<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
Form 8-K
Current Report
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
May 13, 1998
Date of Report (Date of earliest event recorded)
BB&T Corporation
(Exact name of registrant as specified in its charter)
Commission file number : 1-10853
<TABLE>
<S> <C>
North Carolina 56-0939887
(State of Incorporation) (I.R.S. Employer Identification No.)
200 West Second Street
Winston-Salem, North Carolina 27101
(Address of Principal Executive Offices) (Zip Code)
</TABLE>
(336) 733-2000
(Registrant's Telephone Number, Including Area Code)
---------------
This Form 8-K has 51 pages.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
Item 5. Other Events
On March 1, 1998, BB&T Corporation completed its merger with Life Bancorp,
Inc. ("Life") of Norfolk, Virginia. To consummate the transaction, Life
shareholders received .58 shares of BB&T common stock in exchange for each
share of Life common stock held, resulting in the issuance of 9.8 million
shares of BB&T common stock. The transaction was accounted for under the
pooling-of-interests method of accounting. Accordingly, the consolidated
financial statements (including notes to consolidated financial statements),
and supplemental financial information contained in BB&T's Annual Report on
Form 10-K for the year ended December 31, 1997, restated for the accounts of
Life, are included in this Current Report on Form 8-K.
Item 7. Financial Statements and Exhibits
<TABLE>
<CAPTION>
Exhibit Description
- ------------ ----------------------------------------------------
<S> <C> <C>
11 Statement re Computation of Earnings Per Share. Filed herewith as Note R. of the
"Notes to Consolidated Financial
Statements."
23 Consent of Independent Public Accountants. Filed herewith on page 3.
27 Financial Data Schedule. Filed herewith as an exhibit to the
electronically filed document as
required.
99.1 Report of Independent Public Accountants. Filed herewith on page 4.
99.2 BB&T's restated audited financial statements and Filed herewith beginning on page 5.
notes thereto, including the accounts of Life.
99.3 BB&T's restated Securities Act Guide 3 statistical Filed herewith beginning on page 39.
disclosures, including the accounts of Life.
</TABLE>
1
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
BB&T CORPORATION
(Registrant)
By: /s/ SHERRY A. KELLETT
------------------------------------
Sherry A. Kellett
Senior Executive Vice President and Controller
(Principal Accounting Officer)
Date: May 13, 1998.
2
<PAGE>
Exhibit 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
of our report included in this Form 8-K into BB&T Corporation's previously
filed Registration Statement File Nos. 33-52367, 33-57865, 33-57867, 333-03989
and 333-50035 filed on Form S-8 and Registration Statement File Nos. 33-57859,
33-57861, 33-57871 and 333-02899 filed on Form S-3.
ARTHUR ANDERSEN LLP
Charlotte, North Carolina,
May 13, 1998.
3
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<PERIOD-TYPE> 12-MOS
<CASH> 851,971
<INT-BEARING-DEPOSITS> 77,065
<FED-FUNDS-SOLD> 103,245
<TRADING-ASSETS> 67,878
<INVESTMENTS-HELD-FOR-SALE> 7,199,198
<INVESTMENTS-CARRYING> 147,799
<INVESTMENTS-MARKET> 151,581
<LOANS> 20,933,429
<ALLOWANCE> 275,404
<TOTAL-ASSETS> 30,642,799
<DEPOSITS> 20,948,177
<SHORT-TERM> 3,276,177
<LIABILITIES-OTHER> 443,101
<LONG-TERM> 3,575,517
0
0
<COMMON> 708,816
<OTHER-SE> 1,691,011
<TOTAL-LIABILITIES-AND-EQUITY> 30,642,799
<INTEREST-LOAN> 1,768,024
<INTEREST-INVEST> 458,373
<INTEREST-OTHER> 3,224
<INTEREST-TOTAL> 2,229,621
<INTEREST-DEPOSIT> 774,291
<INTEREST-EXPENSE> 1,092,628
<INTEREST-INCOME-NET> 1,136,993
<LOAN-LOSSES> 97,526
<SECURITIES-GAINS> 3,164
<EXPENSE-OTHER> 954,831
<INCOME-PRETAX> 540,537
<INCOME-PRE-EXTRAORDINARY> 354,450
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 354,450
<EPS-PRIMARY> 2.51
<EPS-DILUTED> 2.46
<YIELD-ACTUAL> 4.45
<LOANS-NON> 98,891
<LOANS-PAST> 44,213
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 239,726
<CHARGE-OFFS> 97,447
<RECOVERIES> 18,086
<ALLOWANCE-CLOSE> 275,404
<ALLOWANCE-DOMESTIC> 275,404
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 44,064
<FN>
<F1> Effective December 31, 1997, BB&T adopted SFAS No. 128, "Earnings Per
Share." The lines labeled EPS-PRIMARY and EPS-DILUTED on this exhibit
actually reflect EPS-BASIC and EPS-DILUTED, respectively, as determined under
SFAS No. 128.
</FN>
</TABLE>
<PAGE>
Exhibit 99.1
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders of BB&T Corporation:
We have audited the accompanying consolidated balance sheets of BB&T
Corporation (a North Carolina corporation), and subsidiaries as of December 31,
1997 and 1996, and the related consolidated statements of income, changes in
shareholders' equity and cash flows for each of the three years in the period
ended December 31, 1997. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of BB&T Corporation and
subsidiaries as of December 31, 1997 and 1996, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1997 in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Charlotte, North Carolina,
May 13, 1998.
4
<PAGE>
Exhibit 99.2
BB&T CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 1997 and 1996
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
1997 1996
--------------- ---------------
<S> <C> <C>
Assets
Cash and due from banks ............................................................... $ 851,971 $ 848,180
Interest-bearing deposits with banks .................................................. 77,065 5,504
Federal funds sold and securities purchased under resale agreements or similar
arrangements ......................................................................... 103,245 84,940
Trading securities .................................................................... 67,878 --
Securities available for sale ......................................................... 7,199,198 6,623,135
Securities held to maturity (market value: $151,581 in 1997 and $317,013 in 1996)...... 147,799 311,782
Loans held for sale ................................................................... 509,141 228,333
Loans and leases, net of unearned income .............................................. 20,424,288 18,150,285
Allowance for loan and lease losses .................................................. (275,404) (239,726)
----------- -----------
Loans and leases, net ............................................................... 20,148,884 17,910,559
----------- -----------
Premises and equipment, net ........................................................... 431,631 392,422
Other assets .......................................................................... 1,105,987 722,553
----------- -----------
Total assets ........................................................................ $30,642,799 $27,127,408
=========== ===========
Liabilities and Shareholders' Equity
Deposits:
Noninterest-bearing demand deposits .................................................. $ 2,833,238 $ 2,625,986
Savings and interest checking ........................................................ 1,708,657 2,108,479
Money rate savings ................................................................... 5,241,055 4,239,653
Other time deposits .................................................................. 9,779,594 10,123,129
Foreign deposits ..................................................................... 1,385,633 638,415
----------- -----------
Total deposits ...................................................................... 20,948,177 19,735,662
Short-term borrowed funds ............................................................. 3,276,177 2,539,824
Long-term debt ........................................................................ 3,575,517 2,320,978
Accounts payable and other liabilities ................................................ 443,101 308,439
----------- -----------
Total liabilities ................................................................... 28,242,972 24,904,903
----------- -----------
Shareholders' equity:
Preferred stock, $5 par, 5,000,000 shares authorized, none issued and outstanding
at December 31, 1997 and 1996 ....................................................... -- --
Common stock, $5 par, 500,000,000 shares authorized, issued and outstanding
141,763,220 at December 31, 1997 and 142,608,032 at December 31, 1996 ............... 708,816 713,040
Additional paid-in capital ........................................................... 161,018 209,368
Retained earnings .................................................................... 1,482,037 1,295,463
Loan to employee stock ownership plan and unvested restricted stock .................. (962) (9,073)
Net unrealized appreciation on securities available for sale, net of income taxes of
$31,593 in 1997 and $9,702 in 1996................................................... 48,918 13,707
----------- -----------
Total shareholders' equity .......................................................... 2,399,827 2,222,505
----------- -----------
Total liabilities and shareholders' equity .......................................... $30,642,799 $27,127,408
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
<PAGE>
BB&T CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
For the Years Ended December 31, 1997, 1996 and 1995
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
1997 1996 1995
--------------- --------------- -------------
<S> <C> <C> <C>
Interest Income
Interest and fees on loans and leases ........................... $ 1,768,024 $ 1,603,678 $1,555,558
Interest and dividends on securities ............................ 458,373 421,162 392,528
Interest on short-term investments .............................. 3,224 4,863 9,096
----------- ----------- ----------
Total interest income .......................................... 2,229,621 2,029,703 1,957,182
----------- ----------- ----------
Interest Expense
Interest on deposits ............................................ 774,291 748,153 719,991
Interest on short-term borrowed funds ........................... 148,130 121,442 195,342
Interest on long-term debt ...................................... 170,207 118,204 81,772
----------- ----------- ----------
Total interest expense ......................................... 1,092,628 987,799 997,105
----------- ----------- ----------
Net Interest Income ............................................... 1,136,993 1,041,904 960,077
Provision for loan and lease losses ............................. 97,526 62,246 42,378
----------- ----------- ----------
Net Interest Income After Provision for Loan and Lease Losses ..... 1,039,467 979,658 917,699
----------- ----------- ----------
Noninterest Income
Service charges on deposits ..................................... 148,844 132,809 114,108
Mortgage banking income ......................................... 50,383 40,218 31,497
Trust income .................................................... 31,957 28,794 23,872
Agency insurance commissions .................................... 40,148 27,541 19,874
Other insurance commissions ..................................... 13,164 12,822 12,384
Bankcard fees and merchant discounts ............................ 22,705 18,435 16,207
Other nondeposit fees and commissions ........................... 66,957 47,529 35,332
Securities gains (losses), net .................................. 3,164 3,179 (19,472)
Other income .................................................... 78,579 28,162 21,477
----------- ----------- ----------
Total noninterest income ....................................... 455,901 339,489 255,279
----------- ----------- ----------
Noninterest Expense
Personnel expense ............................................... 459,494 397,845 434,137
Occupancy and equipment expense ................................. 160,939 125,152 128,670
Federal deposit insurance expense ............................... 5,096 49,995 28,224
Amortization of intangibles and mortgage servicing rights ....... 24,370 15,218 11,902
Advertising and public relations expense ........................ 26,514 24,309 16,643
Professional services ........................................... 46,072 26,080 24,277
Other expense ................................................... 232,346 176,111 174,465
----------- ----------- ----------
Total noninterest expense ...................................... 954,831 814,710 818,318
----------- ----------- ----------
Earnings
Income before income taxes ...................................... 540,537 504,437 354,660
Provision for income taxes ...................................... 186,087 165,648 118,244
----------- ----------- ----------
Net Income ...................................................... 354,450 338,789 236,416
Preferred dividend requirements ................................. -- 610 5,079
----------- ----------- ----------
Income applicable to common shares ............................. $ 354,450 $ 338,179 $ 231,337
=========== =========== ==========
Per Common Share
Net income:
Basic .......................................................... $ 2.51 $ 2.39 $ 1.63
=========== =========== ==========
Diluted ........................................................ $ 2.46 $ 2.34 $ 1.60
=========== =========== ==========
Cash dividends declared ......................................... $ 1.16 $ 1.00 $ .86
=========== =========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
6
<PAGE>
BB&T CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
For the Years Ended December 31, 1997, 1996 and 1995
(Dollars in thousands)
<TABLE>
<CAPTION>
Shares of Additional Retained Total
Common Preferred Common Paid-In Earnings Shareholders'
Stock Stock Stock Capital and Other* Equity
--------------- ----------- ----------- ------------ ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1994, as
previously reported .................... 135,269,365 $ 3,850 $ 676,347 $ 285,703 $ 837,988 $1,803,888
Merger with Life Bancorp, Inc.
accounted for under the pooling-of-
interests method ...................... 6,328,163 -- 31,641 74,604 42,266 148,511
----------- -------- --------- ---------- ---------- ----------
Balance, December 31, 1994, restated ..... 141,597,528 3,850 707,988 360,307 880,254 1,952,399
Add (Deduct):
Net income ............................. -- -- -- -- 236,416 236,416
Common stock issued .................... 3,167,198 -- 15,836 34,050 1,287 51,173
Redemption of common stock ............. (1,993,351) -- (9,967) (37,344) -- (47,311)
Preferred stock cancellations and
conversions ........................... 104,836 (181) 524 (2,714) -- (2,371)
Net unrealized appreciation on
securities available for sale ......... -- -- -- -- 118,029 118,029
Cash dividends declared:
Common stock .......................... -- -- -- -- (120,315) (120,315)
Preferred stock ....................... -- -- -- -- (5,079) (5,079)
Other .................................. -- -- -- (16) 3,128 3,112
----------- -------- --------- ---------- ---------- ----------
Balance, December 31, 1995 ............... 142,876,211 3,669 714,381 354,283 1,113,720 2,186,053
Add (Deduct):
Net income ............................. -- -- -- -- 338,789 338,789
Common stock issued .................... 2,788,586 -- 13,942 57,178 1,386 72,506
Redemption of common stock ............. (7,391,457) -- (36,957) (185,614) 2 (222,569)
Preferred stock cancellations and
conversions ........................... 4,334,692 (3,669) 21,674 (18,005) -- --
Net unrealized depreciation on
securities available for sale ......... -- -- -- -- (22,182) (22,182)
Cash dividends declared:
Common stock .......................... -- -- -- -- (131,981) (131,981)
Preferred stock ....................... -- -- -- -- (610) (610)
Other .................................. -- -- -- 1,526 973 2,499
----------- -------- --------- ---------- ---------- ----------
Balance, December 31, 1996 ............... 142,608,032 -- 713,040 209,368 1,300,097 2,222,505
Add (Deduct):
Net income ............................. -- -- -- -- 354,450 354,450
Common stock issued .................... 6,098,340 -- 30,492 240,083 5,495 276,070
Redemption of common stock ............. (6,943,152) -- (34,716) (286,508) -- (321,224)
Net unrealized appreciation on
securities available for sale ......... -- -- -- -- 35,211 35,211
Cash dividends declared on common
stock ................................. -- -- -- -- (168,340) (168,340)
Other .................................. -- -- -- (1,925) 3,080 1,155
----------- -------- --------- ---------- ---------- ----------
Balance, December 31, 1997 ............... 141,763,220 $ -- $ 708,816 $ 161,018 $1,529,993 $2,399,827
=========== ======== ========= ========== ========== ==========
</TABLE>
- ---------
* Other includes net unrealized appreciation (depreciation) on securities
available for sale, unvested restricted stock and a loan to the employee
stock ownership plan.
The accompanying notes are an integral part of these consolidated financial
statements.
7
<PAGE>
BB&T CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1997, 1996 and 1995
(Dollars in thousands)
<TABLE>
<CAPTION>
1997
---------------
<S> <C>
Cash Flows From Operating Activities:
Net income .......................................................................... $ 354,450
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan and lease losses ............................................... 97,526
Depreciation of premises and equipment ............................................ 58,113
Amortization of intangibles and mortgage servicing rights ......................... 24,370
Accretion of negative goodwill .................................................... (6,180)
Amortization of unearned stock compensation ....................................... 1,227
Discount accretion and premium amortization on securities, net .................... 2,301
Net increase in trading account securities ........................................ (25,688)
Loss (gain) on sales of securities, net ........................................... (3,164)
Loss (gain) on sales of loans and mortgage loan servicing rights, net ............. (15,992)
Loss (gain) on disposals of premises and equipment, net ........................... 30,660
Proceeds from sales of loans held for sale ........................................ 1,562,944
Purchases of loans held for sale .................................................. (734,727)
Origination of loans held for sale, net of principal collected .................... (996,943)
Decrease (increase) in:
Accrued interest receivable ...................................................... 3,619
Other assets ..................................................................... (185,112)
Increase (decrease) in:
Accrued interest payable ......................................................... 4,584
Accounts payable and other liabilities ........................................... 96,500
Other, net ........................................................................ 1,139
-------------
Net cash provided by operating activities ........................................ 269,627
-------------
Cash Flows From Investing Activities:
Proceeds from sales of securities available for sale ................................ 1,560,400
Proceeds from maturities of securities available for sale ........................... 1,533,172
Purchases of securities available for sale .......................................... (3,424,111)
Proceeds from sales of securities held to maturity .................................. --
Proceeds from maturities of securities held to maturity ............................. 37,200
Purchases of securities held to maturity ............................................ (14,516)
Leases made to customers ............................................................ (74,420)
Principal collected on leases ....................................................... 57,581
Loan originations, net of principal collected ....................................... (1,147,154)
Purchases of loans .................................................................. (205,232)
Net cash acquired in transactions accounted for under the purchase method ........... 95,205
Purchases and originations of mortgage servicing rights ............................. (39,093)
Proceeds from disposals of premises and equipment ................................... 14,512
Purchases of premises and equipment ................................................. (146,970)
Proceeds from sales of foreclosed property .......................................... 15,917
Proceeds from sales of other real estate held for development or sale ............... 9,611
Other, net .......................................................................... 5,699
-------------
Net cash used in investing activities ............................................ (1,722,199)
-------------
Cash Flows From Financing Activities:
Net increase (decrease) in deposits ................................................. 317,024
Net (decrease) increase in short-term borrowed funds ................................ 388,268
Proceeds from long-term debt ........................................................ 5,598,914
Repayments of long-term debt ........................................................ (4,303,648)
Net proceeds from common stock issued ............................................... 22,583
Redemption of common stock .......................................................... (321,224)
Preferred stock cancellations and conversions ....................................... --
Cash dividends paid on common and preferred stock ................................... (155,688)
-------------
Net cash provided by financing activities ........................................ 1,546,229
-------------
Net (Decrease) Increase in Cash and Cash Equivalents ................................. 93,657
Cash and Cash Equivalents at Beginning of Year ....................................... 938,624
-------------
Cash and Cash Equivalents at End of Year ............................................. $ 1,032,281
=============
Supplemental Disclosure of Cash Flow Information:
Cash paid during the year for:
Interest ........................................................................... $ 1,043,047
Income taxes ....................................................................... 137,195
Noncash financing and investing activities:
Transfer of securities from held to maturity to available for sale ................. --
Transfer of securities from available for sale to held to maturity ................. --
Transfer of loans to foreclosed property ........................................... 17,136
Transfer of fixed assets to other real estate owned ................................ 13,761
Common stock issued upon conversion of debentures .................................. --
Restricted stock issued ............................................................ 74
Securitization of mortgage loans ................................................... --
=============
<CAPTION>
1996 1995
--------------- ---------------
<S> <C> <C>
Cash Flows From Operating Activities:
Net income .......................................................................... $ 338,789 $ 236,416
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan and lease losses ............................................... 62,246 42,378
Depreciation of premises and equipment ............................................ 45,601 42,363
Amortization of intangibles and mortgage servicing rights ......................... 15,218 11,902
Accretion of negative goodwill .................................................... (6,238) (6,239)
Amortization of unearned stock compensation ....................................... 2,450 3,128
Discount accretion and premium amortization on securities, net .................... 6,502 (26,156)
Net increase in trading account securities ........................................ -- --
Loss (gain) on sales of securities, net ........................................... (3,179) 19,472
Loss (gain) on sales of loans and mortgage loan servicing rights, net ............. (9,061) 1,477
Loss (gain) on disposals of premises and equipment, net ........................... 331 3,971
Proceeds from sales of loans held for sale ........................................ 1,349,010 799,757
Purchases of loans held for sale .................................................. (429,523) (311,059)
Origination of loans held for sale, net of principal collected .................... (880,376) (611,127)
Decrease (increase) in:
Accrued interest receivable ...................................................... 19,864 (27,162)
Other assets ..................................................................... (110,441) 14,388
Increase (decrease) in:
Accrued interest payable ......................................................... 5,567 15,012
Accounts payable and other liabilities ........................................... (9,888) 89,676
Other, net ........................................................................ 4,122 2,581
------------- -------------
Net cash provided by operating activities ........................................ 400,994 300,778
------------- -------------
Cash Flows From Investing Activities:
Proceeds from sales of securities available for sale ................................ 605,792 1,357,277
Proceeds from maturities of securities available for sale ........................... 2,709,491 1,711,859
Purchases of securities available for sale .......................................... (2,518,919) (3,343,379)
Proceeds from sales of securities held to maturity .................................. -- 3,810
Proceeds from maturities of securities held to maturity ............................. 179,423 396,804
Purchases of securities held to maturity ............................................ (301,392) (266,230)
Leases made to customers ............................................................ (72,390) (18,091)
Principal collected on leases ....................................................... 48,222 14,620
Loan originations, net of principal collected ....................................... (1,711,909) (764,684)
Purchases of loans .................................................................. (232,236) (189,997)
Net cash acquired in transactions accounted for under the purchase method ........... (4,187) --
Purchases and originations of mortgage servicing rights ............................. (26,356) (18,082)
Proceeds from disposals of premises and equipment ................................... 8,769 18,260
Purchases of premises and equipment ................................................. (70,161) (62,581)
Proceeds from sales of foreclosed property .......................................... 16,156 14,213
Proceeds from sales of other real estate held for development or sale ............... 8,961 2,241
Other, net .......................................................................... (3,818) (7,000)
------------- -------------
Net cash used in investing activities ............................................ (1,364,554) (1,150,960)
------------- -------------
Cash Flows From Financing Activities:
Net increase (decrease) in deposits ................................................. 740,026 892,888
Net (decrease) increase in short-term borrowed funds ................................ (144,341) (357,845)
Proceeds from long-term debt ........................................................ 1,586,766 2,945,754
Repayments of long-term debt ........................................................ (919,661) (2,471,904)
Net proceeds from common stock issued ............................................... 49,736 49,226
Redemption of common stock .......................................................... (225,565) (47,311)
Preferred stock cancellations and conversions ....................................... -- (2,371)
Cash dividends paid on common and preferred stock ................................... (127,771) (112,669)
------------- -------------
Net cash provided by financing activities ........................................ 959,190 895,768
------------- -------------
Net (Decrease) Increase in Cash and Cash Equivalents ................................. (4,370) 45,586
Cash and Cash Equivalents at Beginning of Year ....................................... 942,994 897,408
------------- -------------
Cash and Cash Equivalents at End of Year ............................................. $ 938,624 $ 942,994
============= =============
Supplemental Disclosure of Cash Flow Information:
Cash paid during the year for:
Interest ........................................................................... $ 956,827 $ 964,051
Income taxes ....................................................................... 163,947 147,465
Noncash financing and investing activities:
Transfer of securities from held to maturity to available for sale ................. 36,646 1,763,513
Transfer of securities from available for sale to held to maturity ................. 240 --
Transfer of loans to foreclosed property ........................................... 25,119 11,785
Transfer of fixed assets to other real estate owned ................................ 10,466 21,846
Common stock issued upon conversion of debentures .................................. -- 4,896
Restricted stock issued ............................................................ 88 --
Securitization of mortgage loans ................................................... 817,268 354,882
============= =============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
8
<PAGE>
BB&T CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 1997, 1996 and 1995
BB&T Corporation ("BB&T" or "Parent Company"), formerly Southern National
Corporation, is a multi-bank holding company organized under the laws of North
Carolina and registered with the Federal Reserve Board under the Bank Holding
Company Act of 1956, as amended. BB&T changed its corporate name from Southern
National Corporation effective at the close of business on May 16, 1997. Branch
Banking and Trust Company ("BB&T-NC"), Branch Banking and Trust Company of
South Carolina ("BB&T-SC"), Branch Banking and Trust Company of Virginia
("BB&T-VA"), Fidelity Federal Savings Bank ("Fidelity"), Virginia First Savings
Bank ("Virginia First") and Life Savings Bank, FSB ("Life") (collectively, the
"Banks"), Regional Acceptance Corporation ("Regional Acceptance") and Craigie
Incorporated ("Craigie") comprise the principal subsidiaries.
