent and counsel for the Agent.
If any condition specified in this Section shall not have been fulfilled when
and as required to be fulfilled, this Agreement may be terminated by the Agent
by notice to the Company at any time at or prior to Closing Time, and such
termination shall be without liability of any party to any other party except as
provided in Section 4 hereof.
SECTION 6. INDEMNIFICATION. (a) In addition to any rights to
indemnification granted to the Agent by this or any other agreement, the Company
agrees to indemnify and hold harmless the Agent, and each person, if any, who
controls the Agent within the meaning of Section 15 of the 1933 Act, as follows:
(i) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, arising out of any untrue statement or alleged
untrue statement of a material fact contained or incorporated by reference in
the Registration Statement in the form in which it initially became effective
(or in any amendment thereto), or the omission or alleged omission therefrom
of a material fact required to be stated therein or necessary to make the
statements therein not misleading or arising out of any untrue statement or
alleged untrue statement of a material fact contained in the Prospectus or
the omission or alleged omission therefrom of a material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading;
(ii) against any and all loss, liability, claim, damage and expenses
whatsoever, as incurred, to the extent of the aggregate amount paid in
settlement of any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim
whatsoever based upon any such untrue statement or omission, or any such
alleged untrue statement or omission, if such settlement is effected with the
written consent of the Company; and
(iii) against any and all reasonable expense, whatsoever (including the
fees and disbursements of counsel chosen by the Agent), as incurred,
reasonably incurred in investigating, preparing or defending against any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever based upon any such
untrue statement or omission, or any such alleged untrue statement or
omission, to the extent that any such expense is not paid under (i) or (ii)
above;
provided, however, that the indemnity agreement in this subsection (a) shall not
apply to any loss, liability, claim, damage or expense to the extent it arises
out of any untrue statement or omission or alleged untrue statement or omission
made in the Registration Statement (or in any amendment thereto) or in the
Prospectus in reliance upon and in conformity with the Agent's Information or
written information furnished to the Company by the Agent expressly for use in
the Registration Statement or the Prospectus and included under the caption "The
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Offerings -- Plan of Distribution" (if any such Agent's Information or other
information is included therein) and on the front cover page of the Prospectus.
(b) The Agent agrees to indemnify and hold harmless the Company, its
directors, each of its officers who signed the Registration Statement and each
person, if any, who controls the Company within the meaning of Section 15 of the
1933 Act against any and all loss, liability, claim, damage and expense
described in the indemnity contained in subsection (a) of this Section, as
incurred, but only with respect to untrue statements or omissions, or alleged
untrue statements or omissions, made in the Registration Statement (or in any
amendment thereto) or the Prospectus under the caption "The Offerings -- Plan of
Distribution" (if any such Agent's Information or other is included therein) and
on the front cover page of the Prospectus in reliance upon and in conformity
with the Agent's Information or written information furnished to the Company by
such Agent expressly for use in the Registration Statement or the Prospectus.
(c) Each indemnified party shall give notice as promptly as reasonably
practicable to each indemnifying party of any action or proceeding commenced
against it in respect of which indemnity may be sought hereunder, but failure so
to notify an indemnifying party shall not relieve such indemnifying party from
any liability which it may have otherwise than on account of the indemnity
agreement in this Section 6. An indemnifying party may participate at its own
expense in the defense of any such action. In no event shall the indemnifying
parties be liable for fees and expenses of more than one counsel (in addition to
any local counsel or any other counsel specially retained by counsel) separate
from their own counsels for all indemnified parties in connection with any one
action or separate but similar or related actions in the same jurisdiction
arising out of the same general allegation or circumstances.
SECTION 7. CONTRIBUTION. In order to provide for just and equitable
contribution in circumstances in which the indemnity agreement provided for in
Section 6 hereof is for any reason held to be unenforceable by the indemnified
parties although applicable in accordance with its terms, the Company and the
Agent shall contribute to the aggregate losses, liabilities, claims, damages and
expenses of the nature contemplated by such indemnity agreement incurred by the
Company and the Agent, as incurred, in such proportions that the Agent is
responsible for that portion represented by the percentage that the commission
it receives pursuant to Section 2 hereof bears to the aggregate offering price
of the Conversion Stock (including such commissions) and the Company is
responsible for the balance; provided, however, that no person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933
Act) shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation. For purposes of this Section, each person,
if any, who controls the Agent within the meaning of Section 15 of the 1933 Act
shall have the same rights to contribution as the Agent, and each director of
the Company, each officer of the Company who signed the Registration Statement,
and each person, if any, who controls the Company within the meaning of Section
15 of the 1933 Act shall have the same rights to contribute as the Company.
SECTION 8. REPRESENTATIONS, WARRANTIES AND AGREEMENTS TO SURVIVE DELIVERY.
All representations, warranties and agreements contained in this Agreement, or
contained in certificates of officers of the Company and Home Savings submitted
pursuant hereto, shall remain operative and in full force and effect, regardless
of any investigation made by or on behalf of the Agent or any controlling person
thereof, or by or on behalf of the Company and Home Savings, and shall survive
delivery of the Conversion Stock.
SECTION 9. TERMINATION OF AGREEMENT. (a) The Agent may terminate this
Agreement, by notice to the Company at any time at or prior to Closing Time (i)
if there has been, since the date of this Agreement or since the respective
dates as of which information is given in the Registration Statement, any
material adverse change or any development that could reasonably be expected to
result in a material adverse change in the condition, financial or otherwise, or
the earnings or business affairs of the Company, or the Company and its
subsidiaries considered as one enterprise, or Home Savings and its subsidiaries
considered as one enterprise, whether or not arising in the ordinary course of
business, or (ii) if there has occurred any material adverse change in the
financial markets of the United States or any outbreak or escalation of
hostilities or other calamity or crises the effect of which on the financial
markets of the United States is such as to make it, in the judgment of the
Agent, impracticable to market the Shares or to enforce contracts for the sale
of Shares, or (iii) if (A) trading in the Common Stock on the NASDAQ/NMS has
been suspended, or (B) trading generally on the NASDAQ/NMS, the American Stock
Exchange or the New York Stock Exchange has been suspended, or (C)
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minimum or maximum prices for trading have been fixed, or maximum ranges for
prices for securities have been required, by the NASDAQ/NMS, the American Stock
Exchange or the New York Stock Exchange or by order of the Commission or any
other governmental authority, or (iv) if a banking moratorium has been declared
by federal, New York or North Carolina authorities.
(b) The Company, upon written notice, may terminate this Agreement with
respect to the Agent upon a material breach hereof by such Agent.
(c) If this Agreement is terminated pursuant to this Section, such
termination shall be without liability of any party to any other party except as
provided in Section 4 hereof.
SECTION 10. CONFIDENTIALITY; COOPERATION.
(a) The Agent shall not without the written consent of the Company
disclose material nonpublic information contained in any regulatory report of
the Company if disclosure thereof would in its reasonable judgment violate any
federal law or regulation.
(b) The Agent agrees to cooperate with the Company and Home Savings in
connection with the performance of its duties hereunder.
SECTION 11. NOTICES. All notices and other communications hereunder
shall be in writing and shall be deemed to have been duly given if mailed, sent
by overnight delivery services or transmitted by any standard form of
telecommunication as provided below:
If to the Agent: Trident Securities, Inc.
4601 Six Forks Road, Suite 400
Raleigh, North Carolina 27609
Attention: William M. Moore, Jr.
Facsimile No.: (919) 787-1670
with a copy to: Housley Goldberg & Kantarian, P.C.
1220 19th Street, N.W., Suite 700
Washington, D.C. 20036
Attention: Gary R. Bronstein, Esq.
Facsimile No.: (202) 822-0140
If to the Company: BB&T Financial Corporation
225 West Nash Street
Wilson, North Carolina 27893
Attention: Scott E. Reed
Facsimile No.: (919) 399-4871
with a copy to: Arnold & Porter
1200 New Hampshire Avenue, N.W.
Washington, D.C. 20036
Attention: L. Stevenson Parker, Esq.
Facsimile No.: (202) 872-6720
SECTION 12. PARTIES. This Agreement shall inure to the benefit of and be
binding upon the Agent, the Company and its successors. Nothing expressed or
mentioned in this Agreement is intended or shall be construed to give any
person, firm or corporation (including, without limitation, any depositor,
creditor, borrower or member of Home Savings), other than the Agent, the Company
and their respective successors and the controlling persons and officers and
directors referred to in Sections 6 and 7 hereof and their heirs and legal
representatives, any legal or equitable right, remedy or claim, whether as a
third party beneficiary or otherwise under or in respect of this Agreement or
any provision herein contained. This Agreement and all conditions and
provisions hereof are intended to be for the sole and exclusive benefit of the
Agent, the Company, their respective
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successors, and such controlling persons and officers and directors and their
heirs and legal representatives, and for the benefit of no other person, firm or
corporation.
SECTION 13. GOVERNING LAW AND TIMES. This Agreement shall be governed by and
construed in accordance with the laws of the State of North Carolina applicable
to agreements made and to be performed in such State. Specified times of day
refer to Eastern Time.
SECTION 14. COUNTERPARTS. This Agreement may be executed in any number of
identical counterparts, each of which shall be deemed to be an original, but all
such counterparts shall together constitute one and the same agreement.
SECTION 15. AMENDMENT. This Agreement may be amended only by a subsequent
writing signed by the Agent and the Company.
SECTION 16. HEADINGS. The index, headings and subheadings in this Agreement
are for convenience of reference only and shall not affect the construction or
interpretation of this Agreement.
SECTION 17. ENTIRE AGREEMENT. This Agreement, together with the exhibits and
schedules thereto, and any terms incorporated by reference herein, constitutes
the entire understanding between and among the Parties with respect to the
subject matter hereof and shall supersede any prior agreements and
understandings among the parties with respect to such subject matter.
If the foregoing is in accordance with your understanding of our agreement,
please sign and return to us a counterpart hereof, whereupon this instrument
along with all counterparts will become a binding agreement between the Agent
and the Company in accordance with its terms.
Very truly yours,
BB&T FINANCIAL CORPORATION
By:
--------------------------------------------
Name: Scott E. Reed
Title: Senior Executive Vice President
CONFIRMED AND ACCEPTED,
as of the date first above written:
TRIDENT SECURITIES, INC.
By:
--------------------------------
Name: Timothy E. Lavelle
Title: President
Home Savings hereby joins in the foregoing Agreement, undertakes that it will
be bound thereby and that it will do and perform all the acts therein provided
to be done by it.
HOME SAVINGS BANK OF ALBEMARLE, S.S.B.
By:
---------------------------------------------
Name: Carl M. Hill
Title: President and Chief Executive Officer
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EXHIBIT A
TO THE
AGENCY AGREEMENT
REPRESENTATIONS AND WARRANTIES
OF
HOME SAVINGS BANK OF ALBEMARLE, S.S.B.
All capitalized terms used but not defined in this Exhibit shall have the
respective meanings thereof assigned in the Agency Agreement to which this is an
Exhibit.
Home Savings makes the following representations and warranties to the Agent
pursuant to Section 5(c)(2) of the Agency Agreement:
(i) (a) At the Effective Time, the Registration Statement and the
Prospectus, insofar as they relate to Home Savings, complied in all material
respects with the requirements of the 1933 Act and the 1933 Act Regulations, and
the Registration Statement, insofar as it relates to Home Savings, did not
contain an untrue statement of material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading; and, at the Effective Time (unless the term "Prospectus" refers to a
prospectus used in connection with the Subscription Offering or the Community
Offering which differs from the Prospectus on file with the Commission at the
Effective Time, in which case at the time such prospectus is first used in the
Subscription Offering or the Community Offering) and at Closing Time, the
Prospectus and Annexes thereto and any supplemental sales literature authorized
by the Company or Home Savings for use in connection with the Subscription
Offering or the Community Offering, insofar as they relate to Home Savings (when
read in conjunction with the Prospectus) did not or will not, as the case may
be, contain an untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided, however,
that the representations and warranties in this subsection shall not apply to
the Agent's Information. There are no contracts, indentures, mortgages, loan
agreements, notes, leases or other agreements or instruments to which Home
Savings is a party to or to which any of them or their respective properties and
assets are subject or bound, which are required by the 1933 Act and 1933 Act
Regulations or the North Carolina Conversion Law and Regulations, to be
described or incorporated by reference in the Prospectus or described in or
filed or incorporated by reference as exhibits to the Registration Statement,
the Conversion Application, as defined hereinafter, or the Proxy Statement, as
defined hereinafter, which have not been so described, filed or incorporated by
reference.
(b) Home Savings was and is exclusively responsible for the
information concerning Home Savings and its subsidiaries contained in the
Conversion Application, as defined hereinafter, and Prospectus and Annexes
thereto (the Prospectus and Annexes thereto collectively referred to as the
"Proxy Statement"), and in any amendments or supplements thereto. Home Savings
will make such changes, and provide such supplements or amendments, to the
Conversion Application, as defined hereinafter, the Proxy Statement, and any
marketing material related to Home Savings' solicitation of proxies (the "Proxy
Solicitation") with respect to the Conversion Merger and/or the Offerings,
which, in the opinion of the Agent and its counsel (and not reasonably
objectionable to Home Savings and its counsel), are necessary or desirable to
comply in all material respects with all applicable statutes, rules and
regulations with respect to such Proxy Statement, the Prospectus and materials
related to the Proxy Solicitation and/or the Offerings (collectively, the
"Disclosure Requirements"). The Proxy Statement does not and will not contain
any untrue statement of material fact or omit to state any material fact
required to be stated therein or necessary to make the statements contained
therein not misleading at the time such documents are filed with the
Administrator, when the Proxy Statement becomes effective and at the date the
Proxy Statement is first mailed to Voting Members. Home Savings has mailed or
caused to be mailed the Proxy Statement together with all related Proxy
Solicitation materials, in forms in compliance with the applicable regulations,
including, without limitation, the North Carolina Conversion Law and
Regulations, to each depositor, borrower or other voting member of Home Savings
entitled to receive such a Proxy Statement under the North Carolina Conversion
Law and Regulations, on a timely basis and in the manner and form required by
the North Carolina Conversion Law and Regulations.
