<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED IN THIS PROSPECTUS SUPPLEMENT IS SUBJECT TO COMPLETION +
+PURSUANT TO RULE 424 UNDER THE SECURITIES ACT OF 1933. A REGISTRATION +
+STATEMENT RELATING TO THESE SECURITIES HAS BEEN DECLARED EFFECTIVE BY THE +
+SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 415 UNDER THE SECURITIES +
+ACT OF 1933. A FINAL PROSPECTUS SUPPLEMENT AND PROSPECTUS WILL BE DELIVERED +
+TO PURCHASERS OF THESE SECURITIES. THIS PROSPECTUS SUPPLEMENT AND THE +
+PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN +
+OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN +
+WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO +
+REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS SUPPLEMENT DATED JUNE 22, 1998
(TO PROSPECTUS DATED MAY 10, 1996)
$350,000,000
BB&T CORPORATION
SUBORDINATED NOTES
% REDEEMABLE AND PUTABLE SECURITIESSM ("RAPS")
DUE , 2028
(REMARKETING DATE , 2008)
The annual interest rate on the % Redeemable and Putable Securities (the
"RaPS") due , 2028 (the "Stated Maturity") issued by BB&T
Corporation (the "Company") for the period from , 1998 to
, 2008 (the "Remarketing Date") is %. If Bear, Stearns & Co.
Inc., as Remarketing Dealer (the "Remarketing Dealer"), elects to remarket the
RaPS as described herein, the RaPS will be subject to mandatory tender to the
Remarketing Dealer at 100% of the principal amount thereof for remarketing on
the Remarketing Date, except in the limited circumstances described herein. See
"Description of RaPS--Mandatory Tender;--Remarketing Dealer." If the
Remarketing Dealer for any reason does not purchase all tendered RaPS on the
Remarketing Date or elects not to remarket the RaPS, or in certain other
limited circumstances described herein, the Company will be required to
repurchase the entire principal amount of the RaPS from the Beneficial Owners
(as defined herein) thereof at 100% of the principal amount thereof plus
accrued interest, if any, to the Remarketing Date. See "Description of RaPS--
Mandatory Tender."
Interest on the RaPS is payable semi-annually on and
of each year, commencing , 1998. The RaPS are
unsecured and subordinated to all present and future Senior Indebtedness (as
defined in the accompanying Prospectus) of the Company. Payment of principal of
the RaPS may be accelerated in the case of certain events involving the
bankruptcy, insolvency or reorganization of the Company. There is no right of
acceleration in the case of a default by the Company in the performance of any
covenant or agreement in the RaPS or the Indenture, including the failure to
pay principal of or interest on the RaPS when due. Except in the limited
circumstances described herein, the RaPS are not subject to redemption by the
Company prior to the Stated Maturity.
(continued on next page)
______________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
______________
The RaPS are offered by the Underwriters named below (as hereinafter
defined), subject to prior sale when, as and if issued by the Company and
accepted by the Underwriters and subject to certain other conditions. The
proceeds to the Company will be % of the principal amount of the RaPS sold
to the Underwriters, and the aggregate proceeds will be $ , in each
case plus accrued interest, if any, from , 1998. See
"Underwriting."
______________
The Underwriters reserve the right to withdraw, cancel or modify such offer
and to reject orders in whole or in part. It is anticipated that delivery of
the RaPS will be made through the book-entry facilities of The Depository Trust
Company (the "Depositary") on or about , 1998.
BEAR, STEARNS & CO. INC.
CRAIGIE INCORPORATED
A BB&T COMPANY
KEEFE, BRUYETTE & WOODS, INC.
DONALDSON, LUFKIN & JENRETTE
The date of this Prospectus Supplement is June , 1998.
________
SMService Mark of Bear, Stearns & Co. Inc.
<PAGE>
RaPS will be issued in denominations of $100,000 and integral multiples of
$1,000 in excess thereof. Each of the RaPS will be issued in fully registered
book-entry form (a "Book-Entry Note") and will be represented by one or more
fully registered global securities (the "Global Notes") deposited with or on
behalf of the Depositary and registered in the name of the Depositary or the
Depositary's nominee. Interests in the Global Notes will be shown on, and
transfers thereof will be effected only through, records maintained by the
Depositary (with respect to its participants' interests) and the Depositary's
participants (with respect to Beneficial Owners). Except as described in the
Prospectus Supplement under "Description of RaPS--Book-Entry System," owners
of beneficial interests in the Global Notes will not be entitled to receive
physical delivery of RaPS in definitive form and will not be considered the
Holders thereof.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE RAPS, INCLUDING
OVER-ALLOTMENT, STABILIZING AND SHORT COVERING TRANSACTIONS AND THE IMPOSITION
OF A PENALTY BID IN CONNECTION WITH THE OFFERING. SEE "UNDERWRITING."