The accounting and reporting policies of BB&T Corporation and Subsidiaries
are in accordance with generally accepted accounting principles and conform to
general practices within the banking industry. The following is a summary of
the more significant policies.
NOTE A. Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements of BB&T include the accounts of the
Parent Company and its subsidiaries. In consolidation, all significant
intercompany accounts and transactions have been eliminated. Prior period
financial statements have been restated to include the accounts of companies
acquired in material transactions accounted for as poolings of interests (See
Note B). Results of operations of companies acquired in transactions accounted
for as purchases are included from the dates of acquisition.
Certain amounts for prior years have been reclassified to conform with
statement presentations for 1997. The reclassifications have no effect on
either shareholders' equity or net income as previously reported.
Nature of Operations
BB&T is a multi-bank holding company headquartered in Winston-Salem, North
Carolina. BB&T conducts its operations in North Carolina, South Carolina and
Virginia primarily through its commercial banking subsidiaries and, to a lesser
extent, through its other subsidiaries. BB&T's subsidiaries provide a full
range of traditional commercial banking services and additional services
including investment brokerage, trust services, agency insurance,
credit-related insurance and leasing. Substantially all of BB&T's loans are to
businesses and individuals in the Carolinas and Virginia.
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting periods. Actual results could differ from those estimates.
Cash and Cash Equivalents
Cash and cash equivalents include cash and due from banks,
interest-bearing bank balances, Federal funds sold and securities purchased
under resale agreements or similar arrangements. Generally, both cash and cash
equivalents are considered to have maturities of three months or less.
Accordingly, the carrying amount of such instruments is considered a reasonable
estimate of fair value.
Securities
BB&T classifies investment securities in one of three categories: held to
maturity, available for sale and trading. Debt securities acquired with both
the intent and ability to be held to maturity are classified as held to
maturity and reported at amortized cost. Gains or losses realized from the sale
of securities held to maturity, if any, are determined by specific
identification and are included in noninterest income.
9
<PAGE>
BB&T CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Securities, which may be used to meet liquidity needs arising from
unanticipated deposit and loan fluctuations, changes in regulatory capital and
investment requirements, or unforeseen changes in market conditions, including
interest rates, market values or inflation rates, are classified as available
for sale. Securities available for sale are reported at estimated fair value,
with unrealized gains and losses reported as a separate component of
shareholders' equity, net of deferred income tax. Gains or losses realized from
the sale of securities available for sale are determined by specific
identification and are included in noninterest income.
Trading account securities are selected according to fundamental and
technical analyses that identify potential market movements. Trading account
securities are positioned to take advantage of such movements and are reported
at fair value. Market adjustments, fees and gains or losses earned on trading
account securities are included in noninterest income. Interest income on
trading account securities is included in other interest income. Gains or
losses realized from the sale of trading securities are determined by specific
identification.
During 1996, BB&T transferred securities with an amortized cost of $36.6
million from the held-to-maturity portfolio to the available-for-sale
portfolio. These securities were previously classified as held-to-maturity by
entities acquired under the pooling-of-interests method of accounting. BB&T
transferred these amounts pursuant to the provisions of Statement of Financial
Accounting Standards ("SFAS") No. 115, "Accounting for Certain Investments in
Debt and Equity Securities,"to conform the combined investment portfolio to
BB&T's existing interest rate risk position.
During the fourth quarter of 1995, BB&T transferred $1.8 billion of
securities which were previously classified as held to maturity under SFAS No.
115 to the available-for-sale category. The Financial Accounting Standards
Board ("FASB") provided enterprises the opportunity to make a one-time
reassessment of the classification of all investment securities held at that
time, such that the reclassification of any security from the held-to-maturity
category would not call into question the enterprise's intent to hold other
debt securities to maturity in the future. Management anticipates that this
classification will allow more flexibility in the day-to-day management of the
overall portfolio than the prior classifications.
Loans Held for Sale
Loans held for sale are reported at the lower of cost or market value on
an aggregate loan basis. Gains or losses realized on the sales of loans are
recognized at the time of sale and are determined by the difference between the
net sales proceeds and the carrying value of the loans sold, adjusted for any
servicing asset or liability. Any resulting deferred premium or discount is
amortized, as an adjustment of servicing income, over the estimated lives of
the loans using the level-yield method.
Loans and Lease Receivables
Loans receivable that management has the intent and ability to hold for
the foreseeable future or are reported at their outstanding principal balances
adjusted for any deferred fees or costs and unamortized premiums or discounts.
The net amount of nonrefundable loan origination fees, including commitment
fees and certain direct costs associated with the lending process are deferred
and amortized to interest income over the contractual lives of the loans using
methods which approximate level-yield, with adjustments for prepayments as they
occur. If the loan commitment expires unexercised, the income is recognized
upon expiration of the commitment. Discounts and premiums are amortized to
interest income over the estimated life of the loans using methods which
approximate level-yield.
Commercial loans and substantially all installment loans accrue interest
on the unpaid balance of the loans. Lease receivables consist primarily of
direct financing leases on rolling stock, equipment and real property. Lease
receivables are stated at the total amount of lease payments receivable plus
guaranteed residual values, less unearned income. Recognition of income over
the lives of the lease contracts approximates the level-yield method.
As of January 1, 1995, BB&T adopted SFAS No. 114, "Accounting by Creditors
for Impairment of a Loan," which was amended by SFAS No. 118, "Accounting by
Creditors for Impairment of a Loan-Income Recognition and Disclosures." SFAS
No. 114, as amended, requires that impaired loans be measured based on the
present value of expected future cash flows discounted at the loan's effective
interest rate, or as a practical expedient, at the loan's observable market
price or the fair value of the collateral if the loan is collateral-dependent.
A loan is impaired when, based on current information and events, it is
probable that BB&T will be unable to collect all amounts due according to the
contractual terms of the loan
10
<PAGE>
BB&T CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
agreement. When the measure of the impaired loan is less than the recorded
investment in the loan, the impairment is recorded through a valuation
allowance. BB&T had previously measured the allowance for credit losses using
methods similar to those prescribed in SFAS No. 114. As a result of adopting
these statements, no additional allowance for loan losses was required as of
January 1, 1995.
BB&T's policy is to disclose as impaired loans all commercial loans,
greater than $250,000, that are on nonaccrual status. Substantially all other
loans made by BB&T are excluded from the scope of SFAS No. 114 as they are
large groups of smaller balance homogeneous loans (residential mortgage and
consumer installment) that are collectively evaluated for impairment.
Allowance for Loan and Lease Losses
The provision for loan and lease losses is the estimated amount required
to maintain the allowance for loan and lease losses at a level adequate to
cover estimated incurred losses related to loans and leases currently
outstanding. The primary factors considered in determining the allowance are
the distribution of loans by risk class, the amount of the allowance
specifically allocated to nonperforming loans and other problem loans, prior
years' loan loss experience, economic conditions in BB&T's market areas and the
growth of the credit portfolio. While management uses the best information
available in establishing the allowance for losses, future adjustments to the
allowance may be necessary if economic conditions differ substantially from the
assumptions used in making the valuations or if required by regulators based
upon information available to them at the time of their examinations. Such
adjustments to original estimates, as necessary, are made in the period in
which these factors and other relevant considerations indicate that loss levels
may vary from previous estimates.
Nonperforming Assets
Nonperforming assets include loans and leases on which interest is not
being accrued and foreclosed property. Foreclosed property consists of real
estate and other assets acquired through customers' loan defaults.
Commercial and unsecured consumer loans and leases are generally placed on
nonaccrual status when concern exists that principal or interest is not fully
collectible, or when any portion of principal or interest becomes 90 days past
due, whichever occurs first. Mortgage loans and most other consumer loans past
due 90 days or more may remain on accrual status if management determines that
concern over the collectability of principal and interest is not significant.
When loans are placed on nonaccrual status, interest receivable is reversed
against interest income in the current period. Interest payments received
thereafter are applied as a reduction to the remaining principal balance when
concern exists as to the ultimate collection of the principal. Loans and leases
are removed from nonaccrual status when they become current as to both
principal and interest and when concern no longer exists as to the
collectability of principal or interest.
Assets acquired as a result of foreclosure are valued at the lower of cost
or fair value, and carried thereafter at the lower of cost or fair value less
estimated costs to sell the asset. Cost is the sum of unpaid principal, accrued
but unpaid interest and acquisition costs associated with the loan. Any excess
of unpaid principal over fair value at the time of foreclosure is charged to
the allowance for losses. Generally, such properties are appraised annually and
the carrying value, if greater than the fair value, less costs to sell, is
adjusted with a charge to income. Routine maintenance costs, declines in market
value and net losses on disposal are included in other noninterest expense.
Premises and Equipment
Premises, equipment, capital leases and leasehold improvements are stated
at cost less accumulated depreciation or amortization. Depreciation is computed
principally using the straight-line method over the estimated useful lives of
the related assets. Leasehold improvements are amortized on a straight-line
basis over the lesser of the lease terms or the estimated useful lives of the
improvements. Capitalized leases are amortized by the same methods as premises
and equipment over the estimated useful lives or the lease term, whichever is
lesser. Obligations under capital leases are amortized using the interest
method to allocate payments between principal reduction and interest expense.
Income Taxes
BB&T and its subsidiaries file a consolidated Federal income tax return.
Each subsidiary pays its calculated portion of Federal income taxes to BB&T, or
receives payment from BB&T to the extent that tax benefits are realized.
Deferred income
11
<PAGE>
BB&T CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
taxes have been provided where different accounting methods have been used for
reporting for income tax purposes and for financial reporting purposes.
Deferred tax assets and liabilities are recognized based on future tax
consequences of the differences arising from their carrying values and
respective tax bases. In the event of changes in the tax laws, deferred tax
assets and liabilities are adjusted in the period of the enactment of those
changes, with effects included in the income tax provision.
Institutions acquired during the current fiscal year file separate federal
income tax returns for the periods prior to consummation of the acquisitions.
Derivatives and Off-Balance Sheet Instruments
BB&T utilizes a variety of derivative financial instruments to manage
various financial risks. These instruments include financial forward and
futures contracts, options written and purchased, interest rate caps and floors
and interest rate swaps. Management accounts for these financial instruments as
hedges when the following conditions are met: (1) the specific assets,
liabilities, firm commitments or anticipated transactions (or an identifiable
group of essentially similar items) to be hedged expose BB&T to interest rate
risk or price risk; (2) the financial instrument reduces that exposure; (3) the
financial instrument is designated as a hedge at inception; and (4) at the
inception of the hedge and throughout the hedge period, there is a high
correlation of changes in the fair value or the net interest income associated
with the financial instrument and the hedged items.
The net interest payable or receivable on interest rate swaps, caps and
floors that are designated as hedges is accrued and recognized as an adjustment
to the interest income or expense of the related asset or liability. For
interest rate forwards, futures and options qualifying as a hedge, gains and
losses are deferred and are recognized in income as an adjustment of yield.
Gains and losses from early terminations of derivatives are deferred and
amortized as yield adjustments over the shorter of the remaining term of the
hedged asset or liability or the remaining term of the derivative instrument.
Upon disposition or settlement of the asset or liability being hedged, deferral
accounting is discontinued and any gains or losses are recognized in income.
Derivative financial instruments that fail to qualify as a hedge are carried at
fair value with gains and losses recognized in current earnings.
BB&T utilizes written covered over-the-counter call options on specific
securities in the available-for-sale securities portfolio in order to enhance
returns. Fees received are deferred and recognized in noninterest income upon
exercise or expiration. Written options are carried at estimated fair value.
Unrealized and realized gains and losses on written call options are included
with securities gains and losses.
BB&T also utilizes over-the-counter purchased put options and net
purchased put options (combination of purchased put option and written call
option) in its mortgage banking activities. These options are used to hedge the
mortgage warehouse and pipeline against increasing interest rates. Written call
options are used in tandem with purchased put options to create a net purchased
put option that reduces the cost of the hedge. Net unrealized gains and losses
on purchased put options and net purchased put options are carried with loans
held for sale at the lower of cost or market on an aggregate basis. Realized
gains and losses on purchased put options and net purchased put options are
included in mortgage banking income.
Per Share Data
Effective December 31, 1997, BB&T adopted the provisions of SFAS No. 128,
"Earnings Per Share." This statement establishes standards for computing and
presenting earnings per share ("EPS") and simplifies the standards for
computation previously found in Accounting Principles Board ("APB") Opinion No.
15, "Earnings Per Share," making them more comparable to international EPS
standards. It replaces the presentation of primary EPS with a presentation of
basic EPS and requires dual presentation of basic and diluted EPS (which
replaces the former fully diluted EPS) for all entities with complex capital
structures. The EPS information reported herein reflects the implementation of
SFAS No. 128. Prior periods have been restated to include the provisions of the
statement.
Basic net income per common share has been computed by dividing net income
applicable to common shares by the weighted average number of shares of common
stock outstanding during the years presented.
12
<PAGE>
BB&T CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Diluted net income per common share has been computed by dividing net
income, as adjusted for the interest expense related to convertible debt in
prior years, by the weighted average number of shares of common stock, common
stock equivalents and other potentially dilutive securities outstanding during
the years. Restricted stock grants are considered as issued for purposes of
calculating net income per share.
Weighted average numbers of shares were as follows:
<TABLE>
<CAPTION>
1997 1996 1995
------------- ------------- ------------
<S> <C> <C> <C>
Basic ............ 141,062,260 141,549,598 141,829,072
Diluted .......... 143,798,238 144,560,965 147,871,049
</TABLE>
Intangible Assets
BB&T's intangible assets consist of the cost in excess of the fair value
of net assets acquired in transactions accounted for as purchases (goodwill),
premiums paid on acquisitions of deposits (core deposit intangibles) and other
identifiable intangible assets. Such assets are included in other assets in the
"Consolidated Balance Sheets." Intangible assets are being amortized on
straight-line or accelerated bases over periods ranging from 5 to 25 years. At
December 31, 1997, BB&T had $206.0 million recorded as goodwill and $6.8
million as core deposit and other intangibles, net of amortization. Negative
goodwill is created when the fair value of the net assets purchased exceeds the
purchase price. Such balances are included in other liabilities in the
"Consolidated Balance Sheets" and are being amortized over periods ranging from
10 to 15 years. At December 31, 1997, BB&T had negative goodwill totaling $33.0
million, net of amortization.
Mortgage Servicing Rights
Amounts paid to acquire the right to service certain mortgage loans are
capitalized and amortized over the estimated lives of the loans to which they
relate. In May 1995, the FASB issued SFAS No. 122, "Accounting for Mortgage
Servicing Rights," which amends SFAS No. 65, "Accounting for Certain Mortgage
Banking Activities." This statement was superseded by SFAS No. 125, "Accounting
for Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities," which BB&T adopted on January 1, 1997. SFAS No. 122, as
superseded by SFAS No. 125, requires that mortgage banking enterprises
recognize, as separate assets, rights to service mortgage loans for others,
however those servicing rights are obtained. The statement further requires
mortgage banking enterprises to assess their capitalized mortgage servicing
rights for impairment based on the fair value of those rights. BB&T elected, in
the third quarter of 1995, to adopt this statement effective as of January 1,
1995. The impact of the adoption of this statement resulted in additional
mortgage banking income of $7.6 million, before taxes, or $.03 per diluted
share, after taxes, during 1995. SFAS No. 125 prohibits retroactive application
to prior years. At December 31, 1997, BB&T had capitalized mortgage servicing
rights totaling $68.8 million.
Changes in Accounting Principles and Effects of New Accounting
Pronouncements
During 1995, the FASB issued SFAS No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." This
statement establishes accounting standards for long-lived assets, certain
identifiable intangibles and goodwill related to those assets to be held and to
be disposed of. The statement requires such assets to be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Any resulting impairment
loss is required to be reported in the period in which the recognition criteria
are first applied and met. BB&T adopted the provisions of the statement on
January 1, 1996. The implementation did not have a material impact on the
consolidated financial position or consolidated results of operations.
In October of 1995, the FASB issued SFAS No. 123, "Accounting for
Stock-Based Compensation," which establishes financial accounting and reporting
standards for stock-based compensation plans. The statement defines a fair
value based method of accounting for an employee stock option or similar equity
instrument and encourages the adoption of that method of accounting. However,
the statement also allows entities to continue to account for such plans under
Accounting Principles Board Opinion No. 25. Entities electing to remain with
the accounting in Opinion No. 25 must make pro forma disclosures of net income
and earnings per share as if the fair value based method of accounting defined
in the statement had been applied. BB&T adopted the statement effective January
1, 1996 and elected to continue to account for stock-based compensation plans
under the provisions of Opinion No. 25. Therefore, the implementation of the
statement did not have an impact
13
<PAGE>
BB&T CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
on BB&T's consolidated financial position or consolidated results of
operations. The required pro forma disclosures relating to SFAS No. 123 are
presented in Note J.
In June of 1996, the FASB issued SFAS No. 125, "Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities," which
provides accounting and reporting standards for such transactions based on
consistent application of a financial components approach. This approach
recognizes the financial and servicing assets an entity controls and the
liabilities it has incurred, as well as derecognizes financial assets when
control has been surrendered and liabilities when they are extinguished. The
statement requires that liabilities and derivatives incurred or obtained by
transferors as part of a transfer of financial assets be initially measured at
fair value, if practicable. It also requires that servicing assets and other
retained interests in the transferred assets be measured by allocating the
previous carrying amount between the assets sold, if any, and retained
interests, if any, based on their relative fair values at the date of transfer.