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<PAGE>
(ii) Each time a post-effective amendment to the Registration Statement
became or becomes, as the case may be, effective, the Registration Statement
and the Prospectus insofar as they relate to Home Savings, complied or will
comply, as the case may be, in all material respects with the requirements of
the 1933 Act and the 1933 Act Regulations, and the Registration Statement,
insofar as it relates to Home Savings, did not or will not, as the case may be,
contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading; and the Prospectus, insofar as it relates to Home Savings, each
time a post-effective amendment to the Registration Statement became or becomes
effective (unless the term "Prospectus" refers to a prospectus which has been
provided to the Agent by the Company for use in connection with the Offerings
which differs for the applicable Prospectus on file at the Commission at the
time such post-effective amendment to the Registration Statement became or
becomes, as the case may be, effective, in which case at the time it is first
provided to the Agent for such use) and at Closing Time, will not contain an
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements therein, in the light of the circumstances under
which they were made, not misleading; provided, however, that the
representations and warranties in this subsection shall not apply to the Agent's
Information.
(iii) Pursuant to Article 3 of Chapter 54C of the NCGS and the rules and
regulations promulgated thereunder by the Administrator, including all published
interpretations, rulings and decisions of the Administrator issued thereunder
and all waivers, interpretations and orders issued by the Administrator to Home
Savings thereunder (the "North Carolina Conversion Law and Regulations"), Home
Savings has filed with the Administrator an application for conversion (the
"Conversion Application") and has filed such amendments thereto and
supplementary materials as may have been required to the date hereof, including
copies of the Proxy Statement and the Prospectus. Home Savings will promptly
file the Prospectus with the Administrator and will promptly file such further
amendments and supplements to the Conversion Application as may be necessary or
desirable in connection with the Conversion Merger and Acquisition. At the
date hereof and at all times subsequent hereto, up to and including the Closing
Time, the Conversion Application complies and will comply in all materials
respects with the applicable provisions of the North Carolina Conversion Law and
Regulations (including the Administrator's interpretations thereunder). The
Administrator has, by letter dated November 12, 1993, approved the Conversion
Application, and such approval remains in full force and effect.
(iv) The Proxy Statement, form of proxy, notice of meeting and any other
communication, written or oral, used in the Proxy Solicitation have complied and
will comply in all material respects with the applicable provisions of the North
Carolina Conversion Law and Regulations and at the time of their use did not
contain any statement which, at the time and in light of the circumstances under
which it was made, was false or misleading with respect to any material fact, or
which omitted to state any material fact necessary in order to make the
statements therein not false or misleading or necessary to correct any statement
in an earlier communication with respect to the Proxy Solicitation which had
become false or misleading, and at the time of mailing, Home Savings had
received all required authorizations of the Administrator for the use of such
Proxy Statement and the other Proxy Solicitation materials; the Prospectus and
any supplemental sales literature authorized in writing by an Authorized Officer
or by Home Savings for use in connection with the Subscription Offering or the
Community Offering are in compliance in all material respects with the
applicable provisions of the North Carolina Conversion Law and Regulations and,
at or prior to the Effective Time, received all required authorizations of the
Administrator for use in final form.
(v) At Closing Time, the Plan and the Conversion Agreement shall have been
duly adopted by Home Savings by all necessary action of its board of directors
and voting members, and such approvals shall remain in full force and effect
through the Closing Time.
(vi) At Closing Time, Home Savings shall have completed all the conditions
precedent to the Conversion and Acquisition in accordance in all material
respects with the Plan, the Conversion Agreement, the North Carolina Conversion
Law and Regulations and all other applicable laws, regulations, decisions and
orders, including all material terms, conditions, requirements and provisions
precedent to the Conversion Merger and Acquisition imposed upon Home Savings by
the Administrator other than those which the Administrator expressly permitted
to be completed after the Conversion Merger and Acquisition becomes effective.
At Closing Time, Home Savings shall have no knowledge or notice that any person
has sought or intends to seek to obtain reconsideration or judicial review of
the final action of the Administrator in approving the Plan or otherwise.
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<PAGE>
(vii) Trident Financial, which prepared the valuation of Home Savings as part
of the Conversion Merger and Acquisition, is independent with respect to Home
Savings within the meaning of the North Carolina Conversion Law and Regulations.
(viii) The accountants who certified the financial statements and supporting
schedules of Home Savings forming the bases of the financial and/or statistical
information relating to Home Savings included or incorporated by reference in
the Prospectus, Proxy Statement and/or the Registration Statement were at the
time of such certification independent within the meaning of Rule 101 of the
Code of Professional Conduct of the American Institute of Certified Public
Accountants and its interpretations and rulings and independent public
accountants as required by the 1933 Act and 1933 Act Regulations; and such
accountants were at the time of such certification, with respect to Home Savings
and its subsidiaries, independent auditors within the meaning of the rules,
regulations, resolutions and practice of the Administrator relating to North
Carolina savings banks and savings and loan associations.
(ix) The financial statements of Home Savings that form the basis for the
financial and/or statistical information regarding Home Savings included or
incorporated by reference in the Registration Statement, Prospectus and the
Proxy Statement present fairly the financial position of Home Savings as of the
dates indicated and the results of their operations and cash flows for the
periods specified and no other financial statements of Home Savings are required
to be included in the Proxy Statement or the Conversion Application; except as
otherwise stated in the Registration Statement or the Prospectus and the Proxy
Statement, such financial statements have been prepared in conformity with
generally accepted accounting principles applied on a consistent basis and such
financial statements are consistent in all materials respects with financial
statements and other reports filed by Home Savings with the FDIC and the
Administrator except that the accounting principles employed in such other
filings conform to the requirements of the FDIC and the Administrator and not
necessarily to generally accepted accounting principles.
(x) Since the respective dates as of which information is given in the
Registration Statement, the Prospectus and the Proxy Statement, except as
otherwise stated therein, (A) there has not been any material adverse change in
the condition, financial or otherwise, or the earnings, business affairs or
business prospects of Home Savings, whether or not arising in the ordinary
course of business, and (B) there have not been any transactions entered into by
Home Savings, other than those in the ordinary course of business, which are
material to Home Savings.
(xi) Home Savings possesses such licenses, permits and other governmental
and regulatory authorizations as are required for the conduct of its business;
all such licenses, permits and other governmental and regulatory authorizations
are in full force and effect and Home Savings is in all material respects
complying therewith; Home Savings has not received notice of any proceeding or
action relating to the revocation or modification of any such license, permit or
other governmental or regulatory authorization which, singly or in the
aggregate, if the subject of an unfavorable decision, ruling or finding, might
have a material adverse effect on the conduct of the business or the condition,
financial or otherwise, or the earnings, business affairs or business prospects
of Home Savings.
(xii) At the Closing Time, the shares of Home Savings Common Stock to be
issued to the Company pursuant to the Plan and the Conversion Agreement shall
have been duly and validly authorized for issuance and, when issued and
delivered by Home Savings pursuant to the Plan and Conversion Agreement against
payment therefor in the amount of all net proceeds from the sale of the
Conversion Stock pursuant to the Plan, will be duly and validly issued and fully
paid and non-assessable and will be issued to the Company free and clear of any
security interest, mortgage, pledge, lien, encumbrance or claim, created,
permitted or suffered by Home Savings.
(xiii) Upon consummation of the Conversion Merger and Acquisition,
liquidation accounts for the benefit of eligible account holders and
supplemental eligible account holders, if any, of Home Savings will have been
duly established in accordance with the requirements of the North Carolina
Conversion Law and Regulations. In the event of a complete liquidation of Home
Savings or any successor thereto, including, without limitation, BB&T-NC, each
eligible account holder and each supplemental eligible account holder, if any,
who continues to maintain a deposit account in Home Savings or in such successor
thereto and will be entitled to
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<PAGE>
receive a liquidation distribution to the extent specified in the North Carolina
Conversion Law and Regulations from the liquidation account at Home Savings or
its successors in the amount of the then current adjusted subaccount balance for
each of such eligible account holders' or supplemental eligible account holders'
deposit accounts then held, before any liquidation distribution may be made to
the holders of shares of capital stock of Home Savings or its successors.
(xiv) Home Savings is a North Carolina chartered mutual savings bank and at
Closing Time will be a North Carolina chartered stock savings bank, in each case
with full corporate power and authority to own, lease and operate its properties
and to conduct its business as described in the Proxy Statement and the
Prospectus. Home Savings is in good standing under the laws of the United
States and the State of North Carolina, and is duly qualified to transact
business and is in good standing in each jurisdiction in which such
qualification or good standing is required, whether by reason of the ownership
or leasing of property or the conduct of business, except where the failure to
so qualify or be in good standing would not have a material adverse effect on
the condition, financial or otherwise, or the earnings, business affairs or
business prospects of Home Savings and its subsidiaries considered as one
enterprise: Home Savings does not have any direct or indirect subsidiaries and
does not own, beneficially or otherwise, more than 5% of a class of equity
securities of any other entity.
(xv) Home Savings is a member in good standing of the Federal Home Loan
Bank of Atlanta; the deposit accounts of Home Savings are insured by SAIF to the
fullest extent allowable under law and no proceedings for the termination or
revocation of such insurance are pending or, to the knowledge of Home Savings,
threatened.
(xvi) Home Savings has taken all corporate action necessary to adopt and
perform the Plan, and to execute, deliver and perform the Conversion Agreement,
and the Conversion Agreement is a valid and binding agreement of Home Savings
enforceable in accordance with its terms, except as enforcement may be limited
by applicable bankruptcy, reorganization, insolvency, receivership,
conservatorship, moratorium or similar laws affecting creditors' rights
generally and by judicial limitations on equitable remedies and except as the
enforceability of the indemnification and contribution provision may be limited
by applicable securities laws.
(xvii) Home Savings is not in violation of its charter or by-laws or in
default in the performance or observance of any obligation, agreement, covenant
or condition contained in any contract, license, indenture, mortgage, loan
agreement, note, lease or other agreement or instrument to which Home Savings is
a party or by which it may be bound or to which any of the property or assets of
Home Savings is subject, which violation or default might have a material
adverse effect on the condition, financial or otherwise, or the earnings,
business affairs or business prospects of Home Savings. The adoption and
performance of the Plan, and the execution, delivery and performance of the
Conversion Agreement, the issuance and delivery to the Company of Home Savings
Common Stock and the consummation of the transaction contemplated herein,
therein and thereby will not conflict with or constitute a breach of, or default
under, or result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of Home Savings pursuant to any
contract, indenture, mortgage, loan agreement, note, lease or other agreement or
instrument to which Home Savings is a party or by which it may be bound, or to
which any of the property or assets of Home Savings is subject (other than
certain insurance policies now held for the benefit of Home Savings, its
officers, directors and others which will be cancelled as a result of the
consummation of the transactions contemplated by the Conversion Agreement and
the Plan), nor will such action result in any violation of the provisions of the
charter or by-laws of Home Savings or any applicable law, rule, regulation, or
court, administrative or arbitration decree, resolution, order or decision which
breach, default, creation, imposition or violation might have a material adverse
effect on the condition, financial or otherwise, or the earnings, business
affairs or business prospects of Home Savings.
(xix) Home Savings has good and marketable title to all properties and
assets for which ownership is material to the business of Home Savings, and to
those properties and assets described in the Prospectus and/or the Proxy
Statement as owned by it, free and clear of all security interests, liens,
mortgages, charges, pledges, encumbrances, restrictions or adverse claims; and
all of the leases and subleases material to the business of Home Savings under
which Home Savings holds properties, including, without limitation, those
described in the Prospectus and/or the Proxy Statement, are valid, subsisting
and binding.
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<PAGE>
(xx) Home Savings is not in violation of any directive, order, agreement,
resolution or understanding of kind (regardless of form) from or with the FDIC
or the Administrator specifying any material restriction of, or requiring any
material change in, Home Savings' conduct of its business. Home Savings has
conducted and are conducting their businesses so as to comply in all material
respects will all applicable statutes and regulations (including, without
limitation, all regulations, decisions, directives and orders of the
Administrator and the FDIC); there is no charge, investigation, action, suit or
proceeding before or by any court, governmental, regulatory or arbitration
agency, body or authority, domestic or foreign, now pending or, to the knowledge
of Home Savings, threatened against Home Savings which is required to be
disclosed in the Registration Statement and the Prospectus and/or the Proxy
Statement (other than as disclosed therein), or which might have a material
adverse effect on the condition, financial or otherwise, or the earning,
business affairs or business prospects of Home Savings, or which might
materially and adversely affect the properties or assets thereof or which would
materially and adversely affect the performance of the Plan or Conversion
Agreement, the issuance and delivery of Home Savings Common Stock or the
Conversion Stock or the consummation of the transactions herein, therein or
thereby contemplated. All pending legal, governmental, regulatory and
arbitration proceedings to which Home Savings is a party or of which any of
their respective properties or assets is the subject which are not described in
the Prospectus and/or the Proxy Statement, including ordinary routine litigation
incidental to their businesses, are, considered in the aggregate, not material.
There are no contracts, indentures, mortgages, loan agreements, notes, leases or
other agreements or instruments to which Home Savings is a party which are
required by the 1933 Act, the 1933 Act Regulations or the North Carolina
Conversion Law and Regulations to be described or incorporated by reference in
the Prospectus or described, filed or incorporated by reference as exhibits to
the Registration Statement and/or Proxy Statement or the Conversion Application
which have not been so described, filed or incorporated by reference.
(xxi) Home Savings has filed all necessary federal, state and foreign
income, franchise, intangible and other tax returns and have paid all taxes
shown as due thereon (or obtained appropriate extension); except for matters
referred to in the Prospectus or the Proxy Statement, there are no tax
deficiencies which have been asserted or threatened against Home Savings which,
individually or in the aggregate, might have a material adverse effect on the
condition, financial or otherwise, or the earnings, business affairs or business
prospects of Home Savings. The federal income tax returns of Home Savings have
not been audited through September 30, 19__ and there is no liability for
federal income tax asserted against Home Savings for any year prior to the tax
liabilities for Home Savings' current tax year, all of which have accrued, and
all payment of which have been made in full prior to delinquency.
(xxii) Home Savings maintains insurance of the type and in the amounts
generally deemed adequate for its business and consistent with insurance
maintained by similar companies in similar businesses, including, but not
limited to, general liability insurance, product liability insurance and
insurance covering all real and personal property owned or leased by Home
Savings against theft, damage, destruction, acts of vandalism and all other
risks customarily insured against, all of which insurance is in full force and
effect.
(xxiii) Home Savings is in compliance in all material respects with the
applicable financial recordkeeping and reporting requirements of the Currency
and Foreign Transaction Reporting Act of 1970, as amended, and the regulations
and rules thereunder.
(xxiv) No approval, authorization, consent or other order of any public,
governmental or board, or body is required for the execution and delivery by
Home Savings of the Conversion Agreement, the issuance of Home Savings Common
Stock or the Conversion Stock, or the consummation of the Conversion Merger and
Acquisition except as indicated in the Blue Sky Survey delivered to the Agent.