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following reports filed by the Company with the Securities and Exchange
Commission (File No.
1-10853) under Section 13(a) or 15(d) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), are hereby incorporated by reference in the
Prospectus as supplemented by this Prospectus Supplement:
(i) Annual Report on Form 10-K for the year ended December 31, 1997;
(ii) Quarterly Report on Form 10-Q for the quarter ended March 31, 1998;
and
(iii) Current Reports on Form 8-K filed with the Commission on January 15,
1998, February 26, 1998, February 27, 1998, April 13, 1998 and May
13, 1998.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date hereof and prior to the
termination of the offering of the RaPS are hereby incorporated by reference
into the Prospectus as supplemented by this Prospectus Supplement and shall be
deemed a part hereof from the date of filing of such documents. Any statement
contained in the Prospectus, in this Prospectus Supplement or in a document
incorporated or deemed to be incorporated by reference therein or herein shall
be deemed to be modified or superseded for purposes of the Registration
Statement (as defined in the Prospectus) and the Prospectus as supplemented by
this Prospectus Supplement to the extent that a statement contained in the
Prospectus, in this Prospectus Supplement or in any subsequently filed
document which also is or is deemed to be incorporated by reference in the
Prospectus as supplemented by this Prospectus Supplement modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of
the Registration Statement, the Prospectus or this Prospectus Supplement. In
particular, reference is made to the Company's Current Report on Form 8-K
filed with the Securities and Exchange Commission on May 13, 1998, which
includes the Company's consolidated financial statements and supplemental
financial information restated to give effect to the acquisition of Life
Bancorp, Inc. in a transaction that was accounted for as a pooling of
interests.
The Company will provide without charge to each person to whom a copy of
this Prospectus as supplemented by this Prospectus Supplement is delivered,
upon the written or oral request of such person, a copy of any or all of the
documents incorporated by reference in the Prospectus as supplemented by this
Prospectus Supplement, except for certain exhibits to such documents. Written
requests should be sent to Investor Relations, BB&T Corporation, 150 South
Stratford Road, Suite 400, Winston-Salem, North Carolina 27104. Telephone
requests may be directed to (336) 733-3058.
S-2
<PAGE>
THE COMPANY
BB&T Corporation ("BB&T" or the "Company") is a multi-bank holding company
headquartered in Winston-Salem, North Carolina. The Company conducts its
operations in North Carolina, South Carolina and Virginia primarily through
its commercial banking subsidiaries, which operate 518 banking offices, and,
to a lesser extent, through its other subsidiaries. Substantially all of the
Company's loans are to businesses and individuals in the Carolinas and
Virginia. The Company's principal subsidiaries are 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"), Life
Savings Bank, F.S.B., headquartered in Norfolk, Virginia ("LSB"), Regional
Acceptance Corporation, headquartered in Greenville, North Carolina ("Regional
Acceptance"), and Craigie Incorporated, headquartered in Richmond, Virginia
("Craigie"). At March 31, 1998, the Company had assets of $31.5 billion,
deposits of $20.8 billion, loans of $21.5 billion and shareholders' equity of
$2.44 billion and ranked 27 among bank holding companies in the United States
in terms of assets and 28 in terms of deposits.
BB&T-NC, the Company's largest subsidiary, is the oldest bank in North
Carolina. At March 31, 1998, BB&T-NC had assets of $23.6 billion, deposits of
$15.6 billion, loans of $15.9 billion and shareholder's equity of $1.8 billion
and had the largest share of deposits in North Carolina. Serving North
Carolina through 353 banking offices, BB&T-NC focuses on providing a wide
range of banking services in its local market for retail commercial customers,
including small and mid-size businesses, public agencies and local
governments, trust customers and individuals. BB&T-NC has numerous
subsidiaries which engage in leasing, investment, insurance and other
activities. Among such subsidiaries is BB&T Insurance Services, Inc., which is
the largest independent insurance agency in the Carolinas.