In December 1996, the FASB issued SFAS No. 127, "Deferral of the Effective Date
of Certain Provisions of FASB Statement No. 125." This statement allows the
implementation of certain provisions of SFAS No. 125 to be deferred for one
year. BB&T adopted SFAS No. 125, as amended by SFAS No. 127, effective January
1, 1997. The adoption of these statements did not have a material impact on
BB&T's consolidated financial position or consolidated results of operations.
In February of 1997, the FASB issued SFAS No. 128, "Earnings Per Share,"
as discussed above. The statement was effective for financial statements issued
for periods ending after December 15, 1997, including interim periods, and
requires restatement of all prior periods presented. Accordingly, BB&T adopted
the provisions of the statement effective December 31, 1997, including
retroactive restatement of prior periods. The implementation of the statement
did not have a material impact on BB&T's consolidated financial position or
consolidated results of operations.
In February of 1997, the FASB issued SFAS No. 129, "Disclosure of
Information about Capital Structure," which establishes standards for
disclosing information about an entity's capital structure by continuing and
amending existing standards. The statement is effective for financial
statements for periods ending after December 15, 1997. Management has
determined that BB&T is currently in compliance with the disclosure
requirements of SFAS No. 129, and, therefore, the implementation of the
statement did not affect the capital structure disclosures made by BB&T.
In June of 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income," which establishes standards for reporting and displaying comprehensive
income (revenues, expenses, gains and losses) in a full set of general purpose
financial statements. Comprehensive income is net income plus other
comprehensive income, or the change in equity (net assets) of a company during
a period from transactions and other events. SFAS No. 130 is effective for
fiscal years beginning after December 15, 1997, including interim periods, and
requires restatement of all prior periods presented. Management does not
believe that the implementation of the statement will have a material impact on
the consolidated financial position or consolidated results of operations of
BB&T, but will require additional disclosures to be made. Currently, BB&T's
only item that is considered to qualify as other comprehensive income is
unrealized gains and losses on available-for-sale securities, net of
reclassification adjustments and taxes. At December 31, 1997, this balance
totaled $48.9 million.
In June of 1997, the FASB issued SFAS No. 131, "Disclosures about Segments
of an Enterprise and Related Information," which establishes standards for the
way that business enterprises report information about operating segments in
annual financial statements and requires that those enterprises report selected
information about operating segments in interim financial reports. It also
establishes standards for related disclosures about products and services,
geographic areas and major customers. SFAS No. 131 is effective for periods
beginning after December 15, 1997, and requires restatement of all prior
periods presented. Management does not believe that the implementation of the
statement will have a material impact on the consolidated financial position or
consolidated results of operations of BB&T, but will require substantial
additional disclosures to be made.
In March of 1998, the FASB issued SFAS No. 132, "Employers' Disclosures
about Pensions and Other Postretirement Benefits," which revises the disclosure
requirements for pensions and other postretirement benefit plans. SFAS No. 132
is effective for periods ending after December 15, 1997, and requires
restatement of all prior periods presented. Management does not believe that
the implementation of the statement will have a material impact on the
consolidated financial position or consolidated results of operations of BB&T,
but will require additional disclosures to be made.
14
<PAGE>
BB&T CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Supplemental Disclosures of Cash Flow Information
As referenced in the "Consolidated Statements of Cash Flows," BB&T
acquired assets and assumed liabilities in transactions accounted for under the
purchase method of accounting. The fair values of these assets acquired and
liabilities assumed, at acquisition, were as follows:
<TABLE>
<CAPTION>
1997 1996 1995
------------- ------------ -----
(Dollars in thousands)
<S> <C> <C> <C>
Fair value of net assets acquired ................ $ 129,719 $ 4,994 $--
Purchase price ................................... (276,483) (31,056) --
---------- --------- ---
Excess of purchase price over net assets acquired $ (146,764) $ (26,062) $--
========== ========= ===
</TABLE>
During the first quarter of 1996, BB&T redeemed all outstanding shares of
Convertible Preferred Stock. This transaction, a noncash financing activity,
resulted in the conversion of 733,869 shares of preferred stock into 4,334,692
shares of common stock.
Income and Expense Recognition
Items of income and expense are recognized using the accrual basis of
accounting, except for some immaterial amounts.
NOTE B. Acquisitions and Mergers
Completed Mergers and Acquisitions
On June 30, 1996, BB&T completed the purchase of certain fixed assets and
expiration rights from the James R. Lingle Agency of Florence, South Carolina.
In conjunction with the purchase, BB&T recorded expiration rights totaling $1.7
million which are being amortized using the straight-line method over 15 years.
On August 28, 1996, BB&T became a majority shareholder of AutoBase
Information Systems, Inc., ("AutoBase") through the purchase of 51% of
AutoBase's outstanding common stock. In conjunction with this investment, BB&T
recorded $1.2 million in goodwill which is being amortized using the
straight-line method over 15 years.
During November 1996, BB&T completed the acquisitions of three insurance
agencies in South Carolina. On November 7, 1996, BB&T completed the acquisition
of the William Goldsmith Agency Inc. ("Goldsmith") of Greenville, South
Carolina through the issuance of 70,207 shares of common stock. On November 13,
1996, BB&T completed the acquisition of the C. Dan Joyner Insurance Agency
("Joyner") based in Greenville, South Carolina through the issuance of 48,120
shares of common stock. Boyle-Vaughan Associates, Inc. ("Boyle-Vaughan") based
in Columbia, South Carolina, was acquired on November 22, 1996 through the
issuance of 492,063 shares of common stock. In conjunction with the purchase of
these agencies, BB&T recorded $17.9 million in goodwill, which is being
amortized using the straight-line method over 15 years.
On January 31, 1996, BB&T completed its acquisition of Seaboard Bancorp,
Inc. ("Seaboard Bancorp") of Virginia Beach, Virginia, in a transaction
accounted for as a purchase. The acquisition was accomplished through the
payment of $8.8 million in cash. In conjunction with the purchase, BB&T
recorded $5.2 million in goodwill, which is being amortized using the
straight-line method over 15 years.
On March 1, 1997, BB&T completed its acquisition of Fidelity Financial
Bankshares Corporation ("Fidelity") of Richmond, Virginia, in a transaction
accounted for as a purchase. BB&T issued 1.6 million shares for all of the
shares of Fidelity's common stock outstanding. In conjunction with the
acquisition, BB&T recorded $37.9 million in goodwill, which is being amortized
using the straight-line method over 15 years.
On May 20, 1997, BB&T completed its acquisition of Phillips Factors
Corporation ("Phillips") and its subsidiaries, Phillips Financial Corporation
and Phillips Acceptance Corporation, all of High Point, North Carolina.
Phillips purchases and manages receivables in the temporary staffing industry
nationwide. It also provides payroll processing services to that industry.
Phillips also buys and manages account receivables primarily in the furniture,
textiles and home furnishings-related industries. The acquisition of Phillips
was accounted for as a purchase. In conjunction with the acquisition, BB&T
recorded $11.1 million of goodwill which is being amortized using the
straight-line method over 15 years.
15
<PAGE>
BB&T CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
On July 31, 1997, BB&T completed its acquisition of Refloat, Inc. of Mount
Airy, North Carolina, and its principal subsidiary, Sheffield Financial Corp.
(collectively, "Refloat"), a financial company that specializes in loans to
small commercial lawn care businesses across the country. The acquisition,
which was completed through the issuance of 375,000 shares of common stock, was
accounted for as a purchase. In conjunction with the acquisition of Refloat,
BB&T recorded $3.0 million of goodwill which is being amortized using the
straight-line method over 15 years.
On October 1, 1997, BB&T completed its acquisition of Craigie Incorporated
("Craigie"), an investment banking firm located in Richmond, Virginia. Craigie
specializes in the origination, trading and distribution of fixed-income
securities and equity products in both the public and private capital markets.
Craigie also has a public finance department that provides investment banking
services, financial advisory services and municipal bond financing to a variety
of regional tax-exempt issuers. The acquisition, which was accounted for as a
purchase, was accomplished through the issuance of approximately 463,000 shares
of BB&T's common stock. In conjunction with the acquisition, BB&T recorded $6.8
million of goodwill, which is being amortized using the straight-line method
over a period of 25 years.
On December 1, 1997, BB&T completed its acquisition of Virginia First
Financial Corporation of Petersburg, Virginia ("Virginia First"), a financial
institution with $822.9 million in assets at the time of purchase. The merger,
which was accounted for under the purchase method of accounting, was
consummated through the issuance of 1.9 million shares of BB&T's common stock
and the payment of $44.8 million. In conjunction with the acquisition, BB&T
recorded $89.5 million in goodwill, which is being amortized using the
straight-line method over a period of 15 years.
The above-discussed acquisitions were accounted for under the purchase
method of accounting, and, therefore, the financial information contained
herein includes data relevant to the acquirees since the date of acquisition.
The pro forma effects of the material 1997 purchase transactions, as if they
had been acquired as of the beginning of the years presented, are presented in
the accompanying table:
<TABLE>
<CAPTION>
For the Years Ended
-------------------------------
1997 1996
--------------- ---------------
(Dollars in thousands,
except per share data)
<S> <C> <C>
Total revenues ......... $ 1,536,925 $ 1,436,786
=========== ===========
Net income ............. $ 354,437 $ 337,026
=========== ===========
Basic EPS .............. $ 2.51 $ 2.38
=========== ===========
Diluted EPS ............ $ 2.46 $ 2.33
=========== ===========
</TABLE>
On February 28, 1995, BB&T (formerly Southern National Corporation) and
BB&T Financial Corporation completed a merger accounted for as a pooling of
interests. BB&T Financial Corporation's shareholders received 57.9 million
shares of the common stock of the resulting company for all of the shares of
BB&T Financial Corporation stock held. On January 10, 1995, BB&T acquired
Commerce Bank (subsequently, BB&T-VA) through the issuance of 5.2 million
shares of BB&T common stock for all of the outstanding stock of Commerce Bank.
On April 28, 1995, BB&T issued 75,273 shares of common stock to complete
an acquisition of United Agencies, Inc., a general insurance agency located in
Wilmington, North Carolina. The transaction was accounted for under the
pooling-of-interests method of accounting.
Effective January 25, 1996, BB&T consummated a merger with Seaboard
Savings Bank, Inc. ("Seaboard"), headquartered in Plymouth, North Carolina.
BB&T issued 475,158 shares of common stock for all of the outstanding shares of
Seaboard common stock. The transaction was accounted for as a pooling of
interests.
Effective March 29, 1996, BB&T consummated a merger with Triad Bank
("Triad") headquartered in Greensboro, North Carolina. BB&T issued 1.8 million
shares of common stock for all of the outstanding shares of Triad common stock.
The transaction was accounted for as a pooling of interests.
On August 30, 1996, BB&T issued 42,135 shares of common stock to complete
an acquisition of Tomlinson Insurers, Inc., a general insurance agency in
Fayetteville, North Carolina. The transaction was accounted for under the
pooling-of-interests method of accounting.
16
<PAGE>
BB&T CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
On September 1, 1996, BB&T completed a merger with Regional Acceptance
Corporation of Greenville, N.C. ("Regional Acceptance") in a transaction
accounted for as a pooling of interests. BB&T issued 5.85 million shares in
exchange for all of the outstanding stock of Regional Acceptance.
On July 1, 1997, BB&T merged with United Carolina Bancshares Corporation
("UCB") of Whiteville, North Carolina, in a stock transaction accounted for as
a pooling of interests. UCB shareholders received 27.7 million shares of BB&T
common stock in exchange for all of the shares of UCB common stock outstanding.
On March 1, 1998, BB&T completed its merger with Life Bancorp, Inc.
("Life") of Norfolk, Virginia. The transaction was accounted for as a pooling
of interests. In conjunction with the merger, BB&T issued 5.8 million shares of
common stock in exchange for all of the outstanding shares of Life common
stock.
The following presentation reflects key line items on an historical basis
for BB&T and Life and on a restated basis assuming the merger was effective as
of and for the periods presented.
<TABLE>
<CAPTION>
Historical Basis
----------------------------- BB&T
BB&T Life restated*
--------------- ------------- ----------------
(Dollars in thousands, except per share data)
<S> <C> <C> <C>
1997
- -----
Net interest income .......... $ 1,099,525 $ 37,468 $ 1,136,993
Net income ................... 359,942 (5,492) 354,450
Net earnings per share
Basic ...................... 2.65 (0.60) 2.51
Diluted .................... 2.60 (0.57) 2.46
Assets ....................... 29,177,600 1,465,199 30,642,799
Deposits ..................... 20,210,116 738,061 20,948,177
Shareholders' equity ......... 2,237,637 162,190 2,399,827
1996
- -----
Net interest income .......... $ 1,007,700 $ 34,204 $ 1,041,904
Net income ................... 330,175 8,614 338,789
Net earnings per share
Basic ...................... 2.42 .90 2.39
Diluted .................... 2.38 .89 2.34
Assets ....................... 25,707,646 1,419,762 27,127,408
Deposits ..................... 19,003,340 732,322 19,735,662
Shareholders' equity ......... 2,071,567 150,938 2,222,505
</TABLE>
- ---------
* Balances reflect adjustments necessary to combine BB&T and Life accounts.
Pending Mergers and Acquisitions
On December 16, 1997, BB&T announced plans to acquire Franklin
Bancorporation Inc. ("Franklin") of Washington, D.C. in a stock transaction to
be accounted for under the pooling-of-interests method of accounting. Franklin
shareholders will receive between .35 and .3743 shares of BB&T common stock in
exchange for each share of Franklin stock held.
On February 25, 1998, BB&T announced plans to acquire Maryland Federal
Bancorp, Inc. ("Maryland Federal") of Hyattsville, Maryland in a stock
transaction to be accounted for as a purchase. Maryland Federal shareholders
will receive no less than .5975 and no greater than .6102 shares of BB&T common
stock in exchange for each share of Maryland Federal stock held.
17
<PAGE>
BB&T CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE C. Securities
The amortized costs and estimated fair values of securities held to
maturity and available for sale were as follows:
<TABLE>
<CAPTION>
December 31, 1997
----------------------------------------------
Gross Unrealized Estimated
Amortized ------------------ Fair
Cost Gains Losses Value
------------- --------- -------- -------------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Securities held to maturity:
U.S. Treasury, government
and agency obligations ............ $ 14,952 $ -- $ 30 $ 14,922
States and political
subdivisions ...................... 132,847 3,884 72 136,659
Mortgage-backed securities .......... -- -- -- --
---------- ------- ------ ----------
Total securities held to
maturity .......................... 147,799 3,884 102 151,581
---------- ------- ------ ----------
Securities available for sale:
U.S. Treasury, government
and agency obligations ............ 4,315,512 32,521 5,382 4,342,651
States and political
subdivisions ...................... 36,785 387 31 37,141
Mortgage-backed securities .......... 2,354,343 43,513 3,078 2,394,778
Equity and other securities ......... 412,047 12,583 2 424,628
---------- ------- ------ ----------
Total securities available
for sale .......................... 7,118,687 89,004 8,493 7,199,198
---------- ------- ------ ----------
Total securities .................... $7,266,486 $92,888 $8,595 $7,350,779
========== ======= ====== ==========
<CAPTION>
December 31, 1996
-----------------------------------------------
Gross Unrealized Estimated
Amortized -------------------- Fair
Cost Gains Losses Value
------------- --------- ---------- ------------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Securities held to maturity:
U.S. Treasury, government
and agency obligations ............ $ 6,283 $ -- $ 4 $ 6,279
States and political
subdivisions ...................... 164,525 5,121 181 169,465
Mortgage-backed securities .......... 140,974 1,247 952 141,269
---------- ------- ------- ----------
Total securities held to
maturity .......................... 311,782 6,368 1,137 317,013
---------- ------- ------- ----------
Securities available for sale:
U.S. Treasury, government
and agency obligations ............ 3,980,355 17,405 12,979 3,984,781
States and political
subdivisions ...................... 23,985 168 176 23,977
Mortgage-backed securities .......... 2,297,120 35,596 16,605 2,316,111
Equity and other securities ......... 298,266 2 2 298,266
---------- ------- ------- ----------
Total securities available
for sale .......................... 6,599,726 53,171 29,762 6,623,135
---------- ------- ------- ----------
Total securities .................... $6,911,508 $59,539 $30,899 $6,940,148
========== ======= ======= ==========
</TABLE>
Securities with a book value of approximately $3.7 billion and $3.1
billion at December 31, 1997 and 1996, respectively, were pledged to secure
municipal deposits, securities sold under agreements to repurchase, Federal
Reserve discount window borrowings and for other purposes as required by law.
At December 31, 1997 and 1996, there was no concentration of investments
in obligations of states and political subdivisions that were secured by or
payable from the same taxing authority or revenue source and that exceeded ten
percent of shareholders' equity. Trading securities totaling $67.9 million are
excluded from the accompanying tables. These securities are reported at fair
value with net unrealized gains of $.7 million included in earnings during
1997.
Proceeds from sales of securities during 1997, 1996 and 1995 were $1.6
billion, $605.8 million and $1.4 billion, respectively. Gross gains of $6.8
million, $5.5 million and $3.6 million and gross losses of $3.6 million, $2.3
million and $23.1 million were realized on those sales in 1997, 1996 and 1995,
respectively.
The amortized cost and estimated fair value of the securities portfolio at
December 31, 1997, by contractual maturity, are shown in the accompanying
table. The expected life of mortgage-backed securities will differ from
contractual maturities because borrowers may have the right to call or prepay
the underlying mortgage loans with or without call or prepayment penalties. For
purposes of the maturity table, mortgage-backed securities, which are not due
at a single maturity date, have been allocated over maturity groupings based on
the weighted average contractual maturities of underlying collateral.
18
<PAGE>
BB&T CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
December 31, 1997
--------------------------------------------------
Held to Maturity Available for Sale
----------------------- --------------------------
Estimated Estimated
Amortized Fair Amortized Fair
Cost Value Cost Value
----------- ----------- ------------- ------------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Debt Securities
Due in one year or less .................... $ 38,677 $ 38,737 $ 755,903 $ 766,585
Due after one year through five years ...... 95,435 98,367 3,581,101 3,596,117
Due after five years through ten years ..... 11,494 12,077 403,548 405,010
Due after ten years ........................ 2,193 2,400 1,987,013 2,027,799
-------- -------- ---------- ----------
Total debt securities .................... $147,799 $151,581 $6,727,565 $6,795,511
======== ======== ========== ==========
</TABLE>
NOTE D. Loans and Leases
Loans and leases were composed of the following:
<TABLE>
<CAPTION>
December 31,
---------------------------
1997 1996
------------- -------------
(Dollars in thousands)
<S> <C> <C>
Loans:
Commercial, financial and agricultural ............... $ 3,012,613 $ 2,715,363
Real estate -- construction and land development ..... 2,154,094 1,552,561
Real estate -- mortgage .............................. 11,956,390 10,641,833
Consumer ............................................. 2,745,706 2,827,214
----------- -----------
Loans held for investment .......................... 19,868,803 17,736,971
----------- -----------
Leases ................................................ 788,462 576,991
----------- -----------
Total loans and leases ..................................... 20,657,265 18,313,962
Less: unearned income ...................................... 232,977 163,677
----------- -----------
Loans and leases, net of unearned income ................... $20,424,288 $18,150,285
=========== ===========
</TABLE>
The net investment in direct financing leases was $616.3 million and
$470.5 million at December 31, 1997 and 1996, respectively. BB&T had loans held
for sale at December 31, 1997 and 1996 totaling $509.1 million and $228.3
million, respectively.
BB&T's only significant concentration of credit at December 31, 1997
occurred in loans secured by real estate, which totaled $14.6 billion. However,
this amount was not concentrated in any specific market or geographic area
other than the Banks' primary markets.
The following table sets forth certain information regarding BB&T's
impaired loans as defined under SFAS No. 114.
<TABLE>
<CAPTION>
December 31,
---------------------
1997 1996
---------- ----------
(Dollars in thousands)
<S> <C> <C>
Total recorded investment -- impaired loans ................. $31,423 $27,501
------- -------
Total recorded investment with related valuation allowance .. 31,423 26,423
Valuation allowance assigned to impaired loans .............. 3,086 6,030
------- -------
Net carrying value -- impaired loans ...................... $28,337 $20,393
======= =======
Average balance of impaired loans ........................... $23,296 $32,307
======= =======
Cash basis interest income recognized on impaired loans ..... $ 189 $ 554
======= =======
</TABLE>
19
<PAGE>
BB&T CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table provides an analysis of loans made to directors,
executive officers and their interests, which in the aggregate exceeded $60,000
at any time during 1997. All amounts shown represent loans made by BB&T's
subsidiary banks in the ordinary course of business at the Banks' normal credit
terms, including interest rate and collateralization prevailing at the time for
comparable transactions with other persons.