(xxv) The various certificates and other facts presented in support of the
tax opinions to be rendered in connection with the Conversion Merger by KPMG
Peat Marwick, insofar as they relate to Home Savings, are true, correct and
complete in all material respects, and Home Savings has not and will not take
any action inconsistent with such facts.
(xxvi) No labor dispute by the employees of Home Savings exists or, to Home
Savings' knowledge, is threatened, which might have a material adverse effect
upon the conduct of the business or on the condition, financial or otherwise, or
the earnings, business affairs or business prospects of Home Savings.
31
<PAGE>
(xxvii) During the period when the Prospectus is required to be delivered,
Home Savings will comply, at its own expense, with all requirements imposed upon
it by the Commission, the FDIC, or the Administrator, as the case may be, by the
applicable rules and regulations of and laws administered by the Commission, the
FDIC or the Administrator, including the North Carolina Conversion Law and
Regulations, the 1933 Act, the 1933 Act Regulations, the 1934 Act and the 1934
Act Regulations (including, without limitation, Rule 10b-6 under the 1934 Act),
insofar as necessary to permit the continuance of sales or dealing in shares of
Common Stock during such period in accordance with the provisions hereof and the
Prospectus.
(xxviii) Other than as permitted by the North Carolina Conversion Law and
Regulations, the 1933 Act and the 1933 Act Regulations, Home Savings shall not
distribute any prospectus, offering circular or other offering material or any
proxy solicitation material in connection with the offering and sale of the
Conversion Stock or the solicitation of proxies with respect to the meeting of
Home Savings' voting members to be held to consider and vote upon the Conversion
Merger and Acquisition. Any such material shall be delivered to the Agent a
reasonable time before its intended use and filing with the Administrator, and
no filing or use shall be made thereof unless expressly permitted by the Agent,
and as permitted by the Commission and/or the Administrator.
(xxix) To the best of Home Savings' knowledge, the records of account
holders, depositors, borrowers and other members of Home Savings which have been
delivered to the Agent by or on behalf of Home Savings, or to the Conversion
Agent for use during the Conversion Merger, are reliable and accurate in all
material respects.
32
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EXHIBIT 2.9
HOME SAVINGS BANK OF ALBEMARLE, S.S.B.
155 West South Street
Albemarle, North Carolina 28002
PLAN OF CONVERSION
May 27, 1993
As amended on December 13, 1993 and December 21, 1993
SECTION 1. INTRODUCTION
By Resolutions adopted on May 27, 1993, the Board of Directors of Home
Savings Bank of Albemarle, S.S.B. ("Savings Bank"), a North Carolina chartered
mutual savings bank headquartered in Albemarle, North Carolina, the deposit
accounts of which are insured by the Savings Association Insurance Fund of the
Federal Deposit Insurance Corporation, has adopted this Plan of Conversion,
whereby (i) the Savings Bank will convert in a Stock Conversion from a North
Carolina chartered mutual savings bank to a North Carolina chartered stock
savings bank; (ii) all shares of capital stock issued by the Savings Bank in the
Stock Conversion will be acquired in an Acquisition by BB&T Financial
Corporation ("Acquiror"), a North Carolina corporation; and (iii) as soon as
practicable after the Stock Conversion and the Acquisition, and after any
interim steps as may be necessary or advisable, the Savings Bank will be merged
or otherwise consolidated in a Merger with and into Branch Banking and Trust
Company (the "Bank"), a North Carolina chartered commercial bank and a wholly
owned subsidiary of the Acquiror. The Board of Directors amended this Plan of
Conversion on December 13, 1993 and December 21, 1993.
In connection with the Stock Conversion, rights to subscribe for shares
of Common Stock of the Acquiror will be offered first to an Employee Stock
Ownership Plan and Trust to be established by the Acquiror for the benefit of
the employees of the Savings Bank, and then to the Savings Bank's Eligible
Member Subscribers and Voting Members in a Subscription Offering in accordance
with this Plan of Conversion. The shares of Common Stock of the Acquiror, if
any, that are offered but not sold in the Subscription Offering will be offered
to Community Offering Residents in a Community Offering. It is currently
anticipated that the shares of Common Stock not sold in the Subscription
Offering and the
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Community Offering will not be sold in a public offering or otherwise pursuant
to this Plan of Conversion.
SECTION 2. DEFINITIONS
As used herein, unless the context otherwise requires, the following
terms shall have the following meanings:
"ACQUIROR" shall mean BB&T Financial Corporation, a North Carolina
corporation which is a bank holding company under the Bank Holding Company Act
of 1956, as amended, located at 223 West Nash Street, Wilson, North Carolina
27893.
"ACQUISITION" shall mean the acquisition by the Acquiror of all of the
Conversion Shares, in accordance with, and subject to the terms and conditions
of, the Conversion Plan and the Agreement.
"ACTING IN CONCERT" shall mean:
(a) knowing participation in a joint activity or interdependent
conscious parallel action towards a common goal whether or not pursuant to an
express agreement; or
(b) a combination or pooling of voting or other interests in the
securities of an issuer for a common purpose pursuant to any contract,
understanding, relationship, agreement or other arrangement, whether written or
otherwise.
A person which acts in concert with another person ("Other Party") shall
also be deemed to be acting in concert with any person that also is acting in
concert with that Other Party, except that any tax-qualified employee stock
benefit plan, such as the Home Savings ESOP, or any other employee stock
ownership plan established by BB&T under the BB&T Savings and Thrift Plan, will
not be deemed to be acting in concert with its trustee or a person who serves in
a similar capacity.
"ADMINISTRATOR" shall mean the Administrator of the Savings Institutions
Division of the North Carolina Department of Commerce.
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"AFFILIATE" shall mean, with respect to any person, a person that
directly, or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, the person specified.
"AGREEMENT" shall mean the Agreement and Plan of Reorganization dated as
of May 27, 1993, as it may be amended from time to time, between the Savings
Bank and the Acquiror, providing for the Stock Conversion, the Acquisition and
the Merger.
"APPRAISED VALUE" shall mean the estimated pro forma market value of the
Savings Bank as a capital stock institution, as determined by the Independent
Appraiser in accordance with the Regulations and Section 4.1(b) of the
Conversion Plan.
"ASSOCIATE" shall mean, with respect to any person:
(a) any company (other than the Savings Bank) of which such person is an
officer or partner or is, directly or indirectly, the beneficial owner of 10% or
more of any class of equity securities;
(b) any trust or other estate in which such person has a substantial
beneficial interest or as to which such person serves as trustee or in a similar
fiduciary capacity, except for a tax-qualified employee stock benefit plan; or
(c) any relative or spouse of such person who has the same home as such
person.
"BANK" shall mean Branch Banking and Trust Company, a North Carolina
chartered commercial bank and wholly owned subsidiary of the Acquiror.
"BB&T MARKET PRICE" shall mean the last sale price on the Nasdaq National
Market System of a share of Common Stock prior to the close of business on the
day of the expiration of the Community Offering, rounded to the nearest cent
(with any amount equal to $.0050 rounded to the next higher $.01).
"BOARD OF DIRECTORS" shall mean the board of directors of the Savings
Bank.
"CLOSING DATE" shall mean the effective date on which the Stock
Conversion and the Acquisition are consummated.
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"COMMON STOCK" shall mean the common stock, par value $2.50 per share, of
the Acquiror, shares of which are to be offered pursuant to the Conversion Plan.
"COMMUNITY EXPIRATION DATE" shall mean that date by which Order Forms
distributed in connection with the Community Offering must be received by the
Conversion Information Center, a customer service representative at any of the
Savings Bank's offices or, if hand delivered, at an office of the Bank in
Davidson County or Mecklenberg County, together with payment for the subscribed
Subscription Shares, in accordance with Section 8.3 of the Conversion Plan,
which date shall be determined by the Savings Bank and shall not be less than 20
days after Order Forms are first made available to Community Offering Residents
pursuant to Section 7.1(b) of the Conversion Plan and not more than 45 days
after the close of the Subscription Offering in accordance with Section 7.1(a)
of the Conversion Plan.
"COMMUNITY OFFERING" shall mean the offering for sale of Subscription
Shares to Community Offering Residents concurrently with the Subscription
Offering in accordance with Section 7 of the Conversion Plan.
"COMMUNITY OFFERING PURCHASERS" shall mean Community Offering Residents
who subscribe for shares in the Community Offering.
"COMMUNITY OFFERING RESIDENTS" shall mean (i) individuals who are
residents of Anson County, Cabarrus County, Davidson County, Mecklenberg County,
Montgomery County, Rowan County, Stanly County, or Union County, North Carolina;
(ii) corporations, partnerships, joint ventures, sole proprietorships and
similar business entities which are headquartered in any of the counties listed
in clause (i); and (iii) Individual Retirement Accounts, Keogh Plans and similar
retirement plans established by or for the benefit of those individuals
described in clause (i).
"COMPANY" shall mean any corporation, partnership, association,
joint-stock company, trust, unincorporated organization or similar entity.
"CONVERSION INFORMATION CENTER" shall mean the center at 155 West South
Street, Albemarle, North Carolina (or such other location or locations as the
Savings Bank may select) where Subscribers may send or hand deliver Order Forms,
together with full payment (or in the case of the Home Savings ESOP, Eligible
Member
<PAGE>
- 5 -
Subscribers and Voting Members, if they so elect, instructions for payment in
accordance with Section 8.3(c)) for the subscribed Subscription Shares in the
Subscription Offering and the Community Offering.
"CONVERSION PLAN" shall mean this Plan of Conversion, including any
amendment hereto approved pursuant to Section 11.5.
"CONVERSION SHARES" shall mean all shares of the common stock of the
Savings Bank issued to the Acquiror in the Stock Conversion and the Acquisition.
"DETERMINATION DATE" shall mean the date as of which the Savings Bank's
Net Worth is determined for purposes of the Liquidation Account, which date
shall be the latest date as of which, under the Regulations, such determination
may be made.
"ELIGIBILITY RECORD DATE" shall mean the close of business on January 31,
1993.
"ELIGIBLE MEMBER SUBSCRIBER" shall mean any holder of a Qualifying
Deposit or a Qualifying Borrowing on the Eligibility Record Date.
"ESTIMATED VALUATION RANGE" shall mean the estimated pro forma valuation
range of the Savings Bank as a capital stock institution, as determined by the
Independent Appraiser in accordance with Section 4.1(b) of the Conversion Plan.
"FDIC" shall mean the Federal Deposit Insurance Corporation.
"GROUP" shall mean any two or more persons who are acting in concert with
respect to the activity or object in question.
"HOME SAVINGS ESOP" shall mean the Employee Stock Ownership Plan and
Trust to be established by the Acquiror for the benefit of the employees of the
Savings Bank.
"INDEPENDENT APPRAISER" shall mean the firm of appraisers retained by the
Savings Bank pursuant to Section 4.1(b) of the Conversion Plan, which firm shall
be (a) independent of the Savings Bank, the Acquiror and their respective
Affiliates and Associates, (b) experienced and expert in assessing the market
value of financial
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institutions and (c) acceptable to the Administrator and the Acquiror.
"LIQUIDATION ACCOUNT" shall mean the account established and maintained
by the Savings Bank pursuant to Section 10.2 of the Conversion Plan upon the
Stock Conversion for the benefit of Eligible Member Subscribers who held a
Qualifying Deposit on the Eligibility Record Date.
"MERGER" shall mean the merger or consolidation of the Savings Bank with
and into the Bank.
"NASDAQ" shall mean the National Association of Securities Dealers
Automated Quotations System.
"NET WORTH" shall mean the total net worth of the Savings Bank as set
forth in the latest statement of financial condition of the Savings Bank
contained in the prospectus distributed in the Subscription Offering and the
Community Offering.
"OFFICER" shall mean, with respect to any company, the chairman of the
board, if any, president, vice-president, secretary, treasurer or principal
financial officer, comptroller or principal accounting officer, and any other
person performing similar functions with respect to such company.
"ORDER FORM" shall mean the one or more subscription order forms that
will be mailed to Eligible Member Subscribers and Voting Members in accordance
with Section 6.1(c) of the Conversion Plan and made available to Community
Offering Residents in accordance with Section 7.1(b) of the Conversion Plan.
"OUTSTANDING BB&T COMMON STOCK" shall mean the number of shares of Common
Stock anticipated to be outstanding at the opening of business on the day
following the Closing Date.
"PERSON" shall mean any individual or company.
"85% PRICE" shall mean a price equal to 85% of the BB&T Market Price,
rounded to the nearest cent (with any amount equal to $.0050 rounded to the next
higher $.01).
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"95% PRICE" shall mean a price equal to 95% of the BB&T Market Price,
rounded to the nearest cent (with any amount equal to $.0050 rounded to the next
higher $.01).
"PROXY" shall mean the form of authorization by which a person is, or may
be deemed to be, designated to act for a Voting Member in the exercise of his or
her voting rights in the affairs of the Savings Bank.
"QUALIFYING BORROWING" shall mean any borrowing held by an Eligible
Member Subscriber on the Eligibility Record Date.
"QUALIFYING DEPOSIT" shall mean the aggregate of the balances of all
deposit accounts in the Savings Bank held by an Eligible Member Subscriber on
the Eligibility Record Date; provided, that if the aggregate deposit account
balances held by an Eligible Member Subscriber on the Eligibility Record Date is
less than $50, such aggregate balances shall not constitute a Qualifying
Deposit.
"REGISTRATION STATEMENT" shall mean the registration statement(s) filed
by the Acquiror with the SEC to register the shares of Common Stock under the
Securities Act of 1933, as amended, to be offered in the Subscription Offering
and the Community Offering.
"REGULATIONS" shall mean the regulations adopted by the Administrator
relating to mutual to stock conversions of North Carolina chartered savings
banks.
"SAIF" shall mean the Savings Association Insurance Fund of the FDIC.
"SAVINGS BANK" shall mean Home Savings Bank of Albemarle, S.S.B., in
mutual or stock form (except that Home Savings Bank of Albemarle, S.S.B. in
stock form may be named such other name as the Acquiror may determine).
"SEC" shall mean the Securities and Exchange Commission.
"SPECIAL MEETING" shall mean the special meeting of the Voting Members of
the Savings Bank called for the purpose of submitting the Conversion Plan to the
Voting Members for their approval.
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"STOCK CONVERSION" shall mean the conversion of the Savings Bank to a
North Carolina chartered stock savings bank pursuant to, and in accordance with,
the Regulations, the Agreement, the Conversion Plan and the Stock Conversion
Application.