<TABLE>
<CAPTION>
(Dollars in thousands)
<S> <C>
Balance, December 31, 1996 $174,668
Additions ................. 32,421
Repayments ................ 33,587
--------
Balance, December 31, 1997 $173,502
========
</TABLE>
NOTE E. Allowance for Loan and Lease Losses
An analysis of the allowance for loan and lease losses is presented in the
following table:
<TABLE>
<CAPTION>
For the Years Ended December 31,
-----------------------------------
1997 1996 1995
----------- ----------- -----------
(Dollars in thousands)
<S> <C> <C> <C>
Balance, January 1 ...................... $ 239,726 $ 223,490 $ 219,902
Provision for losses charged to expense . 97,526 62,246 42,378
Allowances of purchased companies ....... 17,513 5,185 --
--------- --------- ---------
Subtotal .............................. 354,765 290,921 262,280
--------- --------- ---------
Total charge-offs ....................... (97,447) (70,502) (53,852)
Recoveries .............................. 18,086 19,307 15,062
--------- --------- ---------
Net charge-offs ....................... (79,361) (51,195) (38,790)
--------- --------- ---------
Balance, December 31 .................... $ 275,404 $ 239,726 $ 223,490
========= ========= =========
</TABLE>
At December 31, 1997, 1996 and 1995, loans not currently accruing interest
totaled $98.9 million, $64.7 million and $70.4 million, respectively. Loans 90
days or more past due and still accruing interest totaled $44.2 million, $41.7
million and $34.6 million, at December 31, 1997, 1996 and 1995, respectively.
The gross interest income that would have been earned during 1997 if the
outstanding nonaccrual loans and leases had been current in accordance with the
original terms and had been outstanding throughout the period (or since
origination, if held for part of the period) was approximately $7.1 million.
Foreclosed property was $34.9 million, $29.1 million and $19.5 million at
December 31, 1997, 1996 and 1995, respectively.
NOTE F. Premises and Equipment
<TABLE>
<CAPTION>
December 31,
---------------------
1997 1996
---------- ----------
(Dollars in thousands)
<S> <C> <C>
Land and land improvements ................... $ 74,617 $ 66,676
Buildings and building improvements .......... 311,315 299,427
Furniture and equipment ...................... 340,877 282,524
Capitalized leases on premises and equipment . 3,647 3,804
-------- --------
Subtotal .................................... 730,614 652,431
Less -- accumulated depreciation and amortization298,825 260,009
-------- --------
Net premises and equipment .................. $431,631 $392,422
======== ========
</TABLE>
Depreciation expense, which is included in occupancy and equipment
expense, was $58.1 million, $45.6 million and $42.4 million in 1997, 1996 and
1995, respectively.
20
<PAGE>
BB&T CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BB&T has noncancellable leases covering certain premises and equipment.
Total rent expense applicable to operating leases was $44.9 million, $28.5
million and $33.1 million for 1997, 1996 and 1995, respectively. Future minimum
lease payments for operating and capitalized leases for years subsequent to
1997 are as follows:
<TABLE>
<CAPTION>
Leases
------------------------
Operating Capitalized
----------- ------------
(Dollars in thousands)
<S> <C> <C>
Years ended December 31:
1998 ......................................... $ 21,593 $ 450
1999 ......................................... 20,663 450
2000 ......................................... 20,132 450
2001 ......................................... 19,184 450
2002 ......................................... 16,615 450
2003 and years later ......................... 82,359 4,547
-------- ------
Total minimum lease payments .................. $180,546 6,797
========
Less -- amount representing interest .......... 3,506
------
Present value of net minimum payments on capitalized
leases (Note I) .............................. $3,291
======
</TABLE>
NOTE G. Loan Servicing
The following is a summary of capitalized mortgage servicing rights, net
of accumulated amortization and adjustments necessary to present the balances
at the lower of cost or estimated fair value, which are included in the
"Consolidated Balance Sheets":
<TABLE>
<CAPTION>
Capitalized Mortgage
Servicing Rights
-----------------------
1997 1996
----------- -----------
(Dollars in thousands)
<S> <C> <C>
Balance, January 1, ...... $ 41,891 $ 21,948
Amount capitalized ................ 39,093 26,356
Amortization expense .............. (9,561) (6,197)
Change in valuation allowance ..... (2,643) (216)
-------- --------
Balance, December 31, .... $ 68,780 $ 41,891
======== ========
</TABLE>
21
<PAGE>
BB&T CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Capitalized mortgage servicing rights are being amortized on a
disaggregated loan basis using an accelerated method over the estimated life of
the servicing income. The servicing rights portfolio is analyzed each quarter
to identify possible impairment using a disaggregated discounted cash flow
methodology that is stratified by predominant risk characteristics. These
characteristics include stratification based on interest rates in intervals of
150 basis points, type of loan and maturity of loan. Following is an analysis
of the aggregate changes in the valuation allowances for mortgage servicing
rights in 1997 and 1996:
<TABLE>
<CAPTION>
Valuation Allowance
for Mortgage
Servicing Rights
-----------------------
(Dollars in thousands)
<S> <C>
Balance, January 1, 1996 . $ 499
Additions ................ 1,184
Reductions ............... (968)
------
Balance, December 31, 1996 715
------
Additions ................ 3,257
Reductions ............... (614)
------
Balance, December 31, 1997 $3,358
======
</TABLE>
Mortgage loans serviced for others are not included in the accompanying
"Consolidated Balance Sheets." The unpaid principal balances of mortgage loans
serviced for others were $8.2 billion and $7.7 billion at December 31, 1997 and
1996, respectively.
NOTE H. Short-Term Borrowed Funds
<TABLE>
<CAPTION>
December 31,
---------------------------
1997 1996
------------- -------------
(Dollars in thousands)
<S> <C> <C>
Federal funds purchased .............................. $ 898,160 $ 729,995
Term Federal funds purchased ......................... -- 50,000
Securities sold under agreements to repurchase ....... 1,258,513 939,315
Master notes ......................................... 638,325 566,225
U.S. Treasury tax and loan deposit notes payable ..... 105,851 101,681
Short-term Federal Home Loan Bank advances ........... 155,810 150,000
Short-term bank notes ................................ 208,079 --
Other short-term borrowed funds ...................... 11,439 2,608
---------- ----------
Total short-term borrowed funds ..................... $3,276,177 $2,539,824
========== ==========
</TABLE>
Federal funds purchased represent unsecured borrowings from other banks
and generally mature daily. Term Federal funds purchased are identical to
Federal funds; however, maturities vary and are greater than one day.
Securities sold under agreements to repurchase are borrowings collateralized by
securities of the U.S. Government or its agencies and have maturities ranging
from one to ninety days. U.S. Treasury tax and loan deposit notes payable are
payable upon demand to the U.S. Treasury. Master notes are unsecured,
non-negotiable obligations of BB&T (variable rate commercial paper). Short-term
Federal Home Loan Bank advances are typically unsecured and generally mature
daily.
22
<PAGE>
BB&T CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE I. Long-Term Debt
<TABLE>
<CAPTION>
December 31,
-------------------------
1997 1996
------------ ------------
(Dollars in thousands)
<S> <C> <C>
Capitalized leases, varying maturities to 2028 with rates from 8.11% to 12.65%. Balance
represents the unamortized amounts due on leases of various facilities .................. $ 3,291 $ 3,561
Medium-term bank notes, unsecured, varying maturities to 2001 with rates from
5.69% to 6.20% .......................................................................... 1,024,833 424,794
Advances from Federal Home Loan Bank, varying maturities to 2017 with rates from
1.00% to 8.95% .......................................................................... 2,038,500 1,637,682
Subordinated Notes, unsecured, dated May 21, 1996 and June 3, 1997, maturing May 23,
2003 and June 15, 2007, with interest ratesof 7.05% and 7.25%, respectively.* ........... 495,589 248,019
CMO Bonds, secured by investments, dated 1985, callable July 1, 2001, with an interest
rate of 11.25% .......................................................................... 8,112 --
Thrift Financing Corporation notes, secured by investments, dated 1985, due January 1,
2016, with an interest rate of 11.61% ................................................... 4,261 5,227
Other mortgage indebtedness .............................................................. 931 1,695
---------- ----------
Total long-term debt .................................................................... $3,575,517 $2,320,978
========== ==========
</TABLE>
- ---------
* Subordinated notes qualify under the risk-based capital guidelines as Tier 2
supplementary capital.
Excluding the capitalized leases set forth in Note F, future debt
maturities total $3.6 billion and are $445.2 million, $1.2 billion, $321.2
million, $424.7 million, and $258.7 million for the next five years. The
maturities for 2003 and later years are $972.1 million.
NOTE J. Shareholders' Equity
The authorized capital stock of BB&T consists of 500,000,000 shares of
common stock, $5 par value, and 5,000,000 shares of preferred stock, $5 par
value. At December 31, 1997, 141,763,220 shares of common stock and no shares
of preferred stock were issued and outstanding.
23
<PAGE>
BB&T CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Stock Option Plans
At December 31, 1997, BB&T had the following stock-based compensation
plans: the 1994 and the 1995 Omnibus Stock Incentive Plans ("Omnibus Plans"),
the Incentive Stock Option Plan ("ISOP"), the Non-Qualified Stock Option Plan
("NQSOP") and the Non-Employee Directors' Stock Option Plan ("Directors'
Plan"), which are described below. BB&T accounts for these plans under APB
Opinion No. 25, under which no compensation cost has been recognized. Had
compensation cost for these plans been determined based on the fair value at
the grant dates for awards under those plans granted after December 31, 1994,
consistent with the method described by SFAS No. 123, BB&T's pro forma net
income and pro forma earnings per share would have been as follows:
<TABLE>
<CAPTION>
For the Years Ended December 31,
-------------------------------------------
1997 1996 1995
------------- -------------- --------------
(Dollars in thousands, except per share
data)
<S> <C> <C> <C>
Net income applicable to common shares:
As reported ......................... $ 354,450 $ 338,179 $ 231,337
Pro Forma ........................... 346,260 335,138 230,401
Basic EPS:
As reported ......................... 2.51 2.39 1.63
Pro Forma ........................... 2.45 2.37 1.62
Diluted EPS:
As reported ......................... 2.46 2.34 1.60
Pro Forma ........................... 2.41 2.32 1.59
</TABLE>
The SFAS No. 123 method of accounting has not been applied to options
granted prior to January 1, 1995; therefore, the weighted average fair value of
options granted prior to that date has not been calculated. The fair value of
each option grant was estimated on the date of grant using the Black-Scholes
option-pricing model with the following weighted-average assumptions used for
grants in 1997, 1996 and 1995, respectively: dividend yield of 3.0% in 1997 and
3.5% in 1996 and 1995; expected volatility of 20% for all years; risk free
interest rates of 6.2%, 6.4% and 5.7% for 1997, 1996 and 1995, respectively;
and expected lives of 6.1 years, 6.5 years and 6.0 years for 1997, 1996 and
1995, respectively.
Because the SFAS No. 123 method of accounting has not been applied to
options granted prior to January 1, 1995, the resulting pro forma compensation
cost may not be representative of that to be expected in future years.
In April, 1994 and May, 1995, the shareholders approved the Omnibus Plans
which cover the award of incentive stock options, non-qualified stock options,
shares of restricted stock, performance shares and stock appreciation rights.
In April, 1996, the shareholders approved an amendment to the 1995 Omnibus Plan
that increased the maximum number of shares issuable under the terms of the
plan to 6,000,000 shares. The combined shares issuable under both Omnibus Plans
is 10,000,000. The Omnibus Plans are intended to allow BB&T to recruit and
retain employees with ability and initiative and to associate the employees'
interests with those of BB&T and its shareholders. At December 31, 1997,
2,944,576 incentive stock options at prices ranging from $9.4828 to $40.3750
and 2,051,342 non-qualified stock options at prices ranging from $.01 to $38.99
were outstanding. The stock options generally vest over 3 years and have a 10
year term.
The ISOP and the NQSOP were established to retain key officers and key
management employees and to offer them the incentive to use their best efforts
on behalf of BB&T. The plans, which expire on December 19, 2000, further
provide for up to 1,101,000 shares of common stock to be reserved for the
granting of options, which have a four year vesting schedule and must be
exercised within ten years from the date granted. Incentive stock options
granted must have an exercise price equal to at least 100% of the fair market
value of common stock on the date granted, and the non-qualified stock options
must have an exercise price equal to at least 85% of the fair market value on
the date granted. At December 31, 1997, options to purchase 258,167 shares of
common stock at prices ranging from $9.50 to $16.75 were outstanding pursuant
to the NQSOP. At December 31,1997, options to purchase 94,174 shares of common
stock at an exercise price of $19.777 were outstanding pursuant to the ISOP.
24
<PAGE>
BB&T CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Directors' Plan is intended to provide incentives to non-employee
directors to remain on the Board of Directors and share in the profitability of
BB&T. The plan creates a deferred compensation system for participating
non-employee directors. Each non-employee director may elect to defer 0%, 50%
or 100% of the annual retainer fee for each calendar year and apply that
percentage toward the grant of options to purchase BB&T common stock. Such
elections are required to be in writing and are irrevocable for each calendar
year. The exercise price at which shares of BB&T common stock may be purchased
shall be equal to 75% of the market value of the common stock as of the date of
grant. Options are vested in six months and may be exercised anytime thereafter
until the expiration date, which is 10 years from the date of grant. The
Directors' Plan provides for the reservation of up to 400,000 shares of BB&T
common stock. At December 31, 1997, options to purchase 368,613 shares of
common stock at prices ranging from $12.7155 to $45.2047 were outstanding
pursuant to the Directors' Plan.
BB&T also has options outstanding from companies acquired in prior years.
These options, which have not been included in the plans described above,
totaled 244,281 as of December 31, 1997, with option prices ranging from
$2.6667 to $23.7069.
A summary of the status of the Company's stock option plans at December
31, 1997, 1996 and 1995 and changes during the years then ended is presented
below:
<TABLE>
<CAPTION>
1997 1996 1995
--------------------------- ------------------------- --------------------------
Wtd. Avg. Wtd. Avg. Wtd. Avg.
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
--------------- ----------- ------------- ----------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year ..... 6,183,607 $ 18.84 6,729,504 $ 18.03 5,527,583 $ 14.95
Granted .............................. 1,035,814 37.38 120,176 25.30 1,853,300 25.24
Exercised ............................ (1,189,703) 15.29 (615,452) 11.43 (608,181) 10.88
Forfeited or Expired ................. (67,713) 27.42 (50,621) 15.82 (43,198) 19.24
---------- --------- --------- --------- --------- ---------
Outstanding at end of year ........... 5,962,005 $ 22.68 6,183,607 $ 18.84 6,729,504 $ 18.03
========== ========= ========= ========= ========= =========
Options exercisable at year-end ...... 4,840,759 $ 19.53 4,762,663 $ 17.26 4,414,099 $ 15.52
</TABLE>
The weighted average fair value of options granted was $9.33, $6.59 and
$5.05 per option at December 31, 1997, 1996 and 1995, respectively.
The following table summarizes information about the options outstanding
at December 31, 1997:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
----------------------------------------------- --------------------------
Weighted-
Average Weighted- Weighted-
Number Remaining Average Number Average
Range of Outstanding Contractual Exercise Exercisable Exercise
Exercise Prices at 12/31/97 Life Price at 12/31/97 Price
- -------------------- ------------- ----------------- ----------- ------------- ----------
<S> <C> <C> <C> <C> <C>
$ 0.01 998 5.0 yrs $ 0.01 998 $ 0.01
$2.67 to $3.67 13,571 6.1 2.88 13,571 2.88
$4.92 to $7.03 23,343 3.1 6.36 23,343 6.36
$7.45 to $10.81 275,346 3.3 9.29 275,346 9.29
$11.72 to $17.50 1,518,899 3.9 14.50 1,518,899 14.50
$18.13 to $26.75 3,155,636 7.0 22.93 2,928,623 22.91
$27.88 to $40.38 959,639 9.1 38.97 79,979 33.46
$45.20 14,573 10.0 45.20 -- --
--------- -------- -------- --------- --------
5,962,005 6.3 yrs $ 22.68 4,840,759 $ 19.53
--------- -------- -------- --------- --------
</TABLE>
Shareholder Rights Plan
On January 17, 1997, pursuant to the Rights Agreement approved by the
Board of Directors, BB&T distributed to shareholders one preferred stock
purchase right for each share of BB&T's common stock then outstanding.
Subsequent to this date, all shares issued are accompanied by a stock purchase
right. Initially, the rights, which expire in 10 years, are not exercisable and
are not transferable apart from the common stock. The rights will become
exercisable only if a person or
25
<PAGE>
BB&T CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
group acquires 20% or more of BB&T's common stock, or BB&T's Board of Directors
determines, pursuant to the terms of the Rights Agreement, that any person or
group that has acquired 10% or more of BB&T's common stock is an "Adverse
Person." Each right would then enable the holder to purchase 1/100th of a share
of a new series of BB&T preferred stock at an initial exercise price of
$145.00. The Board of Directors will be entitled to redeem the rights at $.01
per right under certain circumstances specified in the Rights Agreement.
Under the terms of the Rights Agreement, if any person or group becomes
the beneficial owner of 25% or more of BB&T's common stock, with certain
exceptions, or if the Board of Directors determines that any 10% or more
stockholder is an "Adverse Person," each right will entitle its holder (other
than the person triggering exercisability of the rights) to purchase, at the
right's then-current exercise price, shares of BB&T's common stock having a
value of twice the right's exercise price. In addition, if after any person or
group has become a 20% or more stockholder, BB&T is involved in a merger or
other business combination transaction with another person in which its common
stock is changed or converted, or sells 50% or more of its assets or earning
power to another person, each right will entitle its holder to purchase, at the
right's then-current exercise price, shares of common stock of such other
person having a value of twice the right's exercise price.
Note K. Income Taxes
The provision for income taxes was composed of the following:
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------------
1997 1996 1995
----------- ----------- -----------
(Dollars in thousands)
<S> <C> <C> <C>
Current expense:
Federal .......................... $ 191,239 $156,996 $ 129,648
State ............................ 9,084 4,777 6,794
--------- -------- ---------
Subtotal ........................ 200,323 161,773 136,442
Deferred expense (benefit) ......... (14,236) 3,875 (18,198)
--------- -------- ---------
Provision for income taxes ......... $ 186,087 $165,648 $ 118,244
========= ======== =========
</TABLE>
The reasons for the difference between the provision for income taxes and
the amount computed by applying the statutory Federal income tax rate to income
before income taxes were as follows:
<TABLE>
<CAPTION>
Years Ended December 31,
---------------------------------------
1997 1996 1995
------------ ------------ -----------
(Dollars in thousands)
<S> <C> <C> <C>
Federal income taxes at statutory rates of 35% ............. $187,192 $176,453 $124,031
Tax-exempt income from securities, loans and leases less
related non-deductible interest expense ................... (9,885) (8,190) (8,222)
State income taxes, net of Federal tax benefit ............. 4,931 3,520 3,640
Other, net ................................................. 3,849 (6,135) (1,205)
-------- -------- --------
Provision for income taxes ................................. $186,087 $165,648 $118,244
======== ======== ========
Effective income tax rate .................................. 34.4% 32.8% 33.3%
======== ======== ========
</TABLE>
26
<PAGE>
BB&T CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The tax effects of temporary differences that gave rise to significant
portions of the net deferred tax assets (liabilities) in the Consolidated
Balance Sheets were:
<TABLE>
<CAPTION>
December 31,
--------------------------
1997 1996
------------- ------------
(Dollars in thousands)
<S> <C> <C>
Deferred tax assets:
Allowance for loan and lease losses ............................. $ 106,331 $ 90,669
Deferred compensation ........................................... 28,033 18,410
Postretirement benefits other than pensions ..................... 16,850 18,488
Expense accruals ................................................ 16,115 2,861
Other ........................................................... 27,045 21,477
---------- ---------
Total tax deferred assets ........................................ 194,374 151,905
---------- ---------
Deferred tax liabilities:
Depreciation .................................................... (27,139) (24,367)
Net unrealized appreciation on securities available for sale .... (31,593) (9,702)
Lease financing ................................................. (19,193) (15,623)
Pension plan contribution ....................................... (9,839) (6,363)
Loan servicing rights ........................................... (9,745) (4,048)
Other ........................................................... (24,897) (22,275)
---------- ---------
Total tax deferred liabilities ................................... (122,406) (82,378)
---------- ---------
Net deferred tax asset ........................................... $ 71,968 $ 69,527
========== =========
</TABLE>
The deferred tax assets have been determined to be realizable, and,
accordingly, a valuation allowance was not required. At December 31, 1997,
there were no operating losses, income tax credits or alternative minimum tax
credit carryforwards.
Securities transactions resulted in income tax expense (benefits) of $1.3
million, $1.3 million and ($7.8 million) related to securities gains (losses)
for the years ended December 31, 1997, 1996 and 1995, respectively.
27
<PAGE>
BBT&T CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note L. Benefit Plans
BB&T has various employee benefit plans and arrangements. Employees of
acquired entities typically participate in existing BB&T plans upon
consummation of the acquisitions. Credit is usually given to these employees
for years of service at the acquired institution. The combination of actuarial
information for the benfit plans of acquired entities is not meaningful because
the benefits offered in those plans and assumptions used in the calculations
related to those plans are superseded by the beneifts offered in the BB&T plans
and the assumptions used in the BB&T calculations. Accordingly, the actuarial
information presented for retirement plans and postretirement benefits is that
of BB&T as originally presented. The following table discloses expenses
relating to employee benefit plans restated for transactions accounted for as
poolings of interests.
<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
(Dollars in thousands)
<S> <C> <C> <C>
Defined benefit plans ........................ $ 13,246 $ 12,494 $ 18,921
Defined contribution and ESOP plans .......... 27,386 13,168 11,803
-------- -------- --------
Total expense related to benefit plans ..... $ 40,632 $ 25,662 $ 30,724
======== ======== ========
</TABLE>
Retirement Plans
BB&T has a retirement plan that covers substantially all employees.
Benefits are based on years of service, age at retirement and the employee's
compensation during the five highest consecutive years of earnings within the
last ten years of employment.
BB&T's contributions to the plan were in amounts between the minimum
required for funding standard account purposes and the maximum deductible for
Internal Revenue Service purposes.
Supplemental retirement benefits are provided to certain key officers
under supplemental executive retirement plans, which are not qualified under
the Internal Revenue Code. Although technically unfunded plans, insurance
policies on the lives of the covered employees partially fund future benefits.
Net periodic pension cost, which is included in employee benefits expense,
consisted of the following components in 1997, 1996 and 1995.
<TABLE>
<CAPTION>
1997 1996 1995
------------ ------------ ------------
(Dollars in thousands)
<S> <C> <C> <C>
Service cost ................................ $ 12,412 $ 11,488 $ 11,765
Interest cost ............................... 17,911 16,253 14,984
Actual return on assets ..................... (42,875) (24,260) (31,771)
Early retirement ............................ -- -- 3,372
Net amortization and deferral and other ..... 25,684 8,833 19,746
--------- --------- ---------
Net periodic pension cost .................. $ 13,132 $ 12,314 $ 18,096
========= ========= =========
</TABLE>
28
<PAGE>
BBT&T CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table sets forth the plans' funded status at December 31,
1997 and 1996.
<TABLE>
<CAPTION>
Plans for which Plans for which
assets exceed accumulated benefits
accumulated benefits exceed assets
----------------------------- ----------------------------
1997 1996 1997 1996
-------------- -------------- ------------- --------------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Accumulated benefit obligation
Vested benefits ........................................ $ (185,227) $ (163,691) $ (10,110) $ (5,471)
Nonvested benefits ..................................... (4,488) (3,720) (805) (751)
----------- ----------- ---------- ----------
$ (189,715) $ (167,411) $ (10,915) $ (6,222)
=========== =========== ========== ==========
Projected benefit obligation ............................ $ (234,396) $ (221,697) $ (22,946) $ (16,821)
Plan assets at fair value ............................... 273,922 219,038 -- --
----------- ----------- ---------- ----------
Plan assets in excess of (less than) projectedbenefit
obligation ............................................. 39,526 (2,659) (22,946) (16,821)
Unrecognized transition amount .......................... (6,523) (7,626) 277 321
Unrecognized prior service cost ......................... (23,201) (5,931) 3,516 4,163
Unrecognized net loss ................................... 6,616 22,281 6,066 3,153
Minimum liability adjustment ............................ -- -- (89) (861)
----------- ----------- ---------- ----------
Prepaid (accrued) pension cost included in other
assets (other liabilities) ............................. $ 16,418 $ 6,065 $ (13,176) $ (10,045)
=========== =========== ========== ==========
</TABLE>
Plan assets consist primarily of investments in mutual funds consisting of
equity investments, obligations of the U.S. Treasury and Federal agencies and
corporations. Plan assets included $ 20.3 million, $11.2 million and $7.9
million of BB&T common stock at December 31, 1997, 1996 and 1995, respectively.
Actuarial assumptions used in calculating these amounts were:
<TABLE>
<CAPTION>
1997 1996 1995
--------- ----------- ---------
<S> <C> <C> <C>
Rate of increase in future compensation ...................... 5.5% 5.5% 5.5%
Weighted average discount rate ............................... 7.25 7.5 7.5
Weighted average expected long-term rate of return on assets . 8.0 8.0-9.0 8.0
</TABLE>
Postretirement Benefits
BB&T revised its retiree health care plans in preparation for the
implementation of SFAS No. 106, "Accounting for Postretirement Benefits Other
Than Pensions." Effective January 1, 1996, the plans of BB&T and BB&T Financial
Corporation were merged into a single plan. The new plan covers employees
retiring after December 31, 1995 who are eligible for participation in the BB&T
pension plan and have at least ten years of service. The plan requires retiree
contributions, with a subsidy by BB&T based upon years of service of the
employee at the time of retirement. The subsidy is periodically reviewed for
adjustment. The plan provides flexible benefits to retirees which may also be
used for dependents.
The following table sets forth the components of the retiree benefit plan
and the amount recognized in the consolidated financial statements at December
31, 1997, 1996 and 1995 as originally reported.
<TABLE>
<CAPTION>
1997 1996 1995
---------- -------- ---------
(Dollars in thousands)
<S> <C> <C> <C>
Net periodic postretirement benefit cost:
Service cost ............................... $ 733 $ 834 $1,048
Interest cost .............................. 2,586 2,667 2,920
Amortization of net loss and other ......... (37) 344 524
------ ------ ------
Total expense ............................. $3,282 $3,845 $4,492
====== ====== ======
</TABLE>
29
<PAGE>
BBT&T CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
1997 1996 1995
-------------- -------------- --------------
(Dollars in thousands)
<S> <C> <C> <C>
Reconciliation of funded status:
Accumulated postretirement benefit obligation ..................... $ (38,342) $ (38,208) $ (39,505)
Unrecognized net (gain) loss ...................................... (4,359) (1,463) 1,766
---------- ---------- ----------
Accrued postretirement benefit costs included in other liabilities $ (42,701) $ (39,671) $ (37,739)
========== ========== ==========
</TABLE>
Actuarial assumptions used in calculating these amounts were:
<TABLE>
<CAPTION>
1997 1996 1995
---------- ---------------- ---------------
<S> <C> <C> <C>
Annual rate of increase in the per capita cost of health care claims
Current year ......................................................... 10.0% 11.0-11.25% 8.0-14.00%
Final constant amount ................................................ 5.0 5.0-6.25 4.75-6.5
Annual decrease ...................................................... 1.0 .5-1.0 .8-1.5
General inflation rate ................................................. 4.0 4.0 4.0
Weighted average discount rate ......................................... 7.25 7.5 7.5-8.0
Impact of 1% increase in assumed health care cost on:
Net periodic benefit cost ............................................ -- 3.0 2.0-3.0
Expected postretirement benefit obligation ........................... 2.0 5.0 3.0-4.0
</TABLE>
401-k Savings Plan
Prior to 1996, BB&T had an Employee Stock Ownership Plan which allowed all
employees to acquire common stock in BB&T by contributing up to 15% of their
salaries to the plan. BB&T matched 100% of each employee's contributions, up to
a maximum of 6% of the employee's salary. BB&T Financial Corporation had a
Savings and Thrift Plan which permitted eligible employees to make
contributions up to 16% of base compensation, with matching contributions up to
4% of the employee's base compensation. Effective January 1, 1996, BB&T's
Employee Stock Ownership Plan was merged into the former BB&T Financial
Corporation Savings and Thrift Plan to form the BB&T Corporation 401-k Savings
Plan. The new plan permits employees to contribute up to 16% of their
compensation. BB&T matches up to 6% of the employee's compensation with a 100%
matching contribution.
Settlement Agreements
In connection with recent significant mergers, three executive officers of
merged institutions agreed to retire during 1995 and 1997. BB&T entered into
settlement and noncompetition agreements with these executive officers to
settle existing employment contracts and to require them not to compete with
BB&T. One of the agreements provides for annual payments of $1,655,000 less the
company-provided portion of certain benefits payable under existing benefit
plans. The payments continue for the life of the executive and his current wife
but in no event for a period of less than fifteen years. The executive has
agreed not to compete in a defined geographic area for fifteen years and to
serve as a consultant to BB&T for five years. A second agreement provides for
annual payments of $312,000 for ten years or until death. The third settlement
agreement provides for annual payments of $769,392 (to be adjusted annually in
accordance with the Consumer Price Index) until the executive reaches the age
of 65 in 2002, at which time the annual payments will be reduced to 70% of the
amount paid during the final year pursuant the agreement, estimated to be
approximately $623,000, less the company-provided portion of benefits payable
under certain existing benefit plans. The reduced payments will continue for
the life of the executive. If the executive's current wife survives him,
payments will continue to her in the annual amount equal to 35% of the amount
paid to the executive during the final year pursuant to the agreement. The
executive officer has agreed not to compete in a defined geographic area for
ten years.
Other
There are various other employment contracts, deferred compensation
arrangements and covenants not to compete with selected members of management
and certain retirees.
30
<PAGE>
BBT&T CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note M. Commitments and Contingencies
BB&T is a party to financial instruments with off-balance-sheet risk in
the normal course of business to meet the financing needs of its customers and
to reduce its exposure to fluctuations in interest rates. These financial
instruments include commitments to extend credit, options written, standby
letters of credit and financial guarantees, interest rate caps and floors
written, interest rate swaps and forward and futures contracts.
BB&T's exposure to credit loss in the event of nonperformance by the other
party to the financial instrument for commitments to extend credit and standby
letters of credit and financial guarantees written is represented by the
contractual notional amount of those instruments. BB&T uses the same credit
policies in making commitments and conditional obligations as it does for
on-balance sheet instruments.
<TABLE>
<CAPTION>
Contract or
Notional Amount at
December 31,
---------------------------
1997 1996
------------- -------------
(Dollars in thousands)
<S> <C> <C>
Financial instruments whose contract amounts represent credit risk:
Commitments to extend, originate or purchase credit ................. $7,836,594 $6,803,478
Standby letters of credit and financial guarantees written .......... 275,349 227,310
Commercial letters of credit ........................................ 35,915 21,703
Financial instruments whose notional or contract amounts exceed
the amount of credit risk:
Commitments to sell loans and securities ............................ $ 555,722 $ 240,121
Foreign exchange contracts .......................................... 145,855 103,506
</TABLE>
Commitments to extend credit are arrangements to lend to a customer as
long as there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination clauses
and may require payment of a fee. Since many of the commitments are expected to
expire without being drawn upon, the total commitment amounts do not
necessarily represent future cash requirements. BB&T evaluates each customer's
creditworthiness on a case-by-case basis. The amount and type of collateral
obtained, if deemed necessary by BB&T upon extension of credit, is based on
management's evaluation of the creditworthiness of the counterparty.
Standby letters of credit and financial guarantees written are conditional
commitments issued by BB&T to guarantee the performance of a customer to a
third party. Those guarantees are primarily issued to support public and
private borrowing arrangements, including commercial paper, bond financing and
similar transactions. The credit risk involved in issuing letters of credit is
essentially the same as that involved in extending loan facilities to
customers, and letters of credit are collateralized when necessary.
Forward commitments to sell mortgage loans and mortgage-backed securities
are contracts for delayed delivery of securities in which BB&T agrees to make
delivery at a specified future date of a specified instrument, at a specified
price or yield. Risks arise from the possible inability of counterparties to
meet the terms of their contracts and from movements in securities' values and
interest rates.
Legal Proceedings
The nature of the business of BB&T's banking subsidiaries ordinarily
results in a certain amount of litigation. The subsidiaries of BB&T are
involved in various legal proceedings, all of which are considered incidental
to the normal conduct of business. Management believes that the liabilities
arising from these proceedings will not have a materially adverse effect on the
consolidated financial position or consolidated results of operations of BB&T.
Note N. Regulatory Requirements and Other Restrictions
BB&T's subsidiary banks are required by the Board of Governors of the
Federal Reserve System to maintain reserve balances based on certain
percentages of deposit types subject to various adjustments. At December 31,
1997, these reserves (including average daily vault cash) amounted to $92.9
million.
31
<PAGE>
BBT&T CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Subject to restrictions imposed by state laws and federal regulations, the
Boards of Directors of the subsidiary banks could have declared dividends from
their retained earnings up to $1.3 billion at December 31, 1997. The subsidiary
banks are prohibited from paying dividends from their capital stock and
additional paid-in capital accounts and are required by regulatory authorities
to maintain minimum capital levels. BB&T was in compliance with these
requirements at December 31, 1997.
BB&T is subject to various regulatory capital requirements administered by
the Federal banking agencies. Failure to meet minimum capital requirements can
initiate certain mandatory - and possibly additional discretionary - actions by
regulators that, if undertaken, could have a direct material effect on BB&T's
financial statements. Under capital adequacy guidelines and the regulatory
framework for prompt corrective action, the Corporation must meet specific
capital guidelines that involve quantitative measures of BB&T's assets,
liabilities and certain off-balance-sheet items as calculated under regulatory
accounting practices. BB&T's capital amounts and classification are also
subject to qualitative judgments by the regulators about components, risk
weightings and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require BB&T to maintain minimum amounts and ratios of total and Tier 1 capital
(as defined in the regulations) to risk-weighted assets (as defined), and of
Tier 1 capital to average assets.
<TABLE>
<CAPTION>
December 31, 1997 December 31, 1996
------------------------------------------ -----------------------------------------
For Minimum For Minimum
Actual Capital Actual Capital
-------------------------- Adequacy -------------------------- Adequacy
Ratio Amount Purposes Ratio Amount Purposes
---------- ------------- ------------- ---------- ------------- ------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Tier 1 Capital
BB&T ................... 10.3% $2,115,402 $ 821,195 11.8% $2,118,249 $ 715,730
BB&T -- NC ............. 11.0 1,672,558 606,912 10.8 1,513,438 558,944
BB&T -- SC ............. 12.2 368,256 121,094 14.0 396,537 113,370
BB&T -- VA ............. 12.1 73,296 24,297 11.7 66,640 22,845
Fidelity ............... 12.3 28,253 9,201 N/A N/A N/A
Virginia First ......... 10.5 62,796 23,882 N/A N/A N/A
Life ................... 22.1 135,834 24,606 20.5 121,055 23,570
---- ---------- ---------- ----- ---------- ----------
Total Capital
BB&T ................... 14.0 2,867,562 1,642,391 14.5 2,588,063 1,431,460
BB&T -- NC ............. 12.3 1,862,258 1,213,824 12.1 1,686,083 1,117,887
BB&T -- SC ............. 13.4 406,120 242,188 15.2 431,991 226,741
BB&T -- VA ............. 13.3 80,892 48,593 12.9 73,792 45,691
Fidelity ............... 13.3 30,636 18,402 N/A N/A N/A
Virginia First ......... 11.8 70,317 47,764 N/A N/A N/A
Life ................... 22.4 137,489 49,212 21.4 126,241 47,139
---- ---------- ---------- ----- ---------- ----------
Leverage Capital
BB&T ................... 7.2 2,115,402 880,645 7.9 2,118,249 806,924
BB&T -- NC ............. 7.6 1,672,558 656,147 7.4 1,513,438 609,794
BB&T -- SC ............. 8.5 368,256 129,748 9.4 396,537 126,303
BB&T -- VA ............. 9.4 73,296 23,284 8.6 66,640 23,267
Fidelity ............... 7.9 28,253 10,712 N/A N/A N/A
Virginia First ......... 7.3 62,796 25,710 N/A N/A N/A
Life ................... 9.2 135,834 44,487 8.5 121,055 42,535
---- ---------- ---------- ----- ---------- ----------
</TABLE>
- ---------
N/A -- Not applicable.
32
<PAGE>
BBT&T CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note O. Parent Company Financial Statements
Condensed Balance Sheets
December 31, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
------------ ------------
(Dollars in thousands)
<S> <C> <C>
Assets
Cash and due from banks ................................ $ 2,748 $ 9,047
Interest-bearing bank balances ......................... 605,319 587,330
Securities ............................................. 13,824 40,560
Investment in banking subsidiaries ..................... 2,706,373 2,214,223
Investment in other subsidiaries ....................... 185,504 52,283
Premises and equipment ................................. 5,537 5,809
Receivables from subsidiaries and other assets ......... 80,778 183,644
---------- ----------
Total assets ........................................ $3,600,083 $3,092,896
========== ==========
Liabilities and Shareholders' Equity
Short-term borrowed funds .............................. $ 638,325 $ 566,225
Dividends payable ...................................... 42,173 29,521
Accounts payable and accrued liabilities ............... 23,503 25,626
Long-term debt ......................................... 496,255 249,019
---------- ----------
Total liabilities ................................... 1,200,256 870,391
---------- ----------
Total shareholders' equity .......................... 2,399,827 2,222,505
---------- ----------
Total liabilities and shareholders' equity .......... $3,600,083 $3,092,896
========== ==========
</TABLE>
Condensed Income Statements
For the Years Ended December 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
(Dollars in thousands)
<S> <C> <C> <C>
Income
Dividends from subsidiaries .............................................. $248,294 $142,854 $240,699
Interest and other income from subsidiaries .............................. 61,649 36,627 20,261
Interest on investment securities ........................................ 1,739 2,936 1,855
Other income ............................................................. 722 7,835 6,143
-------- -------- --------
Total income ............................................................ 312,404 190,252 268,958
-------- -------- --------
Expenses
Interest expense ......................................................... 53,161 33,845 17,859
Occupancy expense ........................................................ 249 171 171
Other expenses ........................................................... 14,289 11,327 26,760
-------- -------- --------
Total expenses .......................................................... 67,699 45,343 44,790
-------- -------- --------
Income before income tax benefit and equity in undistributed earnings of
subsidiaries ............................................................. 244,705 144,909 224,168
Income tax (benefit) expense ............................................... (21) 661 (6,042)
-------- -------- --------
Income before equity in undistributed earnings of subsidiaries ............. 244,726 144,248 230,210
Net income of subsidiaries in excess of dividends from subsidiaries ........ 109,724 194,541 6,206
-------- -------- --------
Net income ................................................................. $354,450 $338,789 $236,416
======== ======== ========
</TABLE>
33
<PAGE>
BBT&T CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Condensed Statements of Cash Flows
For the Years Ended December 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
1997 1996 1995
------------- ----------------------- -------------
(Dollars in thousands)
<S> <C> <C> <C>
Cash Flows From Operating Activities:
Net income .............................................................. $ 354,450 $ 338,789 $ 236,416
Adjustments to reconcile net income to net cash provided by operating
activities:
Net income of subsidiaries less than (in excess of) dividends from
subsidiaries .......................................................... (109,724) (194,541) (6,206)
Depreciation of premises and equipment .................................. 272 214 214
Amortization of unearned compensation ................................... 1,227 2,450 3,172
Discount accretion and premium amortization ............................. 396 192 (298)
Loss (gain) on sales of securities ...................................... -- (9) 100
Loss on disposals of other real estate owned ............................ -- -- 240
Loss on disposal of premises and equipment .............................. -- -- 29
(Increase) decrease in other assets ..................................... (16,499) 125,793 (146,036)
Increase (decrease) in accounts payable and accrued liabilities ......... (1,984) 2,293 5,974
---------- ----------- ----------
Net cash provided by operating activities ............................. 228,138 275,181 93,605
---------- ----------- ----------
Cash Flows From Investing Activities:
Proceeds from sales of securities available for sale .................... -- 14 87
Proceeds from maturities of securities available for sale ............... 35,482 49,347 101,339
Purchases of securities available for sale .............................. (8,717) (52,324) (41,697)
Proceeds from sales of securities held to maturity ...................... -- -- 520
Proceeds from sales of premises and equipment ........................... -- -- 79
Investment in subsidiaries .............................................. (483) (68,625) (264)
Advances to subsidiaries ................................................ (430,897) (306,857) --
Repayment of advances to subsidiaries ................................... 369,375 182,875 --
Net cash paid (received) in purchase accounting transactions ............ (45,852) -- --
---------- ----------- ----------
Net cash (used in) provided by investing activities ................... (81,092) (195,570) 60,064
---------- ----------- ----------
Cash Flows From Financing Activities:
Net increase (decrease) in long-term debt ............................... 246,873 247,625 (7,333)
Net increase in short-term borrowed funds ............................... 72,100 169,952 142,004
Net proceeds from common stock issued ................................... 22,583 49,736 49,226
Redemption of common stock .............................................. (321,224) (225,565) (47,311)
Preferred stock cancellations and conversions ........................... -- -- (2,371)
Cash dividends paid on common and preferred stock ....................... (155,688) (127,771) (112,669)
---------- ----------- ----------
Net cash (used in) provided by financing activities ................... (135,356) 113,977 21,546
---------- ----------- ----------
Net Increase in Cash and Cash Equivalents ............................... 11,690 193,588 175,215
Cash and Cash Equivalents at Beginning of Year .......................... 596,377 402,789 227,574
---------- ----------- ----------
Cash and Cash Equivalents at End of Year ................................ $ 608,067 $ 596,377 $ 402,789
========== =========== ==========
</TABLE>
34
<PAGE>
BBT&T CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note P. Disclosures about Fair Value of Financial Instruments
SFAS No. 107, "Disclosures about Fair Value of Financial Instruments,"
requires BB&T to disclose the estimated fair value of its on- and off-balance
sheet financial instruments. A financial instrument is defined by SFAS No. 107
as cash, evidence of an ownership interest in an entity or a contract that
creates a contractual obligation or right to deliver to or receive cash or
another financial instrument from a second entity on potentially favorable or
unfavorable terms.