"STOCK CONVERSION APPLICATION" shall mean the application to effect the
Stock Conversion and any amendments thereto to be filed by the Savings Bank with
the Administrator pursuant to Section 4.1(c) of this Conversion Plan.
"SUB-ACCOUNT" shall mean, with respect to each Qualifying Deposit held by
an Eligible Member Subscriber, the inchoate interest of the holder of such
Qualifying Deposit in a portion of the Liquidation Account representing the
amount such Eligible Member Subscriber would be entitled to receive pursuant to
Section 10.2 of the Conversion Plan in the event of a complete liquidation of
the Savings Bank subsequent to the Stock Conversion.
"SUBSCRIBERS" shall mean (i) the Home Savings ESOP, Eligible Member
Subscribers and Voting Members who subscribe for shares in the Subscription
Offering and (ii) Community Offering Purchasers.
"SUBSCRIPTION EXPIRATION DATE" shall mean the date by which Order Forms
distributed in connection with the Subscription Offering must be received by the
Conversion Information Center, a customer service representative at any of the
Savings Bank's offices or, if hand delivered, at an office of the Bank in
Davidson County or Mecklenberg County, together with payment (or, in the case of
the Home Savings ESOP, Eligible Member Subscribers and Voting Members, if they
so elect, instructions for payment), for the subscribed Subscription Shares, in
accordance with Section 8.3 of the Conversion Plan, which date shall be
determined by the Savings Bank and shall be not less than 20 and not more than
45 days after Order Forms are mailed to Eligible Member Subscribers and Voting
Members pursuant to Section 6.1(c) of the Conversion Plan.
"SUBSCRIPTION OFFERING" shall mean the offering of the Subscription
Shares to the Home Savings ESOP, Eligible Member Subscribers and Voting Members
in accordance with the terms and conditions set forth in Section 6 of the
Conversion Plan.
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"SUBSCRIPTION RIGHTS" shall mean the rights of the Home Savings ESOP,
Eligible Member Subscribers and Voting Members to subscribe for Subscription
Shares to be offered by the Acquiror pursuant to Section 6 of the Conversion
Plan, which rights shall not be transferable either directly or indirectly.
"SUBSCRIPTION SHARES" shall mean the number of shares of the Common Stock
to be offered in the Subscription Offering as set forth in Section 6.1(b) of the
Conversion Plan, and, if necessary, the Community Offering pursuant to the
Conversion Plan.
"VOTING MEMBER" shall mean any member of the Savings Bank pursuant to its
mutual charter and bylaws, who is eligible to vote at the Special Meeting.
"VOTING RECORD DATE" shall mean the record date fixed by the Board of
Directors in accordance with the mutual charter and bylaws of the Savings Bank
and the Regulations for determining eligibility to vote on the Conversion Plan
at the Special Meeting.
SECTION 3. GENERAL AUTHORITY FOR THE STOCK
CONVERSION, THE ACQUISITION AND
THE MERGER
The Stock Conversion shall be effected in accordance with Section 54C-33
of the North Carolina General Statutes and Chapter 16G of the Regulations, and
this Conversion Plan and shall be subject to, among other things, the approval
of the Administrator, other required regulatory approvals and the affirmative
vote of at least a majority of the total outstanding votes eligible to be cast
by the Voting Members at the Special Meeting.
The Acquisition shall be effected in accordance with applicable law, and
subject to the terms and conditions of the Agreement and the Conversion Plan and
shall be subject to all necessary regulatory and other approvals. The Merger
shall be consummated in accordance with applicable law, and shall be subject to
receipt of necessary regulatory and other approvals.
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SECTION 4. STEPS REQUIRED PRIOR TO ADMINISTRATOR
APPROVAL AND THE COMMENCEMENT OF THE
SUBSCRIPTION OFFERING AND THE COMMUNITY
OFFERING
4.1. CONDITIONS TO ADMINISTRATOR APPROVAL. The following steps shall be
------------------------------------
taken before the Administrator approves the Stock Conversion Application:
(a) Promptly after the execution of the Agreement and adoption of the
Conversion Plan, the Savings Bank shall (i) notify its Eligible Member
Subscribers of the adoption of the Conversion Plan by publishing a statement in
a newspaper of general circulation in each community in which an office of the
Savings Bank is located, and (ii) make copies of the Conversion Plan available
for inspection by members of the Savings Bank at each office of the Savings
Bank. The notice described in the preceding sentence shall conform to Section
.0404(d) of the Regulations, and shall be in a form approved by the Acquiror.
(b) The Savings Bank shall cause the Independent Appraiser to determine
the Appraised Value and the Estimated Valuation Range. The Independent
Appraiser shall prepare and submit to the Savings Bank, the Acquiror and the
Administrator a written report summarizing its findings (the "Appraisal
Report"). Such Appraisal Report shall explain the basis for its determination,
shall contain a brief summary of data that is sufficient to support the
conclusions reached therein, and shall comply with the requirements of the
Regulations.
(c) The Acquiror and the Savings Bank shall prepare and file the
necessary and appropriate applications (including the Stock Conversion
Application and the proxy statement contained therein) with the appropriate
regulatory authorities in connection with the Stock Conversion, the Acquisition,
the Merger and any other interim transactions as may be necessary or advisable.
(d) Promptly upon being advised in writing by the Administrator pursuant
to Section .0405 of the Regulations to do so, the Savings Bank shall publish a
notice of the filing of the Stock Conversion Application in a newspaper printed
in the English language and having general circulation in each community in
which an office of the Savings Bank is located, in accordance with the
requirements of Section .0405 of the Regulations, and post a copy of such notice
in each of its offices.
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4.2. PREPARATION OF REGISTRATION STATEMENT. The Acquiror shall prepare
-------------------------------------
and file the Registration Statement with the SEC and also shall prepare and file
with state securities officials (subject to Section 4.4 herein) such
applications, statements and notices as may be necessary in connection with the
Subscription Offering. The Registration Statement also shall be provided to the
Administrator.
4.3. CONDITIONS TO UNDERTAKING THE SUBSCRIPTION OFFERING AND THE
-----------------------------------------------------------
COMMUNITY OFFERING. The Acquiror shall undertake the Subscription Offering and
- ------------------
the Community Offering only upon satisfaction of the following conditions:
(a) The Administrator shall have approved the Stock Conversion
Application and shall have authorized for use the proxy statement to be mailed
to the Voting Members for the Special Meeting;
(b) All other necessary approvals to effect the Stock Conversion and the
Acquisition shall have been received;
(c) If necessary, the Independent Appraiser shall update and revise the
Appraised Value and the Estimated Valuation Range and shall submit its update to
the Savings Bank, the Acquiror and the Administrator;
(d) The Registration Statement shall have been declared effective by the
SEC, and no stop order suspending the effectiveness of the Registration
Statement shall have been issued, or proceedings for that purpose initiated or
threatened, by the SEC; and
(e) All requirements under applicable state securities laws for the
Subscription Offering and the Community Offering shall have been satisfied
(subject to Section 4.4 herein), no order suspending the effectiveness of any
registration, qualification or permit thereunder with respect to the
Subscription Offering, Community Offering or the Subscription Shares shall have
been issued, and no proceeding for such purpose shall have been initiated or
threatened by any state securities officials.
4.4. STATE BLUE SKY LAW CONSIDERATIONS. In undertaking the Subscription
---------------------------------
Offering and the Community Offering, the Acquiror shall make reasonable efforts
to comply with the securities laws of all jurisdictions in the United States in
which Eligible Member Subscribers and Voting Members reside. However,
Subscription Rights shall
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not be issued to any person who resides in a foreign country, or who resides in
any jurisdiction in the United States, if any of the following apply:
(i) A small number of persons otherwise eligible to subscribe for
Subscription Shares under the Conversion Plan reside in such
jurisdiction;
(ii) The offer or sale of Subscription Shares to such persons
would require the Acquiror, under the securities laws of such
jurisdiction, to register as a broker or dealer or otherwise qualify its
securities for sale in such jurisdiction; or
(iii) Such registration or qualification would be impracticable for
reasons of cost or otherwise.
SECTION 5. THE VOTE OF THE SAVINGS BANK'S MEMBERS
After approval of the Stock Conversion Application (which includes the
proxy statement described below) by the Administrator, the Savings Bank shall
mail to each of the Voting Members as of the Voting Record Date at their last
known address appearing on the records of the Savings Bank a notice of special
meeting and a proxy statement describing the Conversion Plan (which proxy
statement may be printed in a document which also contains the prospectus used
in the Subscription Offering and the Community Offering), which will be
submitted to a vote of the Voting Members at the Special Meeting called for that
purpose. Approval of the Conversion Plan shall require the affirmative vote,
cast in person or by proxy, of those Voting Members on the Voting Record Date
holding at least a majority of the total outstanding votes entitled to be cast
at the Special Meeting.
SECTION 6. THE SUBSCRIPTION OFFERING
6.1. IN GENERAL.
----------
(a) Promptly after the conditions set forth in Section 4.3 have been
satisfied, the Acquiror shall effect the Subscription Offering in accordance
with the provisions of this Section 6 of the Conversion Plan and the provisions
of the Agreement.
(b) In the Subscription Offering, the Acquiror shall offer, without
payment, to the Home Savings ESOP,
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Eligible Member Subscribers and Voting Members, nontransferable Subscription
Rights to purchase a number of shares of Common Stock (the "Subscription
Shares"), at the prices specified in Section 6.2(a), equal to (x) the Appraised
Value divided by (y) the BB&T Market Price.
(c) In conducting the Subscription Offering, the Acquiror shall mail to
each Eligible Member Subscriber and Voting Member, at its last known address
appearing on the records of the Savings Bank, an Order Form together with a copy
of the prospectus and such additional information relating to the Subscription
Offering as the Savings Bank may consider appropriate, as approved by the
Administrator.
(d) The Subscription Offering may be held concurrently with the
solicitation of proxies for the Special Meeting.
(e) The Acquiror may pay a reasonable commission to registered broker
dealers effecting sales in the Subscription Offering.
6.2. AMOUNT OF SUBSCRIPTION SHARES THAT MAY BE
-----------------------------------------
PURCHASED IN THE SUBSCRIPTION OFFERING.
--------------------------------------
(a) The Acquiror shall offer Subscription Rights in the following
amounts:
(i) to the Home Savings ESOP, Subscription Rights to subscribe
for that number of Subscription Shares equal to 1% of the Outstanding
BB&T Common Stock upon either of the following prices and terms in the
Home Savings ESOP's discretion: (x) the 85% Price, subject to the
transfer restriction described in Section 6.4 below, and/or (y) the 95%
Price with no restriction on transfer;
(ii) to each Eligible Member Subscriber who held a Qualifying
Deposit on the Eligibility Record Date, Subscription Rights to subscribe
for Subscription Shares at the following purchase prices and in the
following quantities:
(A) Each such Eligible Member Subscriber would be eligible
to purchase up to a number of Subscription Shares having an
aggregate purchase price of $150,000, upon either of the
following
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prices and terms in such Eligible Member Subscriber's discretion
subject to the other terms of this Conversion Plan: (x) the 85%
Price, subject to the transfer restriction described in Section
6.4 below, and/or (y) the 95% Price with no restriction on
transfer;
(B) Each such Eligible Member Subscriber who has either:
(1) a second account at the Savings Bank at the
Eligibility Record Date (which account may include a demand
deposit account, a savings account, a certificate of deposit
or similar account, as well as borrowings) in addition to
the account which qualifies such Eligible Member Subscriber
as an Eligible Member Subscriber or
(2) a single account at the Savings Bank with a
balance of at least $25,000 at the Eligibility Record Date,
would be eligible to purchase, at such Eligible Member
Subscriber's election, either at (x) the 85% Price, subject to
the transfer restriction described in Section 6.4 below, and/or
(y) the 95% Price (with no restriction on transfer), in either
case up to a number of Subscription Shares having an aggregate
purchase price of $100,000 (in addition to the $150,000 provided
in subsection (ii)(A) above), subject to the other terms of this
Conversion Plan.
(iii) Each Eligible Member Subscriber who held a Qualifying
Deposit on the Eligibility Record Date who is not described in subsection
(ii)(B) above would be eligible to purchase at the BB&T Market Price
(with no restriction on transfer) up to a number of Subscription Shares
having an aggregate purchase price of $100,000 (in addition to the
$150,000 provided in subsection (ii)(A) above), subject to the other
terms of this Conversion Plan;
<PAGE>
- 15 -
(iv) to each Voting Member, Subscription Rights to subscribe for
that number of Subscription Shares at the BB&T Market Price having an
aggregate purchase price equal to $250,000, subject further to the terms
and conditions set forth herein;
(v) to each Eligible Member Subscriber who did not hold a
Qualifying Deposit on the Eligibility Record Date, Subscription Rights to
subscribe for Subscription Shares at the following purchase prices and in
the following quantities:
(A) Each such Eligible Member Subscriber would be eligible
to purchase up to a number of Subscription Shares having an
aggregate purchase price of $150,000, upon either of the
following prices and terms in such Eligible Member Subscriber's
discretion subject to the other terms of this Conversion Plan:
(x) the 85% Price, subject to the transfer restriction described
in Section 6.4 below, and/or (y) the 95% Price with no
restriction on transfer;
(B) Each such Eligible Member Subscriber who has a second
account (which may include another borrowing) at the Savings Bank
on the Eligibility Record Date in addition to the borrowing which
qualifies such Eligible Member Subscriber as an Eligible Member
Subscriber would be eligible to purchase, at such Eligible Member
Subscriber's election, either at (x) the 85% Price, subject to
the transfer restriction described in Section 6.4 below, and/or
(y) the 95% Price (with no restriction on transfer), in either
case up to a number of Subscription Shares having an aggregate
purchase price of $100,000 (in addition to the $150,000 provided
in subsection (iv)(A) above), subject to the other terms of this
Conversion Plan.
(vi) Each Eligible Member Subscriber who did not hold a
Qualifying Deposit on the Eligibility Record Date who is not described in
subsection (v)(B) above would be eligible to
<PAGE>
- 16 -
purchase at the BB&T Market Price (with no restriction on transfer) up to
a number of Subscription Shares having an aggregate purchase price of
$100,000 (in addition to the $150,000 provided in subsection (iv)(A)
above), subject to the other terms of this Conversion Plan.
(b) Each Subscriber in the Subscription Offering (other than the Home
Savings ESOP) may purchase, subject to the priority and oversubscription
procedures contained in this Section 6 and the maximum purchase limitations set
forth in Section 8.2 herein, as many whole shares of Common Stock that can be
purchased by such Subscriber in accordance with the provisions of Section 6.2(a)
at the 85% Price, the 95% Price and/or the BB&T Market Price, as applicable,
with the amount of funds submitted by the Subscriber, but in no event more than
$250,000, and any excess amount shall be refunded. Purchases by the beneficiary
of an IRA, Keogh or similar retirement account will be aggregated with purchases
by the retirement account. If such Subscriber is also a Community Offering
Resident and wishes to purchase Common Stock in both the Subscription Offering
and the Community Offering, as provided in Section 8.1 of this Conversion Plan,
then such Subscriber may purchase as many whole shares of Common Stock that can
be purchased at the 85% Price, the 95% Price and/or the BB&T Market Price, as
applicable, in each case in the amounts indicated on the Order Form(s) at each
such price with the amount of funds submitted by the Subscriber, but in no event
shall the Subscriber be permitted to purchase in the aggregate more than
$250,000 of Common Stock, and any excess amount shall be refunded. The Home
Savings ESOP shall purchase as many whole shares of Common Stock as are
designated on its Subscription Order Form, up to the limit set forth in Section
6.2(a)(i).
(c) In determining the number of Subscription Shares for which an
Eligible Member Subscriber or Voting Member is issued Subscription Rights,
fractions of shares shall be disregarded.
(d) The Savings Bank may require any Eligible Member Subscriber claiming
an additional account relationship with the Savings Bank, or deposits of at
least $25,000 in a single account, to provide evidence satisfactory to the
Savings Bank of the existence of such additional account relationship or such
deposits as of the Eligibility Record Date. All determinations as to whether
such Eligible Member Subscriber has submitted sufficient evidence of such
additional account
<PAGE>
- 17 -
relationship or deposits shall be made by the Savings Bank in its sole
discretion and shall be final and conclusive. If evidence of such additional
account relationship or deposits satisfactory to the Savings Bank is not
provided, the Savings Bank may in its sole discretion reject orders received in
the Subscription Offering by such Eligible Member Subscriber at the 85% Price or
the 95% Price in excess of $150,000.
(e) Subscription Rights issued pursuant to Subsection (a)(ii) above
shall be subordinate to Subscription Rights issued pursuant to Subsection (a)(i)
above; Subscription Rights issued pursuant to Subsection (a)(iii) above shall be
subordinate to Subscription Rights issued pursuant to Subsections (a)(i) and
(a)(ii) above; Subscription Rights issued pursuant to Subsection (a)(iv) above
shall be subordinate to Subscription Rights issued pursuant to Subsections
(a)(i), (a)(ii) and (a)(iii) above; Subscription Rights issued pursuant to
Subsection (a)(v) above shall be subordinate to Subscription Rights issued
pursuant to Subsections (a)(i), (a)(ii), (a)(iii) and (a)(iv) above; and
Subscription Rights issued pursuant to Subsection (a)(vi) above shall be
subordinate to Subscription Rights issued pursuant to Subsections (a)(i),
(a)(ii), (a)(iii), (a)(iv) and (a)(v) above.
6.3. OVERSUBSCRIPTION PROCEDURES. In the event that Subscribers in the
---------------------------
Subscription Offering subscribe for more than the Subscription Shares as
described in Section 6.1(b), the excess shall be considered an oversubscription
for the Subscription Shares. In such event, the number of shares described in
Section 6.1(b) shall be allocated among the Home Savings ESOP and subscribing
Eligible Member Subscribers and Voting Members as follows:
(a) The Subscription Shares first shall be allocated to the Home Savings
ESOP. The remaining Subscription Shares that are subscribed for at the 85%
Price and/or the 95% Price shall then be allocated among subscribing Eligible
Member Subscribers who held a Qualifying Deposit on the Eligibility Record Date
so as to permit each such Eligible Member Subscriber to purchase the lesser of
(a) the number of shares for which such Eligible Member Subscriber subscribed at
the 85% Price and/or the 95% Price, or (b) the number of shares equal to the
proportion that the amount of Qualifying Deposits of each such Eligible Member
Subscriber bears to the total amount of Qualifying Deposits of all such Eligible
Member Subscribers whose subscriptions for
<PAGE>
- 18 -
shares at the 85% Price and/or the 95% Price remain unsatisfied. If the amount
so allocated exceeds the amount subscribed for at the 85% Price and/or the 95%
Price by any one or more of such Eligible Member Subscribers, the excess shall
be reallocated (one or more times as necessary) among those Eligible Member
Subscribers who held a Qualifying Deposit on the Eligibility Record Date whose
subscriptions at the 85% Price and/or the 95% Price are still not fully
satisfied on the same principle described above until all available shares have
been allocated or all such subscriptions satisfied.
(b) The Subscription Shares remaining, if any, after the allocations
described in Subsection (a) above, shall be allocated, subject to Sections
6.2(e) above, among Eligible Member Subscribers who held a Qualifying Deposit on
the Eligibility Record Date subscribing at the BB&T Market Price so as to permit
each such Eligible Member Subscriber to purchase the lesser of (a) the number of
shares subscribed for at the BB&T Market Price or (b) the number of shares equal
to the proportion that the amount of Qualifying Deposits of each such Eligible
Member Subscriber bears to the total amount of Qualifying Deposits of all such
Eligible Member Subscribers who subscribed for shares at the BB&T Market Price.
If the amount so allocated exceeds the amount subscribed for at the BB&T Market
Price by any one or more of such Eligible Member Subscribers, the excess shall
be reallocated (one or more times as necessary) among Eligible Member
Subscribers who held a Qualifying Deposit on the Eligibility Record Date whose
subscriptions at the BB&T Market Price are still not fully satisfied on the same
principle described above until all available shares have been allocated or all
such subscriptions satisfied.
(c) The Subscription Shares remaining, if any, after the allocations
described in Subsections (a) and (b) above shall be allocated, subject to
Sections 6.2(e) above, among subscribing Voting Members (who are not Eligible
Member Subscribers), if any, so as to permit each such Voting Member to purchase
the proportion that the amount of shares subscribed for by each such Voting
Member bears to the total amount of the shares subscribed for by all such Voting
Members. If the amount so allocated exceeds the amount subscribed for at the
BB&T Market Price by any one or more Voting Member, the excess shall be
reallocated (one or more times as necessary) among Voting Members whose
subscriptions are still not fully satisfied on the same principle described
above
<PAGE>
- 19 -
until all available shares have been allocated or all such subscriptions
satisfied.
(d) The Subscription Shares remaining, if any, after the allocations
described in Subsections (a), (b) and (c) above, shall be allocated, subject to
Sections 6.2(e) above, among subscriptions at the 85% Price and/or the 95% Price
of Eligible Member Subscribers who did not hold a Qualifying Deposit on the
Eligibility Record Date so as to permit each such Eligible Member Subscriber to
purchase the proportion that the amount of shares subscribed for at the 85%
Price and/or 95% Price by each such Eligible Member Subscriber bears to the
total amount of the shares subscribed for at the 85% Price or the 95% Price by
all such Eligible Member Subscribers. If the amount so allocated exceeds the
amount subscribed for at the 85% Price and the 95% Price by any one or more of
such Eligible Member Subscribers, the excess shall be reallocated (one or more
times as necessary) among those Eligible Member Subscribers who did not hold a
Qualifying Deposit on the Eligibility Record Date whose subscriptions at the 85%
Price and/or the 95% Price are still not fully satisfied on the same principle
described above until all available shares have been allocated or all such
subscriptions satisfied.
(e) The Subscription Shares remaining, if any, after the allocations
described in Subsections (a), (b), (c) and (d) above, shall be allocated,
subject to Sections 6.2(e) above, among subscriptions at the BB&T Market Price
of Eligible Member Subscribers who did not hold a Qualifying Deposit on the
Eligibility Record Date so as to permit each such Eligible Member Subscriber to
purchase the proportion that the amount of shares subscribed for at the BB&T
Market Price by each such Eligible Member Subscriber bears to the total amount
of the shares subscribed for at the BB&T Market Price by all such Eligible
Member Subscribers. If the amount so allocated exceeds the amount subscribed
for at the BB&T Market Price by any one or more of such Eligible Member
Subscribers, the excess shall be reallocated (one or more times as necessary)
among Eligible Member Subscribers who did not hold a Qualifying Deposit on the
Eligibility Record Date whose subscriptions at the BB&T Market Price are still
not fully satisfied on the same principle described above until all available
shares have been allocated or all such subscriptions satisfied.
6.4. RESALE RESTRICTION ON SHARES OF COMMON STOCK PURCHASED IN THE
-------------------------------------------------------------
SUBSCRIPTION OFFERING AT THE 85% PRICE. Each share of Common Stock purchased
- --------------------------------------
by Subscribers in
<PAGE>
- 20 -
the Subscription Offering at the 85% Price shall be subject to the restriction
that the shares shall not be sold or transferred, by sale, gift or otherwise
with or without consideration, for a period of four months following the date of
the prospectus used in the Subscription Offering and the Community Offering,
except in the event of the death of the Subscriber. Each certificate
representing any such restricted shares shall bear an appropriate notice of such
restrictions. Appropriate instructions shall be given to the Acquiror's
transfer agent with respect to such restriction. Any shares issued as a stock
dividend, stock split or otherwise with respect to any such restricted shares
shall be subject to the same restriction for the remainder of such four-month
period.
SECTION 7. THE COMMUNITY OFFERING
7.1. IN GENERAL.
----------
(a) Any shares of Common Stock not subscribed for in the Subscription
Offering shall be offered for sale in a Community Offering to Community Offering
Residents, pursuant to this Section 7 or such other terms and conditions as may
be established by the Board of Directors and by the Acquiror and approved by the
Administrator. The Community Offering will commence concurrently with, or as
soon as practicable after the commencement of, the Subscription Offering and
must be completed within 45 days after the last day of the Subscription
Offering, unless extended by the Savings Bank and the Acquiror with the approval
of the Administrator. No such single extension of time shall exceed 90 days and
shall comply with the conditions of such extension set forth in Section .0722 of
the Regulations. The price of the Subscription Shares offered in the Community
Offering shall be equal to the 95% Price. The Acquiror may pay a reasonable
commission to registered broker-dealers effecting sales in the Community
Offering.
(b) In effecting the Community Offering, the Acquiror shall make
available to Community Offering Residents an Order Form together with a copy of
the Prospectus, and such additional information relating to the Community
Offering as the Savings Bank may consider appropriate, as approved by the
Administrator.
(c) The Savings Bank may require any purchaser who purports to be a
Community Offering Resident to provide evidence, satisfactory to the Savings
Bank, that
<PAGE>
- 21 -
she, he or it qualifies as a Community Offering Resident. All determinations as
to whether a purchaser qualifies as a Community Offering Resident shall be made
by the Savings Bank in its sole discretion and shall be final and conclusive.
The Savings Bank may in its sole discretion accept or reject, in whole or in
part, orders received in the Community Offering.
(d) The Subscription Shares to be offered in the Community Offering
shall be offered and sold in a manner that will achieve the widest distribution
of such stock.
7.2. COMMUNITY OFFERING MAXIMUM PURCHASE
-----------------------------------
LIMITATION AND PRIORITIES.
-------------------------
(a) Each Community Offering Resident may purchase in the Community
Offering at the 95% Price that number of Subscription Shares which, when
multiplied by the 95% Price, would not exceed $250,000. If such Community
Offering Resident is also an Eligible Member Subscriber or a Voting Member and
wishes to purchase Common Stock in both the Subscription Offering and the
Community Offering, as provided in Section 8.1 of this Conversion Plan, then
such Community Offering Resident may purchase as many whole shares of Common
Stock that can be purchased at the 85% Price, the 95% Price, and/or the BB&T
Market Price, as applicable, in each case, in the amounts indicated on the Order
Form at each such price, with the amount of funds submitted by such Community
Offering Resident, but in no event shall the Subscriber be permitted to purchase
in the aggregate more than $250,000 of Common Stock, and any excess amount shall
be refunded. The limitations contained in this Section 7.2 are further subject
to the priority and oversubscription procedures contained in this Section 7 and
the maximum purchase limitation described in Section 8.2 herein.
(b) In the Community Offering, preference shall be given to natural
persons qualifying as Community Offering Residents.
7.3. OVERSUBSCRIPTION PROCEDURES.
---------------------------
(a) If the Subscription Shares offered in the Subscription Offering are
fully subscribed, then no Subscription Shares will be available for purchase in
the Community Offering.
<PAGE>
- 22 -
(b) If Community Offering Purchasers subscribe for more than is
available for purchase in the Community Offering, the Subscription Shares first
shall be allocated among subscribing Community Offering Purchasers who are
natural persons so as to permit each such natural person to purchase shares in
the proportion that the amount of shares ordered by each such purchaser bears to
the total amount of the shares ordered by all such Community Offering
Purchasers, until all subscriptions are satisfied or all available shares have
been allocated.
(c) The Subscription Shares remaining, if any, after the allocations
described in Subsection (b) above shall be allocated among Community Offering
Purchasers who are not natural persons so as to permit each such Community
Offering Purchaser to purchase shares in the proportion that the amount of
shares ordered by each such purchaser bears to the total amount of the shares
ordered by all such Community Offering Purchasers, until all subscriptions are
satisfied or all available shares have been allocated.
7.4. NO PUBLIC OFFERING. It is currently anticipated that the shares of
------------------
Common Stock not sold in the Subscription Offering or the Community Offering
will not be sold in a public offering or otherwise pursuant to this Conversion
Plan.
SECTION 8. PROCEDURES APPLICABLE TO BOTH THE
SUBSCRIPTION OFFERING AND THE
COMMUNITY OFFERING
8.1. ORDER FORMS.
-----------
(a) All Subscription Rights issued in connection with the Stock
Conversion shall be exercisable by delivery of properly completed and executed
Order Forms to the Savings Bank or, if hand delivered, at an office of the Bank
in Davidson County or Mecklenberg County, in accordance with the provisions of
Section 8.1(b) of this Conversion Plan. Community Offering Residents who also
are Eligible Member Subscribers or Voting Members may participate in either the
Subscription Offering or the Community Offering or both. The Savings Bank may,
in its discretion, authorize one Order Form for use in the Subscription Offering
and a separate Order Form to be used in the Community Offering. If the Savings
Bank authorizes separate Order Forms and a Subscriber is both a Community
Offering Resident and an Eligible Member Subscriber or Voting Member and wishes
to purchase in both the
<PAGE>
- 23 -
Subscription Offering and the Community Offering, such Subscriber would submit
both a Subscription Order Form for the purchase of Common Stock at the 85%
Price, the 95% Price and/or the BB&T Market Price, as applicable, and a
Community Order Form for the purchase of Common Stock at the 95% Price. Such
Subscriber shall be limited to purchasing the aggregate dollar amount of Common
Stock in both offerings in the amounts indicated on the Order Form, but in no
event more than $250,000 in the aggregate. If a Subscriber elects to subscribe
for Subscription Shares pursuant to Section 6.2(a)(ii)(B) or Section
6.2(a)(v)(B), the Savings Bank may require the Subscriber to provide a list of
multiple accounts on the Order Form and to provide such other evidence of
eligibility as may be requested by the Savings Bank.