Fair value estimates are made at a point in time, based on relevant market
data and information about the financial instrument. SFAS No. 107 specifies
that fair values should be calculated based on the value of one trading unit
without regard to any premium or discount that may result from concentrations
of ownership of a financial instrument, possible tax ramifications, estimated
transaction costs that may result from bulk sales or the relationship between
various financial instruments. Because no readily available market exists for a
significant portion of BB&T's financial instruments, fair value estimates for
these instruments are based on judgments regarding current economic conditions,
currency and interest rate risk characteristics, loss experience and other
factors. Many of these estimates involve uncertainties and matters of
significant judgment and cannot be determined with precision. Therefore, the
calculated fair value estimates cannot always be substantiated by comparison to
independent markets and, in many cases, may not be realizable in a current sale
of the instrument. Changes in assumptions could significantly affect the
estimates.
The following methods and assumptions were used by BB&T in estimating the
fair value of its financial instruments at December 31, 1997 and 1996:
Cash and cash equivalents: For these short-term instruments, the carrying
amounts are a reasonable estimate of fair values.
Securities: Fair values for securities are based on quoted market prices,
if available. If quoted market prices are not available, fair values are based
on quoted market prices for similar securities.
Loans receivable: The fair values for loans are estimated using discounted
cash flow analyses, using interest rates currently being offered for loans with
similar terms and credit quality. The carrying amounts of accrued interest
approximate fair values.
Deposit liabilities: The fair values for demand deposits,
interest-checking accounts, savings accounts and certain money market accounts
are, by definition, equal to the amount payable on demand at the reporting
date, i.e., their carrying amounts. Fair values for certificates of deposit are
estimated using a discounted cash flow calculation that applies current
interest rates to aggregate expected maturities.
Short-term borrowed funds: The carrying amounts of Federal funds
purchased, borrowings under repurchase agreements, master notes and other
short-term borrowed funds approximate their fair values.
Long-term debt: The fair values of long-term debt are estimated based on
quoted market prices for similar instruments or by using discounted cash flow
analyses, based on BB&T's current incremental borrowing rates for similar types
of instruments.
Interest rate swap agreements: The fair values of interest rate swaps
(used for hedging purposes) are the estimated amounts that BB&T would receive
or pay to terminate the swap agreements at the reporting date, taking into
account current interest rates and the current creditworthiness of the swap
counterparties.
Commitments to extend credit, standby letters of credit and financial
guarantees written: The fair values of commitments are estimated using the fees
charged to enter into similar agreements, taking into account the remaining
terms of the agreements and the present creditworthiness of the counterparties.
For fixed-rate loan commitments, fair values also consider the difference
between current levels of interest rates and the committed rates. The fair
values of guarantees and letters of credit are estimated based on fees
currently charged for similar agreements.
Other off-balance sheet instruments: The fair values for off-balance sheet
instruments (futures, forwards, options, and commitments to sell or purchase
financial instruments) are estimated based on quoted prices, if available. For
instruments for which there are no quoted prices, fair values are estimated
using current settlement values or pricing models.
35
<PAGE>
BBT&T CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
1997 1996
----------------------------- ----------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
--------------- ------------- -------------- -------------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Financial assets:
Cash and cash equivalents ............. $ 1,032,281 $ 1,032,281 $ 938,624 $ 938,624
Trading securities .................... 67,878 67,878 -- --
Securities available for sale ......... 7,199,181 7,199,181 6,610,049 6,610,049
Securities held to maturity ........... 147,799 151,581 311,782 317,013
Loans and leases:
Loans ............................... 20,317,127 20,556,414 17,908,163 17,904,878
Leases .............................. 616,302 N/A 470,455 N/A
Allowance for losses ................ (275,404) N/A (239,726) N/A
----------- -----------
Net loans and leases ............... $20,658,025 $18,138,892
=========== ===========
Financial liabilities:
Deposits .............................. $20,948,177 20,981,345 $19,735,662 19,788,728
Short-term borrowed funds ............. 3,276,177 3,276,177 2,539,824 2,539,824
Long-term debt ........................ 3,572,226 3,868,116 2,317,417 2,408,659
Capitalized leases .................... 3,291 N/A 3,561 N/A
</TABLE>
<TABLE>
<CAPTION>
1997 1996
-------------------------- --------------------------
Notional/ Notional/
Contract Fair Contract Fair
Amount Value Amount Value
------------- ------------ ------------- ------------
<S> <C> <C> <C> <C>
Off balance sheet financial instruments:
Interest rate swaps, caps and floors .................. $2,428,930 $ 25,570 $1,167,099 $ 5,775
Commitments to extend, originate or purchase credit ... 7,836,594 (14,835) 6,803,478 (12,576)
Standby and commercial letters of credit and financial
guarantees written .................................. 311,264 (4,495) 249,013 (3,579)
Commitments to sell loans and securities .............. 555,722 (2,925) 240,121 822
Foreign exchange contracts ............................ 145,855 326 103,506 312
Option contracts purchased ............................ 55,000 (303) 14,000 142
Option contracts written .............................. 55,000 -- 14,000 --
Futures contracts ..................................... 8,486 -- -- --
</TABLE>
- ---------
N/A Not applicable.
NOTE Q. Derivatives and Off-Balance Sheet Financial Instruments
Interest rate volatility often increases to the point that balance sheet
repositioning through the use of account repricing and other on-balance sheet
strategies cannot occur rapidly enough to avoid adverse net income effects. At
those times, off-balance sheet or synthetic hedges are utilized. During 1997,
management used interest rate swaps, caps and floors to supplement balance
sheet repositioning. Such actions were designed to lower the interest
sensitivity of BB&T toward a neutral position.
Interest rate swaps are contractual agreements between two parties to
exchange a series of cash flows representing interest payments. A swap allows
both parties to transform the repricing characteristics of an asset or
liability from a fixed to a floating rate, a floating rate to a fixed rate, or
one floating rate to another floating rate. The underlying principal positions
are not affected. Swap terms generally range from one year to ten years
depending on the need. At December 31, 1997, derivatives with a total notional
value of $2.4 billion, with terms ranging up to ten years, were outstanding.
36
<PAGE>
BBT&T CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following tables set forth certain information concerning BB&T's
interest rate swaps, caps and floors at December 31, 1997:
Interest Rate Swaps, Caps and Floors
December 31, 1997
(Dollars in thousands)
<TABLE>
<CAPTION>
Notional Receive Pay Fair
Amount Rate Rate Value
------------- --------- ---------- ----------
<S> <C> <C> <C> <C>
Type
Receive fixed swaps ......... $1,301,000 6.39% 5.86% $23,785
Pay fixed swaps ............. 351,930 5.88 5.58 (121)
Basis swaps ................. 100,000 5.70 5.63 --
Caps & Floors ............... 676,000 -- -- 1,906
---------- ---- ---- -------
Total ....................... $2,428,930 6.25% 5.79% $25,570
========== ==== ==== =======
</TABLE>
<TABLE>
<CAPTION>
Basis Swaps
Receive Pay Fixed Caps &
Fixed Swaps Swaps Floors Total
------------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Year-to-date Activity
Balance, December 31, 1996 ......... $ 487,000 $ 304,099 $ 376,000 $1,167,099
Additions .......................... 849,000 223,900 660,000 1,732,900
Maturities/amortizations ........... (35,000) (176,069) (10,000) (221,069)
Terminations ....................... -- -- (250,000) (250,000)
---------- ---------- ---------- ----------
Balance, December 31, 1997 ......... $1,301,000 $ 351,930 $ 776,000 $2,428,930
========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
One Year One to Five to
or Less Five Years 10 Years Total
---------- ------------ ---------- -------------
<S> <C> <C> <C> <C>
Maturity Schedule
Receive fixed swaps ......... $276,000 $ 525,000 $500,000 $1,301,000
Pay fixed swaps ............. 103,987 240,143 7,800 351,930
Basis swaps ................. 100,000 -- -- 100,000
Caps & Floors ............... 11,000 605,000 60,000 676,000
-------- ---------- -------- ----------
Total ....................... $490,987 $1,370,143 $567,800 $2,428,930
======== ========== ======== ==========
</TABLE>
As of December 31, 1997, unearned income from swap transactions initiated
during 1997 was $13.5 million. There were no unamortized deferred gains or
losses from terminated transactions remaining at year end. Active transactions
resulted in pretax net income of $1.1 million.
In addition to interest rate swaps, BB&T utilizes written covered
over-the-counter call options on specific securities in the available-for-sale
portfolio in order to enhance returns. During 1997, options were written on
securities totaling $705.0 million. Option fee income was $1.4 million for
1997. There were no unexercised options outstanding at December 31, 1997 or
1996.
BB&T also utilizes over-the-counter purchased put options and net
purchased put options (combination of purchased put option and written call
option) in its mortgage banking activities. These options are used to hedge the
mortgage warehouse and pipeline against increasing interest rates. Written call
options are used in tandem with purchased put options to create a net purchased
put option that reduces the cost of the hedge. At December 31, 1997, net
purchased put option contracts with a notional value of $55.0 million were
outstanding.
37
<PAGE>
BBT&T CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The $2.4 billion of derivatives used in interest rate risk management are
primarily used to hedge variable rate commercial loans, adjustable rate
mortgage loans, retail certificates of deposit and fixed rate notes. BB&T does
not utilize derivatives for trading purposes.
Although off-balance sheet derivative financial instruments do not expose
BB&T to credit risk equal to the notional amount, such agreements generate
credit risk to the extent of the fair value gain in an off-balance sheet
derivative financial instrument if the counterparty fails to perform. Such risk
is minimized based on the quality of the counterparties and the consistent
monitoring of these agreements. The counterparties to these transactions were
large commercial banks and investment banks. Annually, the counterparties are
reviewed for creditworthiness by BB&T's credit policy group. Where appropriate,
master netting agreements are arranged or collateral is obtained in the form of
rights to securities. At December 31, 1997, BB&T's interest rate swaps, caps
and floors reflected an unrealized gain of $25.6 million.
Other risks associated with interest-sensitive derivatives include the
impact on fixed positions during periods of changing interest rates. Indexed
amortizing swaps' notional amounts and maturities change based on certain
interest rate indices. Generally, as rates fall the notional amounts decline
more rapidly, and as rates increase notional amounts decline more slowly. Under
unusual circumstances, financial derivatives also increase liquidity risk,
which could result from an environment of rising interest rates in which
derivatives produce negative cash flows while being offset by increased cash
flows from variable rate loans. Such risk is considered insignificant due to
the relatively small derivative positions held by BB&T. At December 31, 1997,
BB&T had no indexed amortizing swaps outstanding.
38
<PAGE>
BBT&T CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note R. Calculations of Earnings Per Share
The basic and diluted earnings per share calculations are presented in the
following table:
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------------------------------
1997 1996 1995
---------------- ---------------- ----------------
(Dollars in thousands, except per share data)
<S> <C> <C> <C>
Basic Earnings Per Share:
Weighted average number of common shares outstanding during the
period .................................................................. 141,453,468 141,549,598 141,829,072
Less:
Unallocated ESOP shares ................................................. 391,208 -- --
----------- ----------- -----------
Weighted average number of common shares, as adjusted .................... 141,062,260 141,549,598 141,829,072
=========== =========== ===========
Net income ............................................................... $ 354,450 $ 338,789 $ 236,416
Less:
Preferred dividend requirement .......................................... -- 610 5,079
------------- ------------- -------------
Income available for common shares ....................................... $ 354,450 $ 338,179 $ 231,337
============= ============= =============
Basic earnings per share ................................................. $ 2.51 $ 2.39 $ 1.63
============= ============= =============
Diluted Earnings Per Share:
Weighted average number of common shares outstanding during the
period .................................................................. 141,062,260 141,549,598 141,829,072
Add:
Shares issuable assuming conversion of convertible preferred
stock .................................................................. -- 938,652 4,458,426
Dilutive effect of outstanding options (as determined by application
of treasury stock method) .............................................. 2,663,684 1,970,697 1,256,800
Issuance of additional shares under share repurchase agreement,
contingent upon market price ........................................... 72,294 102,018 326,751
------------- ------------- -------------
Weighted average number of common shares, as adjusted .................... 143,798,238 144,560,965 147,871,049
============= ============= =============
Net income ............................................................... $ 354,450 $ 338,789 $ 236,416
Add:
After tax interest expense and amortization of issue costs applicable
to convertible debentures .............................................. -- -- 211
------------- ------------- -------------
Net income, as adjusted .................................................. $ 354,450 $ 338,789 $ 236,627
============= ============= =============
Diluted earnings per share ............................................... $ 2.46 $ 2.34 $ 1.60
============= ============= =============
</TABLE>
39
<PAGE>
Exhibit 99.3
SIX-YEAR FINANCIAL SUMMARY AND SELECTED RATIOS
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
As of / For the Years Ended December 31,
-----------------------------------------------
1997 1996 1995
--------------- --------------- ---------------
<S> <C> <C> <C>
Summary of Operations
Interest income ......................... $ 2,229,621 $ 2,029,703 $ 1,957,182
Interest expense ........................ 1,092,628 987,799 997,105
----------- ----------- -----------
Net interest income ..................... 1,136,993 1,041,904 960,077
Provision for loan and lease losses ..... 97,526 62,246 42,378
----------- ----------- -----------
Net interest income after provision
for loan and lease losses ............. 1,039,467 979,658 917,699
Noninterest income ...................... 455,901 339,489 255,279
Noninterest expense ..................... 954,831 814,710 818,318
----------- ----------- -----------
Income before income taxes .............. 540,537 504,437 354,660
Provision for income taxes .............. 186,087 165,648 118,244
----------- ----------- -----------
Income before cumulative effect of
changes in accounting principles ...... 354,450 338,789 236,416
Less: cumulative effect of
changes in accounting
principles, net of income taxes....... -- -- --
----------- ----------- -----------
Net income .............................. $ 354,450 $ 338,789 $ 236,416
=========== =========== ===========
Per Common Share
Average shares outstanding (000's):
Basic ................................. 141,062 141,550 141,829
Diluted ............................... 143,798 144,561 147,871
Basic earnings:
Income before cumulative effect ....... $ 2.51 $ 2.39 $ 1.63
Less: cumulative effect ............... -- -- --
----------- ----------- -----------
Net income ........................... $ 2.51 $ 2.39 $ 1.63
=========== =========== ===========
Diluted earnings:
Income before cumulative effect ....... $ 2.46 $ 2.34 $ 1.60
Less: cumulative effect ............... -- -- --
----------- ----------- -----------
Net income ........................... $ 2.46 $ 2.34 $ 1.60
=========== =========== ===========
Cash dividends declared ................. $ 1.16 $ 1.00 $ 0.86
Shareholders' equity .................... 16.93 15.58 14.81
Average Balance Sheets
Securities, at carrying value ........... $ 7,124,652 $ 6,802,133 $ 6,803,072
Loans and leases * ...................... 19,308,577 17,538,038 16,736,054
Other assets ............................ 1,956,015 1,725,086 1,741,841
----------- ----------- -----------
Total assets .......................... $28,389,244 $26,065,257 $25,280,967
=========== =========== ===========
Deposits ................................ $20,051,207 $19,280,809 $18,289,320
Other liabilities ....................... 3,140,862 2,619,616 3,637,143
Long-term debt .......................... 2,925,628 2,027,683 1,303,992
Common shareholders' equity ............. 2,271,547 2,121,990 1,978,167
Preferred shareholders' equity .......... -- 15,159 72,345
----------- ----------- -----------
Total liabilities and
shareholders' equity ................ $28,389,244 $26,065,257 $25,280,967
=========== =========== ===========
Period End Balances
Total assets ............................ $30,642,799 $27,127,408 $25,768,277
Deposits ................................ 20,948,177 19,735,662 18,928,847
Long-term debt .......................... 3,575,517 2,320,978 1,542,064
Shareholders' equity .................... 2,399,827 2,222,505 2,186,053
Selected Performance Ratios
Rate of return on:
Average total assets .................. 1.25% 1.30% 0.94%
Average common shareholders'
equity ............................... 15.60 15.94 11.69
Dividend payout ......................... 46.22 41.84 52.76
Average equity to average assets ........ 8.00 8.20 8.11
<CAPTION>
As of / For the Years Ended December 31,
----------------------------------------------- Compound
1994 1993 1992 Growth Rate
--------------- --------------- --------------- ------------
<S> <C> <C> <C> <C>
Summary of Operations
Interest income ......................... $ 1,643,532 $ 1,480,194 $ 1,493,047 8.4%
Interest expense ........................ 713,990 622,740 721,889 8.6
----------- ----------- -----------
Net interest income ..................... 929,542 857,454 771,158 8.1
Provision for loan and lease losses ..... 25,161 60,544 76,924 4.9
----------- ----------- -----------
Net interest income after provision
for loan and lease losses ............. 904,381 796,910 694,234 8.4
Noninterest income ...................... 269,939 267,699 232,779 14.4
Noninterest expense ..................... 742,519 803,108 641,273 8.3
----------- ----------- -----------
Income before income taxes .............. 431,801 261,501 285,740 13.6
Provision for income taxes .............. 150,010 97,328 100,575 13.1
----------- ----------- -----------
Income before cumulative effect of
changes in accounting principles ...... 281,791 164,173 185,165 13.9
Less: cumulative effect of
changes in accounting
principles, net of income taxes....... -- (32,629) -- NM
----------- ----------- -----------
Net income .............................. $ 281,791 $ 131,544 $ 185,165 13.9
=========== =========== ===========
Per Common Share
Average shares outstanding (000's):
Basic ................................. 139,972 134,911 127,856 2.0
Diluted ............................... 146,199 141,748 136,504 1.0
Basic earnings:
Income before cumulative effect ....... $ 1.98 $ 1.18 $ 1.41 12.2
Less: cumulative effect ............... -- (0.24) -- NM
----------- ----------- -----------
Net income ........................... $ 1.98 $ 0.94 $ 1.41 12.2
=========== =========== ===========
Diluted earnings:
Income before cumulative effect ....... $ 1.93 $ 1.16 $ 1.36 12.7
Less: cumulative effect ............... -- (0.23) -- NM
----------- ----------- -----------
Net income ........................... $ 1.93 $ 0.93 $ 1.36 12.7
=========== =========== ===========
Cash dividends declared ................. $ 0.74 $ 0.64 $ 0.50 18.3
Shareholders' equity .................... 13.26 11.86 11.70 7.7
Average Balance Sheets
Securities, at carrying value ........... $ 6,468,094 $ 5,686,306 $ 4,909,543 7.7
Loans and leases * ...................... 15,089,645 13,562,910 12,411,605 9.2
Other assets ............................ 1,775,937 1,689,903 1,632,285 3.7
----------- ----------- -----------
Total assets .......................... $23,333,676 $20,939,119 $18,953,433 8.4
=========== =========== ===========
Deposits ................................ $17,888,784 $16,777,490 $15,683,646 5.0
Other liabilities ....................... 2,759,767 1,745,317 1,606,184 14.4
Long-term debt .......................... 870,697 733,047 199,734 71.1
Common shareholders' equity ............. 1,740,285 1,609,122 1,398,064 10.2
Preferred shareholders' equity .......... 74,143 74,143 65,805 NM
----------- ----------- -----------
Total liabilities and
shareholders' equity ................ $23,333,676 $20,939,119 $18,953,433 8.4
=========== =========== ===========
Period End Balances
Total assets ............................ $24,494,732 $23,043,669 $19,671,324 9.3
Deposits ................................ 18,046,347 18,123,340 16,196,214 5.3
Long-term debt .......................... 1,095,781 1,010,168 490,770 48.8
Shareholders' equity .................... 1,952,399 1,734,386 1,554,426 9.1
Selected Performance Ratios
Rate of return on:
Average total assets .................. 1.21% 0.63% 0.98%
Average common shareholders'
equity ............................... 15.89 7.85 12.92
Dividend payout ......................... 37.37 68.09 35.46
Average equity to average assets ........ 7.78 8.04 7.72
</TABLE>
- ---------
* Loans and leases are net of unearned income and the allowance for
losses. Amounts include loans held for sale.