(b) Subject to the oversubscription procedures set forth in Section 6.3,
the Home Savings ESOP and each Eligible Member Subscriber and Voting Member who
wishes to subscribe for Subscription Shares in the Subscription Offering shall
be required to subscribe for a number of Subscription Shares having a minimum
aggregate 85% Price, 95% Price or BB&T Market Price, as applicable, of $500.
Subject to the oversubscription procedures set forth in section 7.3, each
Subscriber who wishes to subscribe in the Community Offering shall be required
to subscribe for a number of Subscription Shares having a minimum aggregate 95%
Price of $500.
(c) The Home Savings ESOP and each Eligible Member Subscriber and Voting
Member receiving an Order Form authorized for use in the Subscription Offering
shall have until the close of business on the Subscription Expiration Date to
properly complete, execute and return the executed Order Form to the Conversion
Information Center, to a customer service representative at any one of the
Savings Bank's offices, or, if hand delivered, to an office of the Bank in
Davidson County or Mecklenberg County, in each case accompanied by payment (or
in the case of the Home Savings ESOP, Eligible Member Subscribers or Voting
Members, if they so elect, instructions for payment), as described in Section
8.3 of the Conversion Plan. Each Community Offering Resident receiving an Order
Form authorized for use in the Community Offering shall have until the close of
business on the Community Expiration Date to properly complete, execute and
return the executed Order Form to the Conversion Information Center, to a
customer service representative at any one of the Savings Bank's offices, or, if
hand delivered, to an office of the Bank in Davidson County or Mecklenberg
County, in each case accompanied by payment (or in the case of any Community
Offering Resident
<PAGE>
- 24 -
who also is an Eligible Member Subscriber or a Voting Member, if he, she or it
so elects, instructions for payment), as described in Section 8.3 of the
Conversion Plan. Order Forms may be sent by mail, hand delivery or facsimile
transmission; however, the Savings Bank may, in its sole discretion, reject any
orders submitted by facsimile transmission. Any Order Form sent by mail or
similar means must be received at the Conversion Information Center by the
Subscription Expiration Date in the case of the Subscription Offering and by the
Community Expiration Date in the case of the Community Offering. Failure of the
Savings Bank, for any reason, to receive from the Home Savings ESOP or any
Eligible Member Subscriber or Voting Member a properly completed and executed
Order Form and payment, or instructions for payment, before the close of
business on the Subscription Expiration Date, or to receive from any Community
Offering Purchaser a properly completed and executed Order Form and payment, or
if appropriate, instructions for payment, before the close of business on the
Community Expiration Date, shall be deemed a waiver and release by the Home
Savings ESOP or such Eligible Member Subscriber, Voting Member or Community
Offering Resident of any right to subscribe hereunder for Subscription Shares;
provided, however, that on an equitable basis the Savings Bank may, but will not
be required to, waive any immaterial irregularity in any Order Form or require
the submission of a corrected form or the remittance of full payment for
subscribed shares by such date as the Savings Bank may specify. The Savings
Bank's interpretation of terms and conditions of Order Forms shall be final,
subject to the authority of the Administrator.
8.2. MAXIMUM PURCHASE LIMITATION. Notwithstanding anything contained in
---------------------------
this Conversion Plan to the contrary, no person (other than the Home Savings
ESOP, and any other employee stock ownership plan established by the Acquiror as
part of the BB&T Savings and Thrift Plan), together with any Associate or group
of persons acting in concert with such person, may acquire, through the exercise
of Subscription Rights in the Subscription Offering and/or through purchases in
the Community Offering, beneficial ownership of more than 5% of the Outstanding
BB&T Common Stock in the aggregate (taking into account shares that already may
be held by such person). For purposes of this Section 8.2, the Board of
Directors and officers of the Savings Bank who also are Eligible Member
Subscribers or Voting Members shall not be deemed to be Associates or a group
acting in concert solely as a result of their office or board membership.
<PAGE>
- 25 -
8.3. METHOD OF PAYMENT.
-----------------
(a) Neither the Savings Bank, the Acquiror nor any Affiliate of the
Acquiror shall loan funds or otherwise extend credit to any person (other than
the Home Savings ESOP) for the purpose of purchasing any shares of the Common
Stock pursuant to this Conversion Plan.
(b) Subject to Subsections (c) and (d) below, all shares of Common Stock
purchased in the Subscription Offering and the Community Offering shall be paid
for in cash (if paid in person at the Conversion Information Center, the office
of the Savings Bank or an office of the Bank in Davidson County or Mecklenberg
County), or by check, money order or wire transfer; provided, however, that the
Savings Bank may, in its sole discretion, reject any orders where funds are
submitted by wire transfer.
(c) If a Subscriber has a deposit account (other than in a demand
deposit account or negotiable order of withdrawal account) with the Savings
Bank, the Subscriber may pay for the shares subscribed for by authorizing and
directing the Savings Bank on the Order Form to make a withdrawal from such
deposit account in an amount equal to the aggregate price of such shares. The
Savings Bank shall make such withdrawal and shall pay such amount to the
Acquiror on the Closing Date. Those persons who are beneficiaries of Individual
Retirement Accounts, Keogh Plans or similar retirement plans are not themselves
Account Holders, but the account itself may be. If the beneficiary wishes such
account or plan to subscribe for Subscription Shares in the Subscription
Offering or the Community Offering, the beneficiary should authorize and direct
the Savings Bank on the Order Form to transfer the Subscriber's account or plan
to a self-directed account at an independent trustee that permits the account to
hold stock. The independent trustee must then be directed by the beneficiary to
use funds from such account in an amount equal to the aggregate price for the
shares subscribed for. Such shares shall then become part of the retirement
account or plan estate. Notwithstanding any regulatory provision regarding
penalties for early withdrawal from a certificate of deposit account, the
Savings Bank shall permit a Subscriber to pay for any shares of Common Stock
subscribed for by withdrawal from a certificate of deposit account without the
assessment of an early withdrawal penalty. If the authorized withdrawal is from
a certificate account and the remaining balance does not meet the applicable
minimum balance requirement, the certificate shall be cancelled
<PAGE>
- 26 -
at the time of the withdrawal and the remaining balance shall earn interest
thereafter at the Savings Bank's passbook rate. Funds for which such a
withdrawal is authorized shall remain as part of the Subscriber's Qualifying
Deposit, but may not be used by the Subscriber until the Subscription Shares
have been sold or the Stock Conversion is terminated.
(d) The Home Savings ESOP may pay for or arrange for the payment for the
shares it subscribes for on or before the Closing Date.
(e) All amounts received for the purchase of Subscription Shares in the
Subscription Offering and the Community Offering (other than by charge against
the Subscriber's account or as provided in Subsections (c) and (d)) shall be
placed in a special escrow account with the Savings Bank. The Savings Bank
shall pay interest to the Subscriber at the passbook rate on such amounts paid
to purchase Subscription Shares from the date payment is received until the
Stock Conversion is completed or terminated, as the case may be. The Savings
Bank shall deliver all amounts received for the purchase of Subscription Shares
in the Subscription Offering and the Community Offering to the Acquiror on the
Closing Date.
(f) In the event that the Conversion Plan or the Subscription Offering
and/or Community Offering is terminated or abandoned, all funds received from
Subscribers shall be promptly refunded, and funds authorized for withdrawal
released, with interest thereon as provided in Section 8.3(e).
(g) Any interest payment or refund required to be made pursuant to
paragraph (e) or (f) above shall be made to the Subscriber entitled thereto
promptly after the Stock Conversion is completed or terminated, as the case may
be.
8.4. RESTRICTION ON COMMON STOCK PURCHASED BY OFFICERS AND DIRECTORS.
---------------------------------------------------------------
All Common Stock purchased in the Subscription Offering and/or Community
Offering by directors or officers of the Savings Bank shall be subject to the
restriction that the shares shall not be sold without the prior written
permission of the Administrator for a period of one year following the Closing
Date, except in the event of the death of the director or officer. Each
certificate representing any such restricted shares shall bear an appropriate
notice of such restriction. Appropriate instructions shall be
<PAGE>
- 27 -
given to the Acquiror's transfer agent with respect to such restriction. Any
shares issued as a stock dividend, stock split or otherwise with respect to any
such restricted shares shall be subject to the same restriction for the
remainder of such one-year period.
SECTION 9. CONSUMMATION OF THE STOCK CONVERSION,
THE ACQUISITION AND THE MERGER
9.1. CONFIRMATION OF APPRAISED VALUE. At the expiration of the
-------------------------------
Subscription Offering and the Community Offering, the Independent Appraiser
shall promptly confirm to the Savings Bank and the Administrator that, to the
best of its knowledge, either (i) nothing of a material nature has occurred
that, taking into account all relevant factors, would cause it to conclude that
the Appraised Value of the Savings Bank as most recently submitted to the
Administrator prior to the Subscription Offering and the Community Offering is
incompatible with its estimate of the Appraised Value as of the expiration of
the Subscription Offering and the Community Offering, or (ii) there is such an
incompatibility, in which case the Independent Appraiser shall state its
determination of the Appraised Value as of the expiration of the Subscription
Offering and the Community Offering. If the Appraised Value, as updated as of
the expiration of the Subscription Offering and the Community Offering, is not
within the Estimated Valuation Range, then Administrator approval shall be
obtained before such updated Appraised Value is used as the basis for
determining the total number of shares of Common Stock that the Acquiror will
offer for sale pursuant to the Conversion Plan.
9.2. CONSUMMATION OF THE STOCK CONVERSION, THE ACQUISITION AND THE
-------------------------------------------------------------
MERGER. After all required regulatory approvals have been received and all
- ------
other conditions set forth herein or in the Agreement have been satisfied or
waived, the Stock Conversion shall be consummated and immediately thereafter (a)
the Savings Bank shall issue to the Acquiror all of the Conversion Shares and
the Acquiror shall pay in consideration thereof cash or other qualifying assets
in an aggregate dollar amount equal to the Appraised Value, minus expenses, but
in no event less than the Net Worth of the Savings Bank; and (b) the Acquiror
shall issue and sell to the Subscribers the Subscription Shares subscribed for
during the Subscription Offering and the Community Offering. As soon as
practicable after consummation of the Stock Conversion and the Acquisition and
after any
<PAGE>
- 28 -
interim steps as may be necessary or advisable, the Merger will be consummated.
9.3. CHARTER AND BYLAWS. The charter and bylaws of the Savings Bank
------------------
shall be amended and restated, effective immediately upon consummation of the
Stock Conversion, as specified in Annexes A and B hereto.
9.4. EFFECTIVENESS OF THE STOCK CONVERSION, THE ACQUISITION AND THE
--------------------------------------------------------------
MERGER. The Stock Conversion and the Acquisition shall be deemed to occur and
- ------
be effective on the Closing Date. The Merger shall be deemed to occur and be
effective at the time set forth in the Articles of Merger or other appropriate
document effecting the Merger.
9.5 CASH BONUS TO DEPOSITORS. In connection with the Stock Conversion
------------------------
and the Acquisition, BB&T agrees to pay a one time cash bonus to eligible
depositors of the Savings Bank upon such terms and subject to the conditions
agreed to by the Acquiror and the Savings Bank.
SECTION 10. STATUS OF DEPOSITS FOLLOWING THE
STOCK CONVERSION, THE ACQUISITION
AND THE MERGER
10.1 CONTINUATION OF DEPOSITS.
------------------------
(a) All of the Savings Bank's deposit accounts shall retain the same
status after the Stock Conversion and Acquisition as they had prior to the Stock
Conversion and Acquisition (except as to voting and liquidation rights). Each
deposit shall have a value equal to and of the same character as the deposit
immediately prior to the consummation of the Stock Conversion and Acquisition
and each holder of a deposit account shall retain, without payment, a
withdrawable deposit account or accounts in the Savings Bank, equal in
withdrawable amount to the withdrawal value of such holder's deposit account in
the Savings Bank immediately prior to consummation of the Stock Conversion and
Acquisition. Upon consummation of the Stock Conversion and Acquisition, all
insured deposits shall continue to be insured up to the legal maximum by the
SAIF.
(b) Upon consummation of the Merger, all insured deposits shall continue
to be insured up to the legal maximum by the FDIC in accordance with the
provisions of applicable law, except that, in accordance with 12 U.S.C.
(S) 1818(q), persons who had deposit accounts at the Bank
<PAGE>
- 29 -
and the Savings Bank prior to the Merger will retain separate insurance coverage
on such deposit accounts only until the end of six months from the date of the
Merger, or in the case of any time deposit account coming due after the
six-month period, at the earliest maturity date after such six-month period.
10.2. LIQUIDATION ACCOUNT AND SUB-ACCOUNTS.
------------------------------------
(a) The Savings Bank shall establish and maintain a Liquidation Account,
which shall be assumed by the Bank in the Merger, for the benefit of Eligible
Member Subscribers who held a Qualifying Deposit on the Eligibility Record Date
who maintain an account in the Savings Bank (or in the Bank subsequent to the
Merger) in the event of a complete liquidation of the Savings Bank following the
Stock Conversion (or the Bank subsequent to the Merger). The initial
Liquidation Account balance shall be equal to the Net Worth of the Savings Bank
as of the Determination Date. The initial Liquidation Account balance shall not
be increased, and shall be subject to downward adjustment to the extent of any
downward adjustment to any Sub-Account balance in accordance with Section .0314
of the Regulations.
(b) The Savings Bank shall maintain, in accordance with the Regulations,
for each Qualifying Deposit, a Sub-Account of the Liquidation Account the
initial balance of which shall be determined by multiplying (x) the opening
balance in the Liquidation Account by (y) a fraction (A) the numerator of which
is the balance in such deposit on the Eligibility Record Date, and (B) the
denominator of which is the total amount of Qualifying Deposits of the Savings
Bank on the Eligibility Record Date.