NM -- Not meaningful.
40
<PAGE>
Table 1
Selected Financial Data of Banking Subsidiaries
As of / For the Years Ended December 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
BB&T-NC BB&T-SC
-------------------------------------------- -----------------------------------------
1997 1996 1995 1997 1996 1995
-------------- -------------- -------------- ------------- ------------- -------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Total assets ................... $22,530,009 $20,652,519 $19,654,218 $4,364,982 $4,213,458 $4,179,955
Securities ..................... 5,392,894 4,962,941 4,970,762 1,020,554 1,034,385 1,055,622
Loans and leases, net of
unearned income* .............. 15,402,775 14,149,983 13,213,131 3,052,755 2,901,930 2,928,298
Deposits ....................... 15,931,795 15,683,080 14,856,949 3,401,236 3,336,711 3,255,945
Shareholder's equity ........... 1,771,589 1,601,950 1,380,924 374,871 399,965 385,481
Net interest income ............ 842,745 773,019 710,338 184,341 173,235 166,764
Provision for loan and lease
losses ........................ 53,533 44,675 31,264 14,109 8,405 5,518
Noninterest income ............. 436,607 333,119 238,050 70,916 57,729 58,199
Noninterest expense ............ 809,599 689,969 659,681 135,018 134,200 119,931
Net income ..................... 278,536 250,956 172,970 68,024 56,489 62,319
<CAPTION>
BB&T-VA Life Fidelity**
----------------------------------- ----------------------------------------- ------------
1997 1996 1995 1997 1996 1995 1997
----------- ----------- ----------- ------------- ------------- ------------- ------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Total assets ................... $785,870 $790,955 $737,462 $1,462,469 $1,418,659 $1,097,962 $356,226
Securities ..................... 132,596 147,019 154,358 702,817 736,752 585,185 28,639
Loans and leases, net of
unearned income* .............. 590,306 550,218 505,767 649,777 630,463 474,984 275,640
Deposits ....................... 679,252 690,318 669,000 736,552 732,467 607,795 255,475
Shareholder's equity ........... 73,922 67,039 60,734 143,942 127,845 118,040 64,758
Net interest income ............ 36,670 35,144 31,231 8,666 8,678 6,427 10,960
Provision for loan and lease
losses ........................ 2,033 2,550 1,910 579 34 88 605
Noninterest income ............. 12,546 10,296 4,650 1,296 1,515 (67) 1,230
Noninterest expense ............ 30,523 24,839 25,965 5,850 5,290 4,344 8,322
Net income ..................... 10,973 11,791 4,853 2,669 2,751 1,362 1,278
<CAPTION>
Virginia
First**
-----------
1997
-----------
(Dollars in
thousands)
<S> <C>
Total assets ................... $925,279
Securities ..................... 23,329
Loans and leases, net of
unearned income* .............. 771,928
Deposits ....................... 662,594
Shareholder's equity ........... 152,626
Net interest income ............ 2,826
Provision for loan and lease
losses ........................ 183
Noninterest income ............. 1,077
Noninterest expense ............ 2,654
Net income ..................... 468
</TABLE>
* Includes loans held for sale.
** Fidelity Federal Savings Bank was acquired on March 1, 1997 and Virginia
First Savings Bank was acquired on December 1, 1997. These acquisitions
were accounted for as purchases and consequently the amounts above reflect
the acquired institutions only since the dates of acquisition.
41
<PAGE>
Table 2
Composition of Loan and Lease Portfolio *
<TABLE>
<CAPTION>
December 31,
---------------------------------------------------------------------
1997 1996 1995 1994 1993
------------- ------------- ------------- ------------- -------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Loans:
Commercial, financial and agricultural ..... $ 3,012,613 $ 2,715,363 $ 2,395,084 $ 2,941,109 $ 2,303,554
Real estate -- construction and land
development .............................. 2,154,094 1,552,561 1,185,128 898,790 871,346
Real estate -- mortgage .................... 11,956,390 10,641,833 10,611,912 9,593,805 8,755,685
Consumer ................................... 2,745,706 2,827,214 2,542,290 2,435,694 2,247,933
----------- ----------- ----------- ----------- -----------
Loans held for investment ................ 19,868,803 17,736,971 16,734,414 15,869,398 14,178,518
Loans held for sale ...................... 509,141 228,333 261,364 141,676 707,973
----------- ----------- ----------- ----------- -----------
Total loans ............................. 20,377,944 17,965,304 16,995,778 16,011,074 14,886,491
Leases ...................................... 788,462 576,991 376,152 304,544 225,312
----------- ----------- ----------- ----------- -----------
Total loans and leases ................... $21,166,406 $18,542,295 $17,371,930 $16,315,618 $15,111,803
=========== =========== =========== =========== ===========
</TABLE>
- ---------
* Balances are gross of unearned income.
42
<PAGE>
Table 3
Selected Loan Maturities and Interest Sensitivity *
<TABLE>
<CAPTION>
December 31, 1997
-------------------------------------------
Commercial,
Financial
and Real Estate:
Agricultural Construction Total
-------------- -------------- -------------
(Dollars in thousands)
<S> <C> <C> <C>
Fixed rate:
1 year or less (2) .................... $ 216,859 $ 323,954 $ 540,813
1-5 years ............................. 419,260 159,560 578,820
After 5 years ......................... 86,743 -- 86,743
---------- ---------- ----------
Total ............................... 722,862 483,514 1,206,376
---------- ---------- ----------
Variable rate:
1 year or less (2) .................... 1,121,642 1,105,207 2,226,849
1-5 years ............................. 1,030,079 565,373 1,595,452
After 5 years ......................... 138,030 -- 138,030
---------- ---------- ----------
Total ............................... 2,289,751 1,670,580 3,960,331
---------- ---------- ----------
Total loans and leases (1) ......... $3,012,613 $2,154,094 $5,166,707
========== ========== ==========
</TABLE>
- ---------
* Balances are gross of unearned income.
Scheduled repayments are reported in the maturity category in which the
payment is due. Determinations of maturities are based upon contract terms.
BB&T's credit policy does not permit automatic renewals of loans. At the
scheduled maturity date (including balloon payment date), the customer must
request a new loan to replace the matured loan and execute a new note with
rate, terms and conditions renegociated at that time.
<TABLE>
<CAPTION>
(Dollars in thousands)
-----------------------
<S> <C>
(1) The table excludes:
(i) consumer loans to individuals for household, family and other
personal expenditures $ 2,745,706
(ii) real estate mortgage loans 11,956,390
(iii) loans held for sale 509,141
(iv) leases 788,462
-----------
$15,999,699
===========
(2) Includes loans due on demand.
</TABLE>
43
<PAGE>
Table 4
Allocation of Allowance for Loan and Lease Losses by Category
<TABLE>
<CAPTION>
December 31,
-------------------------------------------
1997 1996
--------------------- ---------------------
% Loans % Loans
in each in each
Amount category Amount category
---------- ---------- ---------- ----------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Balance at end of
period applicable to:
Commercial, financial
and agricultural ............. $ 30,295 14% $ 31,543 16%
Real estate:
Construction and
land development ........... 19,278 10 15,260 8
Mortgage ..................... 93,638 59 100,434 58
-------- -- -------- --
Real estate -- total ......... 112,916 69 115,694 66
-------- -- -------- --
Consumer ...................... 79,867 13 54,430 15
Leases ........................ 8,262 4 3,833 3
Unallocated ................... 44,064 -- 34,226 --
-------- -- -------- --
Total ........................ $275,404 100% $239,726 100%
======== === ======== ===
<CAPTION>
December 31,
----------------------------------------------------------------
1995 1994 1993
--------------------- --------------------- --------------------
% Loans % Loans % Loans
in each in each in each
Amount category Amount category Amount category
---------- ---------- ---------- ---------- ---------- ---------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Balance at end of
period applicable to:
Commercial, financial
and agricultural ............. $ 33,026 14% $ 41,174 18% $ 49,240 15%
Real estate:
Construction and
land development ........... 16,769 7 13,802 6 15,235 6
Mortgage ..................... 98,043 62 84,983 59 86,181 63
-------- -- -------- -- -------- --
Real estate -- total ......... 114,812 69 98,785 65 101,416 69
-------- -- -------- -- -------- --
Consumer ...................... 38,746 15 34,404 15 31,945 15
Leases ........................ 3,513 2 925 2 1,237 1
Unallocated ................... 33,393 -- 44,614 -- 32,142 --
-------- -- -------- -- -------- --
Total ........................ $223,490 100% $219,902 100% $215,980 100%
======== === ======== === ======== ===
</TABLE>
Table 5
Composition of Allowance for Loan and Lease Losses
<TABLE>
<CAPTION>
December 31,
-------------------------------------------------------------------------------
1997 1996 1995 1994 1993
--------------- --------------- --------------- --------------- ---------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Balance, beginning of period .................. $ 239,726 $ 223,490 $ 219,902 $ 215,980 $ 179,484
----------- ----------- ----------- ----------- -----------
Charge-offs:
Commercial, financial and agricultural ..... (16,013) (10,178) (11,180) (11,888) (24,999)
Real estate ................................ (14,068) (11,720) (12,336) (9,700) (11,962)
Consumer ................................... (66,695) (47,836) (29,722) (16,664) (16,677)
Lease receivables .......................... (671) (768) (614) (647) (771)
----------- ----------- ----------- ----------- -----------
Total charge-offs ......................... (97,447) (70,502) (53,852) (38,899) (54,409)
----------- ----------- ----------- ----------- -----------
Recoveries:
Commercial, financial and agricultural ..... 5,664 6,722 5,460 7,498 6,285
Real estate ................................ 4,931 6,232 3,737 3,643 3,612
Consumer ................................... 7,259 6,217 5,470 5,105 4,377
Lease receivables .......................... 232 136 395 295 149
----------- ----------- ----------- ----------- -----------
Total recoveries .......................... 18,086 19,307 15,062 16,541 14,423
----------- ----------- ----------- ----------- -----------
Net charge-offs .............................. (79,361) (51,195) (38,790) (22,358) (39,986)
----------- ----------- ----------- ----------- -----------
Provision charged to expense ............... 97,526 62,246 42,378 25,161 60,544
----------- ----------- ----------- ----------- -----------
Allowance of loans acquired in purchase
transactions .............................. 17,513 5,185 -- 1,119 15,938
----------- ----------- ----------- ----------- -----------
Balance, end of period ........................ $ 275,404 $ 239,726 $ 223,490 $ 219,902 $ 215,980
=========== =========== =========== =========== ===========
Average loans and leases * .................... $19,567,114 $17,765,208 $16,956,554 $15,297,500 $13,751,417
Net charge-offs as a percentage of average
loans and leases ............................. .41% .29% .23% .15% .29%
=========== =========== =========== =========== ===========
</TABLE>
- ---------
* Loans and leases are net of unearned income and include loans held for sale.
44
<PAGE>
Table 6
Composition of Securities Portfolio
<TABLE>
<CAPTION>
December 31,
--------------------------------------
1997 1996 1995
------------ ------------ ------------
(Dollars in thousands)
<S> <C> <C> <C>
Trading Securities (at estimated fair value) ............... $ 67,878 $ -- $ --
---------- ---------- ----------
Securities held to maturity (at amortized cost):
U.S. Treasury, government and agency obligations ........ 14,952 6,283 41,570
States and political subdivisions ....................... 132,847 164,525 205,168
Mortgage-backed securities .............................. -- 140,974 173,110
Other securities ........................................ -- -- 77
---------- ---------- ----------
Total securities held to maturity ......................... 147,799 311,782 419,925
---------- ---------- ----------
Securities available for sale (at estimated fair value):
U.S. Treasury, government and agency obligations ........ 4,342,651 3,984,781 4,811,172
States and political subdivisions ....................... 37,141 23,977 22,115
Mortgage-backed securities .............................. 2,394,778 2,316,111 1,400,649
Other securities ........................................ 424,628 298,266 162,301
---------- ---------- ----------
Total securities available for sale ....................... 7,199,198 6,623,135 6,396,237
---------- ---------- ----------
Total securities ........................................... $7,414,875 $6,934,917 $6,816,162
========== ========== ==========
</TABLE>
Table 7
Time Deposits $100,000 and Over
Remaining Maturity at December 31, 1997
<TABLE>
<CAPTION>
(Dollars in
thousands)
------------
<S> <C>
Less than three months .............. $1,018,600
Four through six months ............. 568,939
Seven through twelve months ......... 514,233
Over twelve months .................. 423,924
----------
Total ............................. $2,525,696
==========
</TABLE>
At December 31, 1997, the scheduled maturities of total time deposits were:
<TABLE>
<CAPTION>
(Dollars in
thousands)
--------------
<S> <C>
1998 ................... $ 8,943,871
1999 ................... 1,585,707
2000 ................... 361,957
2001 ................... 102,466
2002 ................... 151,686
2003 and later ......... 19,540
-----------
Total ................ $11,165,227
===========
</TABLE>
45
<PAGE>
Table 8
Short-Term Borrowed Funds
The following information summarizes certain pertinent information for the
past three years on short-term borrowed funds:
<TABLE>
<CAPTION>
1997 1996 1995
--------------- --------------- ---------------
(Dollars in thousands)
<S> <C> <C> <C>
Maximum outstanding at any month-end during the year .. $ 3,276,177 $ 2,638,536 $ 4,103,219
Average outstanding during the year ................... 2,773,824 2,287,710 3,298,396
Average interest rate during the year ................. 5.34% 5.31% 5.92%
Average interest rate at end of year .................. 5.50 4.91 5.41
</TABLE>
Table 9
Capital Adequacy for BB&T Corporation and Banking Subsidiaries
<TABLE>
<CAPTION>
Regulatory BB&T- BB&T- BB&T- Virginia
Minimums BB&T NC SC VA Fidelity First Life
------------ ---------- ---------- ---------- ---------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Risk-based capital ratios:
Tier 1 capital (1) ............... 4.0% 10.3% 11.0% 12.2% 12.1% 12.3% 10.5% 22.1%
Total risk-based capital (2) ..... 8.0 14.0 12.3 13.4 13.3 13.3 11.8 22.4
Tier 1 leverage ratio (3) .......... 3.0 7.2 7.6 8.5 9.4 7.9 7.3 9.2
</TABLE>
- ---------
(1) Shareholders' equity less nonqualifying intangible assets; computed as a
ratio of risk-weighted assets, as defined in the risk-based capital
guidelines.
(2) Tier 1 capital plus qualifying loan loss allowance and subordinated debt;
computed as a ratio of risk-weighted assets as defined in the risk-based
capital guidelines.
(3) Tier 1 capital computed as a ratio of fourth quarter average assets less
nonqualifying intangibles.
Table 10
Composition of Average Total Assets
<TABLE>
<CAPTION>
% Change
--------------------
1997 v. 1996 v.
1997 1996 1995 1996 1995
---------------- ---------------- ---------------- --------- ----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Securities * ................................... $ 7,102,225 $ 6,711,665 $ 6,701,270 5.8% 0.2%
Federal funds sold and other earning assets .... 60,042 91,469 154,827 (34.4) (40.9)
Loans and leases, net of unearned income ** .... 19,567,114 17,765,208 16,956,554 10.1 4.8
------------ ------------ ------------
Average earning assets ......................... 26,729,381 24,568,342 23,812,651 8.8 3.2
Non-earning assets ............................. 1,659,863 1,496,915 1,468,316 10.9 1.9
------------ ------------ ------------
Average total assets ........................... $ 28,389,244 $ 26,065,257 $ 25,280,967 8.9% 3.1%
============ ============ ============ ===== =====
Average earning assets as a percentage
of average total assets ..................... 94.2% 94.3% 94.2%
============ ============ ============
</TABLE>
- ---------
* Based on amortized cost.
** Includes loans held for sale based on lower of amortized cost or market.
Amounts are gross of the allowance for loan and lease losses.
46
<PAGE>
Table 11
Securities
<TABLE>
<CAPTION>
December 31, 1997
-----------------------------------
Carrying Value Average Yield (3)
---------------- ------------------
(Dollars in thousands)
<S> <C> <C>
U.S. Treasury, government and agency obligations (1):
Within one year ....................................... $ 780,655 6.13%
One to five years ..................................... 3,551,316 6.77
Five to ten years ..................................... 392,880 7.08
After ten years ....................................... 2,027,530 7.19
---------- -----
Total ................................................ 6,752,381 6.84
---------- -----
States and political subdivisions:
Within one year ....................................... 24,416 8.88
One to five years ..................................... 119,889 8.86
Five to ten years ..................................... 23,490 8.69
After ten years ....................................... 2,193 10.90
---------- -----
Total ................................................ 169,988 8.87
---------- -----
Other securities:
Within one year ....................................... 191 5.03
One to five years ..................................... 20,347 6.79
Five to ten years ..................................... 134 7.90
After ten years ....................................... 269 6.96
---------- -----
Total ................................................ 20,941 6.78
---------- -----
Securities with no stated maturity ...................... 471,565 6.79
---------- -----
Total securities (2) ................................. $7,414,875 6.88%
========== =====
</TABLE>
- ---------
(1) Included in U.S. Treasury, government and agency obligations are
mortgage-backed securities totaling $2.4 billion classified as available
for sale and disclosed at estimated fair value. These securities are
included in each of the categories based upon final stated maturity dates.
The original contractual lives of these securities range from five to 30
years; however, a more realistic average maturity would be substantially
shorter because of the monthly return of principal on certain securities.
(2) Includes securities held to maturity of $147.8 million disclosed at
amortized cost and securities available for sale and trading securities
disclosed at estimated fair values of $7.2 billion and $67.9 million,
respectively.
(3) Taxable equivalent basis as applied to amortized cost.
47
<PAGE>
Table 12
Asset Quality
<TABLE>
<CAPTION>
December 31,
---------------------------------------
1997 1996 1995
------------- ------------ ------------
(Dollars in thousands)
<S> <C> <C> <C>
Nonaccrual loans and leases* ..................................... $ 98,891 $ 64,740 $ 70,369
Restructured loans ............................................... 1,377 2,464 4,525
Foreclosed property .............................................. 34,923 29,147 19,508
--------- -------- --------
Nonperforming assets ............................................ $ 135,191 $ 96,351 $ 94,402
========= ======== ========
Loans 90 days or more past due and still accruing ............... $ 44,213 $ 41,742 $ 34,648
========= ======== ========
Asset Quality Ratios:
Nonaccrual loans and leases as a percentage of loans and leases .47% .35% .41%
Nonperforming assets as a percentage of:
Total assets ................................................ .44 .36 .37
Loans and leases plus foreclosed property ................... .64 .52 .55
Net charge-offs as a percentage of average loans and leases .... .41 .29 .23
Allowance for losses as a percentage of loans and leases ....... 1.32 1.30 1.29
Ratio of allowance for losses to:
Net charge-offs ............................................. 3.47x 4.68x 5.76x
Nonaccrual loans and leases ................................. 2.78 3.70 3.18
</TABLE>
- ---------
NOTE: Items referring to loans and leases are net of unearned income, gross of
the allowance and include loans held for sale.
* Includes $31.4 million of impaired loans at December 31, 1997 and $27.5
million of impaired loans at December 31, 1996. See Note D in the "Notes
to Consolidated Financial Statements."