(c) A distribution of each Sub-Account balance may be made only in the
event of a complete liquidation of the Savings Bank subsequent to the Stock
Conversion and Acquisition (or the Bank subsequent to the Merger) and only out
of funds available for such purpose after payment of all creditors but before
any payments to stockholders. The Savings Bank (or the Bank subsequent to the
Merger) shall not be required to set aside funds for the purpose of establishing
the Liquidation Account.
10.3. VOTING RIGHTS. Voting Rights in the Acquiror are held and
-------------
exclusively exercised by the holders of the common stock of the Acquiror. After
<PAGE>
- 30 -
consummation of the Stock Conversion and the Acquisition, no deposit account
holders or borrowers of the Savings Bank shall have any voting rights in those
capacities in the Savings Bank or the Acquiror, except to the extent such
persons become stockholders of the Acquiror.
SECTION 11. MISCELLANEOUS
11.1. EXPENSES OF THE STOCK CONVERSION AND ACQUISITION. The expenses
------------------------------------------------
incurred by the Savings Bank in the Stock Conversion and the Acquisition shall
be reasonable.
11.2. TIME LIMITATION. The Stock Conversion and the Acquisition must be
---------------
completed not more than 12 months after the date on which the Voting Members
approve the Conversion Plan, which date may be extended up to an additional 12
months with the prior written approval of the Administrator.
11.3. PREEMPTIVE RIGHTS. Persons that acquire Common Stock in the
-----------------
Subscription Offering and/or the Community Offering shall not have preemptive
rights to acquire additional or treasury shares of the Acquiror. In addition,
the Acquiror shall not have preemptive rights to acquire additional or treasury
shares of the Savings Bank.
11.4. INTERPRETATION OF CONVERSION PLAN. All interpretations of the
---------------------------------
Conversion Plan and application of its provisions to particular circumstances by
a majority of the Board of Directors shall be final, subject to the Agreement
and the authority of the Administrator. The headings contained in the
Conversion Plan are for reference purposes only and shall not affect the
interpretation of the Conversion Plan.
11.5. AMENDMENT OR TERMINATION OF CONVERSION PLAN. If deemed necessary
-------------------------------------------
or desirable, the Board of Directors may amend or terminate the Conversion Plan
at any time without the concurrence of the Administrator before the Stock
Conversion Application is filed, and at any time after the Stock Conversion
Application is filed until the Closing Date with the concurrence of the
Administrator, provided that any such amendment or termination is effected in
accordance with Article VI of the Agreement.
<PAGE>
EXHIBIT 8.4
(LETTERHEAD OF PEAT MARWICK APPEARS HERE)
January 3, 1994
Board of Directors
Home Savings Bank of Albemarle, S.S.B.
155 West South Street
Albemarle, North Carolina 28002
Board of Directors
BB&T Financial Corporation
223 West Nash Street
Wilson, North Carolina 27893
Gentlemen:
You have requested our opinion as to the federal and North Carolina income tax
consequences resulting from a plan pursuant to which there will be offered
shares of newly issued common stock of BB&T Financial Corporation ("BB&T
Financial") in simultaneous subscription and community offerings (the
"Offerings"). Under the plan, Home Savings Bank of Albemarle, S.S.B.,
Albemarle, North Carolina ("Home Savings") will convert from a North
Carolina-chartered mutual savings bank to a North Carolina-chartered stock
savings bank (the "Conversion") and will concurrently become a wholly-owned
subsidiary of BB&T Financial (the "Acquisition"). The Conversion and the
Acquisition will be referred to herein as the Conversion/Acquisition. After
the Conversion/Acquisition, and after any interim steps as may be necessary or
advisable, Home Savings will be merged or otherwise combined with and into
Branch Banking and Trust Company ("BB&T-NC"), a North Carolina chartered
commercial bank and a wholly-owned subsidiary of BB&T Financial (the "Bank
Merger").
You have submitted for our consideration certain representations as to the
proposed transaction and copies of the Plan of Conversion (the "Plan"), the
Agreement and Plan of Reorganization, dated as of May 27, 1993, (the
"Reorganization Agreement"), the Form S-3 Registration Statement filed with the
Securities and Exchange Commission ("SEC") on July 9, 1993, Pre-Effective
Amendment No. 1 to the Form S-3, as filed with the SEC on August 9, 1993, Post-
Effective Amendment No. 1 to the Form S-3, as filed with the SEC on October 29,
1993 and Post-Effective Amendment No. 2 to the Form S-3 to be filed with the SEC
on or about January 5, 1994. Our opinion is based on a review of the
information above and certain assumptions of fact. It is also based on existing
tax law and authorities that are subject to change. We have not reviewed the
legal documents necessary to effectuate the steps to be undertaken and we assume
that all steps will be effectuated under state and federal law and will be
consistent with the legal documentation and with the list of steps submitted to
us.
<PAGE>
(LOGO OF PEAT MARWICK APPEARS HERE)
Board of Directors
January 3, 1994
Page 2
Facts
BB&T Financial, a North Carolina corporation, is a registered bank holding
company under federal and North Carolina law, a registered savings institution
holding company under North Carolina law and the parent holding company of
BB&T-NC, and through BB&T Financial Corporation of South Carolina (which is
wholly owned by BB&T Financial), Branch Banking and Trust Company of South
Carolina ("BB&T-SC"). BB&T Financial has authorized two classes of capital
stock, consisting of common and nonvoting preferred. Common stockholders are
entitled to one vote for each share of stock held.
Home Savings is a North Carolina-chartered mutual savings bank. As a mutual
savings bank, Home Savings has no authorized capital stock. Instead, the
residual proprietary interest in Home Savings' reserves and undivided profits
belong to all of its depositors. Each depositor is entitled to interest on his
or her account balance that is declared and paid by Home Savings. In addition,
each depositor has an intangible ownership interest in the net proceeds on
liquidation of the institution equal to the proportion that his or her deposit
balance bears to the aggregate deposit balances of all depositors. However,
liquidation of the institution requires approval by the Administrator of the
North Carolina Savings Institutions Division (the "NC Administrator"). Voting
rights in Home Savings are held by the depositors and by certain borrowers on
outstanding loans. All voting and ownership interests of a depositor cease when
he or she closes his or her account(s) with Home Savings.
The Conversion/Acquisition will enable Home Savings to offer a wider range of
services and products to its existing customers and market area due to the
stronger financial and managerial resources of BB&T Financial. BB&T Financial
will be acquiring all of the capital stock of Home Savings and the combined
resources of Home Savings and BB&T Financial will enable BB&T Financial to
maintain and expand the business of Home Savings.
In the Conversion/Acquisition, Home Savings will convert from a North
Carolina-chartered mutual savings bank to a North Carolina-chartered stock
savings bank and simultaneously become a wholly-owned subsidiary of BB&T
Financial. After the Conversion/Acquisition, and after any interim steps as may
be necessary or advisable, Home Savings will be merged or otherwise combined
with and into BB&T-NC in the Bank Merger.
In accordance with the NC Administrator's regulations regarding conversions,
upon completion of the Conversion/Acquisition, a liquidation account will be
established by Home Savings for the
<PAGE>
(LOGO OF KPMG PEAT MARWICK APPEARS HERE)
Board of Directors
January 3, 1994
Page 3
benefit of the depositors who held accounts in Home Savings at January 31, 1993
in an amount equal to the net worth of Home Savings as shown on its statement of
financial condition as of September 30, 1993. Each depositor would be entitled
to his or her pro rata interest in the liquidation account in the event of a
complete liquidation of Home Savings following the Conversion/Acquisition. Each
depositor would have an initial interest in such liquidation account for each
deposit account held at Home Savings on January 31, 1993. A depositor's
interest as to the liquidation account will be in the same proportion to the
total liquidation account as the balance of his or her deposit account was to
the balance in all deposit accounts held by depositors of Home Savings as of
the eligibility record date (January 31, 1993). However, if the amount in the
deposit account on any subsequent measurement date is less than the amount in
such account on the eligibility record date, or the amount in such account on
any previous measurement date, then such depositor's interest in the
liquidation account would be reduced from time to time by an amount
proportionate to any such reduction and his or her interest would cease to
exist if such deposit account were closed. The interest in the liquidation
account would never be increased despite any subsequent increase in the related
deposit account after the Conversion/Acquisition.
Pursuant to the Plan, shares of BB&T Financial Common Stock (the "Conversion
Stock") are being offered through nontransferable subscription rights granted
first to an employee stock ownership plan and trust established for the benefit
of employees of Home Savings (the "Home Savings ESOP") and then to holders of
qualifying deposit accounts of Home Savings as of the eligibility record date
("Eligible Member Subscribers") and to certain other members of Home Savings
who are eligible to vote on the Plan ("Voting Members"), in a subscription
offering (the "Subscription Offering"). Shares offered but not sold in the
Subscription Offering are being offered simultaneously to residents of Stanly,
Anson, Cabarrus, Davidson, Montgomery, Rowan, Mecklenburg and Union counties,
North Carolina in a community offering (the "Community Offering").
The number of shares of Conversion Stock to be offered will be determined based
upon an independent appraisal of the pro forma market value of Home Savings and
the price of the Conversion Stock. The price of the Conversion Stock will be
equal to a percentage (85% in the case of Eligible Member Subscribers
participating in the Subscription Offering that consent to a four month holding
period restriction, subject to certain purchase limitations, 95% in the case of
Eligible Member Subscribers participating in the Subscription Offering that do
not consent to a four month holding period restriction, 95% in the case of
participants in the Community
<PAGE>
(LOGO OF PEAT MARWICK APPEARS HERE)
Board of Directors
January 3, 1994
Page 4
Offering, 85% or 95% in the case of the Home Savings ESOP and 100% in the case
of Voting Members) of the last sale price of the common stock of BB&T Financial
as reported on the NASDAQ National Market System (trading symbol "BBTF") on the
Community Expiration Date, as defined in the Plan, rounded to the nearest cent,
with any amount equal to $.0050 rounded to the next higher $.01.
In exchange for all of the net proceeds from the sale of the Conversion Stock,
BB&T Financial will be issued all of the capital stock of Home Savings.
Irrespective of the amount of Conversion Stock sold in the Subscription and
Community Offerings, BB&T Financial will invest cash or other qualified assets
in Home Savings equal to the appraised value of Home Savings less the expenses
of the Conversion/Acquisition, but in no event less than the current net worth
of Home Savings. BB&T Financial does not anticipate selling any shares that are
not sold in the Offerings, in a public offering or otherwise pursuant to the
Plan. The Conversion/Acquisition is subject to the receipt of regulatory
approval from appropriate parties, including the NC Administrator and the Board
of Governors of the Federal Reserve System.
In connection with the Conversion/Acquisition, the Eligible Member Subscribers
of Home Savings will receive a one-time bonus interest payment ("Bonus
Interest") in an amount equal to two (2.00) additional percentage point of the
balance in each deposit account on January 31, 1993. The Bonus Interest will
be paid to depositors within thirty days of the closing of the
Conversion/Acquisition (the "Closing Date").
Immediately after the Conversion/Acquisition, BB&T Financial has agreed to grant
to the directors and certain officers of Home Savings shares of restricted stock
of BB&T Financial in a manner designed to encourage such individuals to remain
with BB&T Financial following the Conversion/Acquisition.
The shares of restricted stock vest in equal increments over a five year period
beginning on the first anniversary of the date of grant, subject to acceleration
with 100% vesting at the individual's earlier retirement from the director or
officer position due to health reasons, death or disability, and also subject
to approval by the BB&T Compensation Committee that vesting be accelerated in
the event of termination of employment by BB&T Financial other than for cause.
In addition, BB&T Financial will pay cash bonuses to the individuals receiving
awards of restricted stock to compensate those individuals for a portion of the
tax liability associated with the awards granted. The cash bonus would equal
53.9% of the market price of the restricted stock awarded at the date of grant,
payable as the tax
<PAGE>
(LOGO OF PEAT MARWICK APPEARS HERE)
Board of Directors
January 3, 1994
Page 5
liability is incurred. If the individual elects not to incur all of the tax
liability in the year the restricted stock is awarded, 20% of the cash bonus
will be paid in each year as the stock vests. The grants of restricted stock
and related cash awards are referred to herein as the "Restricted Stock Plan."
In addition to the foregoing statement of facts, the following representations
have been made:
(a) The fair market value of the deposits in the stock savings bank plus
interests in the liquidation account and subscription rights to
acquire BB&T Financial stock to be received in the Conversion will be
approximately equal to the fair market value of the deposits and
proprietary interests in the mutual savings bank surrendered in the
Conversion.
(b) There is no plan or intention for the depositors of Home Savings to
sell, exchange or otherwise dispose of any of the deposits received in
the Conversion.
(c) Immediately following the Conversion, the depositors of Home Savings on
the eligibility record date will own all of the outstanding interests
in the liquidation account, and will own such interests solely by
reason of their ownership of deposits at the mutual savings bank
(including the rights to liquidation proceeds). As a matter of law,
additional interests in the liquidation account may not be issued
following the Conversion.
(d) Immediately following the Conversion/Acquisition, Home Savings will
possess the same assets and liabilities that it held immediately prior
to the transaction, except for the addition of cash paid by BB&T
Financial for the shares of Home Savings issued in the
Conversion/Acquisition.
(e) Except for Home Savings' agreement to sell all of its stock to BB&T
Financial in the Conversion/Acquisition, at the time of the
Conversion/Acquisition, Home Savings will not have outstanding any
warrants, options, convertible securities, or any other type of right
pursuant to which any person could acquire stock in Home Savings.
(f) Home Savings has no plan or intention to reacquire any of the stock
issued to BB&T Financial in the Acquisition.
(g) Except for the Bank Merger, Home Savings has no plan or intention to
sell or otherwise dispose of any of the assets of
<PAGE>
Board of Directors
January 3, 1994
Page 6
the mutual savings bank, except in the ordinary course of business.
(h) The liabilities to be assumed by the stock savings bank, plus the
liabilities, if any, to which the transferred assets are subject, were
incurred by Home Savings in the ordinary course of its business and are
associated with the assets transferred.
(i) Immediately following the Conversion/Acquisition, BB&T Financial will
continue the historic business of Home Savings or will use a significant
portion of Home Savings' historic business assets in a business.
(j) The depositors of Home Savings will pay their expenses, if any,
incurred in connection with the Conversion.
(k) Home Savings is not under the jurisdiction of a court in a Title 11 or
similar case within the meaning of Section 368(a) (3) (A) of the Internal
Revenue Code.
(l) No depositor of Home Savings who is eligible to receive an interest
in the liquidation account will be excluded from participating in the
liquidation account.