Table 13
Composition of Average Deposits and Other Borrowings
<TABLE>
<CAPTION>
1997 1996 1995
--------------------- --------------------- ----------------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Savings and interest checking ........... $ 2,022,469 8% $ 2,202,450 9% $ 2,404,330 11%
Money rate savings ...................... 4,681,160 18 3,899,694 17 3,770,329 16
Other time deposits ..................... 10,798,201 42 10,741,425 46 9,827,582 43
----------- -- ----------- -- ----------- --
Total interest-bearing deposits ......... 17,501,830 68 16,843,569 72 16,002,241 70
Noninterest-bearing demand deposits ..... 2,549,377 10 2,437,240 10 2,287,079 10
----------- -- ----------- -- ----------- --
Total deposits .......................... 20,051,207 78 19,280,809 82 18,289,320 80
Short-term borrowed funds ............... 2,773,824 11 2,287,710 10 3,298,396 14
Long-term debt .......................... 2,925,628 11 2,027,683 8 1,303,992 6
----------- -- ----------- -- ----------- --
Total deposits and other borrowings ..... $25,750,659 100% $23,596,202 100% $22,891,708 100%
=========== === =========== === =========== ===
<CAPTION>
% Change
-------------------------
1997 v. 1996 v.
1996 1995
------------ ------------
<S> <C> <C>
Savings and interest checking ........... (8.2)% ( 8.4)%
Money rate savings ...................... 20.0 3.4
Other time deposits ..................... 0.5 9.3
Total interest-bearing deposits ......... 3.9 5.3
Noninterest-bearing demand deposits ..... 4.6 6.6
Total deposits .......................... 4.0 5.4
Short-term borrowed funds ............... 21.2 (30.6)
Long-term debt .......................... 44.3 55.5
Total deposits and other borrowings ..... 9.1% 3.1%
==== =====
</TABLE>
48
<PAGE>
Table 14
Net Interest Income and Rate/Volume Analysis
For the Years Ended December 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
Average Balances Yield / Rate
----------------------------------------- --------------------------------
Fully Taxable Equivalent -- 1997 1996 1995 1997 1996 1995
(Dollars in thousands) ------------- ------------- ------------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Assets
Securities (1):
U.S. Treasury, government and
other (5) ............................ $ 6,930,250 $ 6,507,501 $ 6,465,905 6.78% 6.57% 6.14%
States and political
subdivisions ......................... 171,975 204,164 235,365 8.75 8.98 9.00
----------- ----------- ----------- ----- ----- -----
Total securities (5) ................. 7,102,225 6,711,665 6,701,270 6.83 6.64 6.24
Other earning assets (2) ............... 60,042 91,469 154,827 5.47 5.36 5.89
Loans and leases, net of unearned
income (1)(3)(4)(5) ................... 19,567,114 17,765,208 16,956,554 9.17 9.09 9.23
----------- ----------- ----------- ----- ----- -----
Total earning assets ................. 26,729,381 24,568,342 23,812,651 8.54 8.41 8.37
----------- ----------- ----------- ----- ----- -----
Non-earning assets ................... 1,659,863 1,496,915 1,468,316
----------- ----------- -----------
Total assets ........................ $28,389,244 $26,065,257 $25,280,967
=========== =========== ===========
Liabilities and Shareholders'
Equity
Interest-bearing deposits:
Savings and interest-checking ......... $ 2,022,469 $ 2,202,450 $ 2,404,330 1.78 1.89 2.28
Money rate savings .................... 4,681,160 3,899,694 3,770,329 3.05 2.82 3.11
Other time deposits ................... 10,798,201 10,741,425 9,827,582 5.51 5.55 5.58
----------- ----------- ----------- ----- ----- -----
Total interest-bearing
deposits ............................ 17,501,830 16,843,569 16,002,241 4.42 4.44 4.50
Short-term borrowed funds .............. 2,773,824 2,287,710 3,298,396 5.34 5.31 5.92
Long-term debt ......................... 2,925,628 2,027,683 1,303,992 5.82 5.83 6.27
----------- ----------- ----------- ----- ----- -----
Total interest-bearing
liabilities ......................... 23,201,282 21,158,962 20,604,629 4.71 4.67 4.84
----- ----- -----
Noninterest-bearing demand
deposits ............................ 2,549,377 2,437,240 2,287,079
Other liabilities .................... 367,038 331,906 338,747
Shareholders' equity ................. 2,271,547 2,137,149 2,050,512
----------- ----------- -----------
Total liabilities and
shareholders' equity ................ $28,389,244 $26,065,257 $25,280,967
=========== =========== ===========
Average interest rate spread ........... 3.83 3.74 3.53
Net yield on earning assets ............ 4.45% 4.39% 4.18%
===== ===== =====
Taxable equivalent adjustment ..........
<CAPTION>
1997 v. 1996
-------------------
Income / Expense Change due to
----------------------------------------- ----------------------
Increase
Fully Taxable Equivalent -- 1997 1996 1995 (Decrease) Rate Volume
(Dollars in thousands) ------------- ------------- ------------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Assets
Securities (1):
U.S. Treasury, government and
other (5) ............................ $ 469,969 $ 427,380 $ 397,201 $ 42,589 $14,223 $28,366
States and political
subdivisions ......................... 15,046 18,333 21,173 (3,287) (460) (2,827)
---------- ---------- --------- -------- ------- --------
Total securities (5) ................. 485,015 445,713 418,374 39,302 13,763 25,539
Other earning assets (2) ............... 3,286 4,902 9,117 (1,616) 102 (1,718)
Loans and leases, net of unearned
income (1)(3)(4)(5) ................... 1,794,178 1,615,234 1,564,732 178,944 13,828 165,116
---------- ---------- --------- -------- ------- --------
Total earning assets ................. 2,282,479 2,065,849 1,992,223 216,630 27,693 188,937
---------- ---------- --------- -------- ------- --------
Non-earning assets ...................
Total assets ........................
Liabilities and Shareholders'
Equity
Interest-bearing deposits:
Savings and interest-checking ......... 35,997 41,637 54,896 (5,640) (2,354) (3,286)
Money rate savings .................... 142,855 110,078 117,167 32,777 9,445 23,332
Other time deposits ................... 595,439 596,438 547,928 (999) (4,142) 3,143
---------- ---------- --------- -------- ------- --------
Total interest-bearing
deposits ............................ 774,291 748,153 719,991 26,138 2,949 23,189
Short-term borrowed funds .............. 148,130 121,442 195,342 26,688 732 25,956
Long-term debt ......................... 170,207 118,204 81,772 52,003 (238) 52,241
---------- ---------- --------- -------- ------- --------
Total interest-bearing
liabilities ......................... 1,092,628 987,799 997,105 104,829 3,443 101,386
---------- ---------- --------- -------- ------- --------
Noninterest-bearing demand
deposits ............................
Other liabilities ....................
Shareholders' equity .................
Total liabilities and
shareholders' equity ................
Average interest rate spread ...........
Net yield on earning assets ............ $1,189,851 $1,078,050 $ 995,118 $111,801 $24,250 $87,551
========== ========== ========= ======== ======= ========
Taxable equivalent adjustment .......... $ 52,858 $ 36,146 $ 35,041
========== ========== =========
<CAPTION>
1996 v. 1995
-----------------------------------
Change due to
Increase -------------------------
Fully Taxable Equivalent -- (Decrease) Rate Volume
(Dollars in thousands) ---------- ------------ ------------
<S> <C> <C> <C>
Assets
Securities (1):
U.S. Treasury, government and
other (5) ............................$30,179 $27,609 $ 2,570
States and political
subdivisions ......................... (2,840) (38) (2,802)
------- ------- -------
Total securities (5) ................. 27,339 27,571 (232)
Other earning assets (2) ............... (4,215) (759) (3,456)
Loans and leases, net of unearned
income (1)(3)(4)(5) ................... 50,502 (23,281) 73,783
------- ------- -------
Total earning assets ................. 73,626 3,531 70,095
------- ------- -------
Non-earning assets ...................
Total assets ........................
Liabilities and Shareholders'
Equity
Interest-bearing deposits:
Savings and interest-checking .........(13,259) (8,910) (4,349)
Money rate savings .................... (7,089) (11,009) 3,920
Other time deposits ................... 48,510 (2,242) 50,752
------- ------- -------
Total interest-bearing
deposits ............................ 28,162 (22,161) 50,323
Short-term borrowed funds ..............(73,900) (18,680) (55,220)
Long-term debt ......................... 36,432 (6,115) 42,547
------- ------- -------
Total interest-bearing
liabilities ......................... (9,306) (46,956) 37,650
------- ------- -------
Noninterest-bearing demand
deposits ............................
Other liabilities ....................
Shareholders' equity .................
Total liabilities and
shareholders' equity ................
Average interest rate spread ...........
Net yield on earning assets ............$82,932 $50,487 $32,445
======= ======= =======
Taxable equivalent adjustment ..........
</TABLE>
- -------
(1) Yields related to securities, loans and leases 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 in effect for
the periods presented.
(2) Includes Federal funds sold and securities purchased under resale
agreements or similar arrangements.
(3) Loan fees, which are not material for any of the periods shown, have been
included for rate calculation purposes.
(4) Nonaccrual loans have been included in the average balances. Only the
interest collected on such loans has been included as income.
(5) Includes assets which were held for sale or available for sale at amortized
cost and trading securities at estimated fair value.
49
<PAGE>
Table 15
Noninterest Income
<TABLE>
<CAPTION>
% Change
--------------------
Years Ended December 31,
----------------------------------- 1997 v. 1996 v.
1997 1996 1995 1996 1995
----------- ----------- ----------- --------- ----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Service charges on deposits ................. $148,844 $132,809 $ 114,108 12.1% 16.4%
Mortgage banking income ..................... 50,383 40,218 31,497 25.3 27.7
Trust income ................................ 31,957 28,794 23,872 11.0 20.6
Agency insurance commissions ................ 40,148 27,541 19,874 45.8 38.6
Other insurance commissions ................. 13,164 12,822 12,384 2.7 3.5
Securities gains (losses), net .............. 3,164 3,179 (19,472) ( .5) NM
Bankcard fees and merchant discounts ........ 22,705 18,435 16,207 23.2 13.7
Investment brokerage commissions ............ 19,908 17,069 10,103 16.6 68.9
Other bank service fees and commissions ..... 43,364 27,254 22,334 59.1 22.0
International income ........................ 3,685 3,206 2,895 14.9 10.7
Amortization of negative goodwill ........... 6,180 6,238 6,239 ( .9) --
Other noninterest income .................... 72,399 21,924 15,238 230.2 43.9
-------- -------- ---------
Total noninterest income ................. $455,901 $339,489 $ 255,279 34.3% 33.0%
======== ======== ========= ===== ====
</TABLE>
- ---------
NM -- not meaningful.
Table 16
Noninterest Expense
<TABLE>
<CAPTION>
% Change
----------------------
Years Ended December 31,
----------------------------------- 1997 v. 1996 v.
1997 1996 1995 1996 1995
----------- ----------- ----------- --------- ------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Salaries and wages ............................................ $366,534 $321,720 $356,269 13.9% ( 9.7)%
Pension and other employee benefits............................ 92,960 76,125 77,868 22.2 ( 2.3)
Net occupancy expense on bank premises ........................ 77,535 57,662 61,120 34.5 ( 5.7)
Furniture and equipment expense ............................... 83,404 67,490 67,550 25.1 ( 1.3)
Federal deposit insurance premiums ............................ 5,096 49,995 28,224 (89.8) 77.1
Foreclosed property expense ................................... 3,289 2,531 3,745 29.9 (32.4)
Amortization of intangibles and mortgage servicing rights ..... 24,370 15,218 11,902 60.1 27.9
Software ...................................................... 14,219 11,074 12,479 28.4 (11.3)
Telephone ..................................................... 18,308 16,005 15,159 14.4 5.6
Donations ..................................................... 6,740 6,007 7,740 12.2 (22.4)
Advertising and public relations .............................. 26,514 24,309 16,643 9.1 46.1
Travel and transportation ..................................... 8,693 7,372 7,193 17.9 2.5
Professional services ......................................... 46,072 26,080 24,277 76.7 7.4
Supplies ...................................................... 15,410 14,486 20,534 6.4 (29.5)
Loan and lease expense ........................................ 41,237 32,186 24,888 28.1 29.3
Deposit related expense ....................................... 16,806 14,280 12,875 17.7 10.9
Other noninterest expenses .................................... 107,644 72,170 69,852 49.2 3.3
-------- -------- --------
Total noninterest expense .................................. $954,831 $814,710 $818,318 17.2% ( 0.4)%
======== ======== ======== ===== =====
</TABLE>
50
<PAGE>
Table 17
Interest Rate Sensitivity Gap Analysis
December 31, 1997
<TABLE>
<CAPTION>
Expected Repricing or Maturity Date
---------------------------------------------------------------------------
Within One to Three to After Five
One Year Three Years Five Years Years Total
--------------- ---------------- -------------- ------------- -------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Assets
Securities and other interest-earning assets* ..... $ 1,711,150 $ 2,464,259 $2,187,452 $1,048,568 $ 7,411,429
Federal funds sold and securities purchased
under resale agreements or similar
arrangements .................................... 103,245 -- -- -- 103,245
Loans and leases** ................................ 13,402,945 4,452,131 2,097,135 981,218 20,933,429
------------ ------------ ---------- ---------- -----------
Total interest-earning assets ...................... 15,217,340 6,916,390 4,284,587 2,029,786 28,448,103
------------ ------------ ---------- ---------- -----------
Liabilities
Other time deposits ............................... 7,674,481 1,843,570 248,826 12,717 9,779,594
Foreign deposits .................................. 1,385,633 -- -- -- 1,385,633
Savings and interest checking*** .................. -- 999,337 354,660 354,660 1,708,657
Money rate savings*** ............................. 2,651,470 2,589,585 -- -- 5,241,055
Federal funds purchased and securities sold
under repurchase agreements or similar
arrangements .................................... 2,156,673 -- -- -- 2,156,673
Long-term debt and other borrowings ............... 2,750,840 590,059 681,630 672,492 4,695,021
------------ ------------ ---------- ---------- -----------
Total interest-bearing liabilities ................. 16,619,097 6,022,551 1,285,116 1,039,869 $24,966,633
------------ ------------ ---------- ---------- ===========
Asset-liability gap ................................ (1,401,757) 893,839 2,999,471 989,917
------------ ------------ ---------- ----------
Derivatives affecting interest rate sensitivity:
Pay fixed interest rate swaps ..................... 247,943 (220,726) (19,417) (7,800)
Receive fixed interest rate swaps ................. (1,025,000) 525,000 -- 500,000
Caps and floors ................................... (665,000) 605,000 -- 60,000
------------ ------------ ---------- ----------
(1,442,057) 909,274 (19,417) 552,200
------------ ------------ ---------- ----------
Interest rate sensitivity gap ...................... $ (2,843,814) $ 1,803,113 $2,980,054 $1,542,117
============ ============ ========== ==========
Cumulative interest rate sensitivity gap ........... $ (2,843,814) $ (1,040,701) $1,939,353 $3,481,470
============ ============ ========== ==========
</TABLE>
- ---------
* Securities based on amortized cost.
** Loans and leases include loans held for sale and are net of unearned income.
*** Projected runoff of non-maturity deposits was computed based upon decay
rate assumptions developed by bank regulators to assist banks in
addressing FDICIA rule 305.
Table 18
Interest Sensitivity Simulation Analysis
<TABLE>
<CAPTION>
Annualized
Interest Hypothetical
Rate Percentage
Scenario Change in
- ----------- Prime Net Interest
Linear Rate Income
- ----------- ----------- -------------
<S> <C> <C>
+ 3.00% 11.50% -2.34%
+ 1.50 10.00 -1.88
Flat 8.50 -.20
- - 1.50 7.00 .46
- - 3.00 5.50 .60
</TABLE>
51
<PAGE>
Table 19
Capital -- Components and Ratios
<TABLE>
<CAPTION>
December 31,
-------------------------------
1997 1996
--------------- ---------------
(Dollars in thousands)
<S> <C> <C>
Tier 1 capital .............. $ 2,115,402 $ 2,118,249
Tier 2 capital .............. 752,160 469,814
----------- -----------
Total regulatory capital .... $ 2,867,562 $ 2,588,063
=========== ===========
Risk-based capital ratios:
Tier 1 capital ............. 10.3% 11.8%
Total regulatory capital ... 14.0 14.5
Tier 1 leverage ratio ...... 7.2 7.9
</TABLE>
Table 20
Quarterly Common Stock Summary
<TABLE>
<CAPTION>
1997 1996
----------------------------------------------- ----------------------------------------------
Sales Prices Sales Prices
----------------------------------- Dividends ----------------------------------- Dividends
High Low Last Paid High Low Last Paid
----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Quarter Ended:
March 31 ............. $ 40.75 $ 35.25 $ 37.25 $ .27 $ 29.75 $ 25.88 $ 27.75 $ .23
June 30 .............. 47.13 35.75 45.00 .27 31.75 28.88 31.75 .23
September 30 ......... 55.13 45.31 53.44 .31 33.88 28.63 33.25 .27
December 31 .......... 65.00 51.94 64.06 .31 36.75 33.38 36.25 .27
Year ............... 65.00 35.25 64.06 1.16 36.75 25.88 36.25 1.00
</TABLE>
Table 21
Quarterly Financial Summary
<TABLE>
<CAPTION>
1997
---------------------------------------------------------------
Fourth Third Second First
Quarter Quarter Quarter Quarter
--------------- --------------- --------------- ---------------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C>
Consolidated Summary of Operations:
Net interest income FTE ................. $ 303,394 $ 300,716 $ 301,245 $ 284,496
FTE adjustment .......................... 15,223 14,169 13,039 10,427
Provision for loan and lease losses ..... 29,796 21,745 24,865 21,120
Securities gains (losses), net .......... 1,306 991 (933) 1,800
Other noninterest income ................ 109,396 149,204 97,788 96,349
Noninterest expense ..................... 239,460 311,517 205,180 198,674
Provision for income taxes .............. 41,800 38,786 53,155 52,346
----------- ----------- ----------- -----------
Net income .............................. $ 87,817 $ 64,694 $ 101,861 $ 100,078
=========== =========== =========== ===========
Diluted net income per share ............ $ .61 $ .45 $ .71 $ .69
=========== =========== =========== ===========
Selected Average Balances:
Assets .................................. $29,402,237 $28,647,083 $28,305,003 $27,175,348
Securities, at amortized cost ........... 7,213,182 7,209,155 7,157,151 6,823,961
Loans and leases * ...................... 20,287,804 19,735,137 19,487,514 18,739,135
Total earning assets .................... 27,580,097 26,984,200 26,705,385 25,623,542
Deposits ................................ 20,070,938 20,051,872 20,307,748 19,770,969
Short-term borrowed funds ............... 3,154,831 2,900,917 2,676,482 2,352,858
Long-term debt .......................... 3,406,587 3,109,329 2,709,641 2,464,586
Total interest-bearing liabilities ...... 23,991,016 23,485,509 23,144,675 22,160,695
Shareholders' equity .................... 2,285,107 2,263,096 2,280,193 2,257,577
<CAPTION>
1996
---------------------------------------------------------------
Fourth Third Second First
Quarter Quarter Quarter Quarter
--------------- --------------- --------------- ---------------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C>
Consolidated Summary of Operations:
Net interest income FTE ................. $ 279,769 $ 270,594 $ 268,428 $ 259,259
FTE adjustment .......................... 9,755 8,831 8,967 8,593
Provision for loan and lease losses ..... 18,384 15,105 15,123 13,634
Securities gains (losses), net .......... 2,756 719 (95) (201)
Other noninterest income ................ 88,470 84,774 83,700 79,366
Noninterest expense ..................... 206,088 231,575 189,928 187,119
Provision for income taxes .............. 43,614 32,069 46,204 43,761
----------- ----------- ----------- -----------
Net income .............................. $ 93,154 $ 68,507 $ 91,811 $ 85,317
=========== =========== =========== ===========
Diluted net income per share ............ $ .65 $ .47 $ .63 $ .59
=========== =========== =========== ===========
Selected Average Balances:
Assets .................................. $26,876,912 $26,289,524 $25,745,032 $25,338,176
Securities, at amortized cost ........... 7,020,516 6,988,777 6,448,692 6,382,338
Loans and leases * ...................... 18,111,296 17,777,119 17,767,591 17,400,892
Total earning assets .................... 25,278,022 24,804,612 24,294,127 23,886,314
Deposits ................................ 19,801,709 19,518,321 19,017,910 18,776,963
Short-term borrowed funds ............... 2,125,122 2,213,054 2,357,912 2,442,939
Long-term debt .......................... 2,439,596 2,104,323 1,926,486 1,649,376
Total interest-bearing liabilities ...... 21,829,871 21,400,154 20,883,996 20,528,360
Shareholders' equity .................... 2,197,266 2,117,256 2,103,544 2,130,088
</TABLE>
- ---------
* Loans and leases are net of unearned income and include loans held for sale.
52