(m) BB&T Financial will pay all of the expenses of the Conversion/
Acquisition, except for expenses of the depositors of Home Savings.
(n) BB&T Financial has no plan or intention to redeem or otherwise
acquire any of the Conversion Stock to be issued pursuant to the
Conversion/Acquisition.
(o) At the time of the Conversion, the fair market value of the assets
of the mutual savings bank (on a going-concern basis) to be transferred
to the stock savings bank will equal or exceed the liabilities to be
assumed by the stock savings bank plus the liabilities to which such
assets are subject. Immediately prior to the Conversion, Home Savings
will have a positive net worth.
(p) None of the shares of the Conversion Stock to be issued to or
purchased by depositors who are also employees of Home Savings will be
issued or acquired at a discount from the price offered to any other
depositor or as compensation. Compensation to be paid to depositors who
are also employees of Home Savings will be commensurate with amounts paid
to third parties bargaining at arm's length for similar services.
<PAGE>
Board of Directors
January 3, 1994
Page 7
(q) Except for the Bank Merger, BB&T Financial has no plan or intention to
sell or otherwise dispose of the stock of Home Savings received by it in
the Conversion/Acquisition and there is no plan or intention for Home
Savings to liquidate or merge into another corporation following the
Conversion/Acquisition.
(r) BB&T Financial and Home Savings are corporations within the meaning of
Section 7701(a)(3) of the Code.
(s) No cash or property will be given to depositors of Home Savings or
others in lieu of non-transferable subscription rights or an interest in
the liquidation account of Home Savings.
Opinion
FEDERAL INCOME TAX CONSEQUENCES
- -------------------------------
Based solely on the above facts and representations, it is our opinion that:
(1) The proposed conversion of Home Savings from a North Carolina-chartered
mutual savings bank to a North Carolina-chartered stock savings bank will
constitute a reorganization within the meaning of Section 368(a) of the
Code, and no gain or loss will be recognized by Home Savings as a result
of the Conversion. Rev. Rul. 80-105, 1980-1 C.B. 78. The mutual savings
bank and the stock savings bank will each be a "party to the
reorganization" within the meaning of Section 368(b) of the Code.
(2) No gain or loss will be recognized by Home Savings upon the receipt of
money from BB&T Financial in exchange for shares of common stock of Home
Savings. In addition, no gain or loss will be recognized by BB&T Financial
upon the receipt of money in exchange for its common stock. Section
1032(a).
(3) Home Savings will not recognize any gain or loss with respect to its assets
as a result of the Conversion; the basis of Home Savings in its assets will
not change as a result of the Conversion and the holding period of the
assets will include the period during which such assets were held by Home
Savings prior to the Conversion.
<PAGE>
Board of Directors
January 3, 1994
Page 8
(4) No gain or loss will be recognized by a depositor of Home Savings upon the
deemed issuance to him or her of deposit accounts in the stock savings
bank in exchange for, and in the same amount as, his or her deposit
accounts in the mutual savings bank.
(5) Gain, if any, will be recognized by an Eligible Member Subscriber upon
the exchange of his or her membership interest in the mutual savings
bank for subscription rights and an interest in the liquidation account.
Any gain resulting therefrom will be recognized, but only in an amount
not in excess of the fair market value of the subscription rights and the
interests in the liquidation account. However, the interests in the
liquidation account will have nominal, if any, fair market value.
Section 1001; Paulsen v. Commissioner, 469 U.S. 131 (1985).
------- ------------
(6) A Voting Member will be in receipt of taxable income upon the receipt of
nontransferable subscription rights to the extent of the fair market
value, if any, of the subscription rights received.
(7) A depositor will be in receipt of taxable income in the amount of the
Bonus Interest paid to the depositor, at the time such amount is paid or
made available.
(8) A depositor's basis in his or her deposit accounts will not change as a
result of the Conversion. An Eligible Member Subscriber will have a basis
of zero in his or her interest in the liquidation account, increased by
the amount of gain, if any, recognized on receipt of such interest.
Finally, an Eligible Member Subscriber or Voting Member will have a basis
in any subscription rights received equal to zero, increased by the
amount of income or gain, if any, recognized on receipt of such rights.
(9) No taxable income will be recognized by an Eligible Member Subscriber or
Voting Member as a result of the exercise of his or her subscription
rights. Rev. Rul. 56-572, 1956-2 C.B. 182.
(10) An Eligible Member Subscriber or Voting Member will be entitled to claim,
for the year in which any subscription rights expire unexercised, a loss
in an amount equal to his or her basis in such rights. Such loss will be a
capital loss provided the common stock of BB&T Financial that would have
been acquired upon the exercise of such subscription rights would have
<PAGE>
(LOGO OF KPMG PEAT MARWICK APPEARS HERE)
Board of Directors
January 3, 1994
Page 9
constituted a capital asset in the hands of the Eligible Member Subscriber
or Voting Member.
(11) No income, gain or loss will be recognized by the purchasers of BB&T
Financial stock pursuant to the Community Offering. A purchaser of
Conversion Stock will have a basis in such stock equal to the purchase
price of such stock, increased (in the case of stock acquired pursuant to
the Subscription Offering) by the basis, if any, of the subscription
rights exercised. Section 1012.
(12) The holding period for BB&T Financial stock acquired pursuant to the
Subscription Offering will commence on the date the subscription rights
are exercised. Section 1223 (6). The holding period for BB&T Financial
stock acquired pursuant to the Community Offering will commence on the
date following the date on which such stock is purchased. Rev. Rul.
70-598, 1970-2 C.B. 168, Rev. Rul. 66-97, 1966-1, C.B. 190.
(13) The tax attributes enumerated in Section 381(c), including any earnings
and profits or a deficit of earnings and profits, will be taken into
account by Home Savings following the Conversion. Section 381.
(14) The Conversion/Acquisition will not require the bad debt reserves of Home
Savings to be restored to gross income (Section 381(c)(4), Treas. Reg.
Sec. 1.381 (c)(4)-1 (a) (1) (ii)), nor will it affect deductions for
additions to reserves for bad debts under Section 593 or distributions to
shareholders under Section 593(a). Because the Conversion will be a
transaction to which Section 381 applies, Section 593(a) will not apply.
NORTH CAROLINA INCOME TAX CONSEQUENCES
- --------------------------------------
It is our opinion that the State of North Carolina will, for North Carolina
income tax purposes, treat the Conversion/Acquisition in an identical manner as
it is treated by the Internal Revenue Service for federal income tax purposes.
N.C.G.S. 105-130.2, 105-130.3, 105-130.5, 105-134.1, 105-134.2, 105-134.5,
105-134.6, 105-134.7 and 105-228.23.
THE BANK MERGER
- ---------------
Nothing in the foregoing opinion is to be construed either explicitly or
implicitly as opining on the federal or North Carolina income tax consequences
of the Bank Merger.
<PAGE>
(LOGO OF KPMG PEAT MARWICK APPEARS HERE)
Board of Directors
January 3, 1994
Page 10
THE RESTRICTED STOCK PLAN
- -------------------------
Nothing in the foregoing opinion is to be construed either explicitly or
implicitly as opining on the federal or North Carolina income tax consequences
of the Restricted Stock Plan.
Sincerely,
KPMG Peat Marwick
Sheldon M. Fox, Partner
SMF:jr
<PAGE>
(LETTERHEAD OF KPMG PEAT MARWICK APPEARS HERE)
EXHIBIT 23.21
TAX ADVISORS' CONSENT
---------------------
Board of Directors
Home Savings Bank of Albemarle, S.S.B.
Board of Directors
BB&T Financial Corporation
We consent to the inclusion of our tax opinion dated December 21, 1993, regard
- -ing the federal and North Carolina income tax consequences of the Conversion
and the Acquisition, in Exhibit No. 8.4 of Post-Effective Amendment No. 2 to the
Form S-3 Registration Statement to be filed with the Securities and Exchange
Commission, and the references to our firm under the headings "SUMMARY - Certain
Federal Income Tax Consequences", "THE OFFERINGS - Certain Federal Income Tax
Consequences" and "Opinions" in the Prospectus/Proxy Statement.
KPMG Peat Marwick
Raleigh, North Carolina
January 5, 1994
<PAGE>
EXHIBIT 23.22
The Board of Directors
BB&T Financial Corporation
We consent to the use of our report dated January 14, 1993 included in BB&T
Financial Corporation's Form 10-K for the year ended December 31, 1992
incorporated herein by reference and to the reference to our firm under the
heading "Experts" in the Registration Statement and related Prospectus for the
conversion/acquisition of Home Savings Bank of Albemarle, S.S.B.
KPMG Peat Marwick
Raleigh, North Carolina
January 10, 1994
<PAGE>
EXHIBIT 23.23
Board of Directors
BB&T Financial Corporation
We consent to the use of our report on the consolidated statement of financial
condition of Old Stone Bank of North Carolina and subsidiaries as of December
31, 1992 and the related consolidated statements of income, stockholder's equity
and cash flows for the year then ended incorporated herein by reference to our
firm under the heading "Experts" in the Prospectus/Proxy Statement.
KPMG Peat Marwick
Greensboro, North Carolina
January 4, 1994
<PAGE>
EXHIBIT 23.24
January 10, 1994
Board of Directors
BB&T Financial Corporation
223 West Nash Street
Wilson, North Carolina 27893
Gentlemen:
I hereby consent to the reference to my name under the caption "Opinions" in the
Prospectus relating to Home Savings Bank of Albemarle, S.S.B. included in
Post-Effective Amendment No. 2 to the Registration Statement.
Very Truly Yours,
Jerone C. Herring
Vice President and Secretary
<PAGE>
(LOGO OF McGLADREY & PULLEN APPEARS HERE) (LOGO OF RSM APPEARS HERE)
Exhibit 23.25
CONSENT OF INDEPENDENT AUDITORS
To the Board of Directors
BB&T Financial Corporation
Wilson, North Carolina
We consent to the incorporation by reference in the Prospectus/Proxy Statement
for the conversion/merger of Home Savings Bank of Albemarle, S.S.B. of our
report dated November 10, 1993, with respect to the financial statements of
Home Savings Bank of Albemarle, S.S.B., (formerly Home Savings & Loan
Association) and subsidiary incorporated by reference on BB&T Financial
Corporation's Form 8-K for the years ended September 30, 1993, and 1992 and to
the reference to our firm under the heading "Experts".
McGLADREY & PULLEN
By: /s/ McGLADREY & PULLEN
-----------------------
Charlotte, North Carolina
January 5, 1994
Interstate Tower, Suite 2700 Worldwide
121 West Trade Street Services
Charlotte, North Carolina 28202-5399 Through
(704) 333-9003 FAX (704) 376-3255 RSM International
<PAGE>
(LOGO OF McGLADREY & PULLEN APPEARS HERE) (LOGO OF RSM APPEARS HERE)
Exhibit 23.26
CONSENT OF INDEPENDENT AUDITORS
To the Board of Directors
BB&T Financial Corporation
Wilson, North Carolina
We consent to the incorporation by reference in the Prospectus/Proxy Statement
for the conversion/merger of Home Savings Bank of Albemarle, S.S.B. of our
report dated October 27, 1992, with respect to the financial statements of
Citizens Savings Bank, SSB Inc. (formerly Citizens Bank, Inc.) and subsidiary
incorporated by reference on BB&T Financial Corporation's Form 8-K for the
years ended September 30, 1992, 1991 and 1990 and to the reference to our
firm under the heading "Experts".
McGLADREY & PULLEN
By: /s/ McGLADREY & PULLEN
-----------------------
Charlotte, North Carolina
January 5, 1994
Interstate Tower, Suite 2700 Worldwide
121 West Trade Street Services
Charlotte, North Carolina 28202-5399 Through
(704) 333-9003 FAX (704) 376-3255 RSM International
<PAGE>
EXHIBIT 23.27
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We hereby consent to the incorporation by reference in the Prospectus/Proxy
Statement constituting part of this Registration Statement on Form S-3 of BB&T
Financial Corporation of our report dated March 12, 1993 relating to the
consolidated financial statements of Security Financial Holding Company, which
appears in the Current Report on Form 8-K of BB&T Financial Corporation dated
August 6, 1993. We also consent to the reference to us under the heading
"Experts" in such Prospectus/Proxy Statement.
/s/ Price Waterhouse
PRICE WATERHOUSE
Raleigh, North Carolina
January 4, 1994
<PAGE>
EXHIBIT 23.28
INDEPENDEDNT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
BB&T Financial Corporation on Form S-3 of our report dated January 22, 1993,
relating to the consolidated financial statements of Asheville Federal Bank, FSB
and subsidiary (now Asheville Savings Bank, SSB), appearing in the Current
Report on Form 8-K of BB&T Financial Corporation dated August 6, 1993, and to
the reference to us under the heading "Experts" in the Prospectus/Proxy
Statement, which is part of this Registration Statement.
/s/ Deloitte & Touche
DELOITTE & TOUCHE
Hickory, North Carolina
January 10, 1994
<PAGE>
EXHIBIT 23.29
We consent to the incorporation by reference into this Registration
Statement of BB&T Financial Corporation on Form S-3 of our report dated March
11, 1993 relating to the consolidated financial statements of L.S.B. Bancshares,
Inc. of South Carolina as of December 31, 1992 and 1991 and for each of the
three years in the period ended December 31, 1992. We also consent to the
reference to us under the heading "Experts" in the Prospectus/Proxy Statement
for the conversion merger of Home Savings Bank of Albemarle, S.S.B. forming a
part of this Registration Statement.
/s/ Donald G. Jones and Company, P.A.
Donald G. Jones and Company, P.A.
January 6, 1994
<PAGE>
[LETTER OF TRIDENT FINANCIAL CORPORATION APPEARS HERE]
Exhibit 23.30
January 4, 1994
Board of Directors
BB&T Financial Corporation
223 West Nash
Wilson, North Carolina 27893
Board of Directors
Home Savings Bank of Albemarle, S.S.B.
155 West South Street
Albemarle, North Carolina 28002
Gentlemen:
We hereby consent to the reference to our firm under the heading "Experts"
in Post-Effective Amendment No. 2 to the Form S-3 Registration Statement and in
BB&T Financial Corporation's Prospectus/Proxy Statement for the acquisition of
Home Savings Bank of Albemarle, S.S.B. and do further consent to the use of the
summary of our appraisal opinion of Home Savings Bank of Albemarle, S.S.B. in
the Prospectus/Proxy Statement.
Sincerely,
/s/ MICHAEL A. MURPHY
Michael A. Murphy
Managing Director