BB&T-SC serves South Carolina through 93 banking offices and focuses on
providing a wide range of banking services in its local market for retail and
commercial customers, including small and mid-size businesses, public
agencies, local governments, trust customers and individuals. At March 31,
1998, BB&T-SC had assets of $4.4 billion, deposits of $3.5 billion, loans of
$3.1 billion and shareholder's equity of $386.3 million and had the third
largest market share of deposits in South Carolina.
BB&T-VA offers a full range of commercial and retail banking services
through 52 banking offices in the Hampton Roads and Richmond areas and the
southern, central and southwestern regions of Virginia. At March 31, 1998,
BB&T-VA had assets of $851.9 million, deposits of $683.8 million, loans of
$636.5 million and shareholder's equity of $75.2 million and ranked sixth
among banks in Virginia in terms of deposits. On March 1, 1998, the Company
acquired LSB, which has 20 retail banking offices in the Hampton Roads region
of Virginia. At March 31, 1998, LSB had assets of $1.4 billion, deposits of
$715.6 million, loans of $626.7 million and shareholder's equity of $130.6
million. It is anticipated that LSB will merge into BB&T-VA during the second
half of 1998.
Regional Acceptance, acquired by the Company effective September 1, 1996,
specializes in indirect financing of purchases of mid-model and late-model
used automobiles by consumers with limited access to traditional sources of
credit. It operates 41 branch offices in the Carolinas, Tennessee and
Virginia. At March 31, 1998, Regional Acceptance had assets of $191.9 million,
loans of $182.2 million and shareholder's equity of $42.8 million.
Craigie, acquired by the Company on October 1, 1997, is an investment
banking firm headquartered in Richmond, Virginia, with offices in Charlotte,
Raleigh and Winston-Salem, North Carolina and Columbia, South Carolina, that
specializes in the origination, trading and distribution of fixed-income
securities and equity products in both the public and private capital markets.
Craigie's public finance department provides investment banking services,
financial advisory services and municipal bond financing to a variety of
regional tax-exempt issuers. The firm's corporate finance department
specializes in raising capital for corporate clients and has an active mergers
and acquisitions advisory practice.
S-3
<PAGE>
Other subsidiaries of BB&T include Phillips Factors Corporation, which buys
and manages accounts receivable primarily in the furniture, textiles and home
furnishings-related industries, and Sheffield Financial Corp., which
specializes in loans to small commercial lawn care businesses across the
country.
The Company is continuing to develop its franchise through the acquisition
of two financial institutions in metropolitan Washington, D.C. region pursuant
to transactions which are expected to be consummated in 1998. See "Recent
Developments--Pending Acquisitions and Other Developments."
RECENT DEVELOPMENTS
The Company reported net income of $113.7 million for the quarter ended
March 31, 1998, representing an increase of 13.6% from the $100.1 million of
net income in the first quarter of 1997. The increase in net income reflected
a 8.0% increase in net interest income and a 23.4% increase in noninterest
income, while noninterest expenses increased 15.3%. Returns on average assets
and average equity in the first quarter of 1998 were 1.50% and 18.77%,
respectively, compared to prior year ratios of 1.49% and 17.98%, respectively.
The Company's net interest income was $296.1 million for the first quarter
of 1998 compared to $274.1 million in the first quarter of 1997. The increase
in net interest income was a result of higher average interest-earning assets,
which increased 12.1% from the first quarter of 1997. Total interest income
was $592.2 million for the first quarter of 1998, an increase of 12.4% from
$527.0 million earned in the comparable period of 1997. Total interest expense
was $296.1 million in the first quarter of 1998 compared to $252.9 million in
the first quarter of 1997, an increase of $43.2 million. During the first
quarter of 1998, average interest-earning assets were $28.7 billion compared
to $25.6 billion for the first quarter of 1997. Average interest-bearing
liabilities during the first quarter of 1998 were $25.2 billion compared to
$22.2 billion during the first quarter of 1997, an increase of $3.0 billion.
The net interest margin in the first quarter of 1998 was 4.36%, a decrease of
.10% from the net interest margin in the first quarter of 1997.
The Company's provision for loan and lease losses was $22.0 million in the
first quarter of 1998 compared to $21.1 million in the first quarter of 1997.
Net charge-offs in the first quarter of 1998 were .29% of average loans and
leases compared to .27% in the first quarter of 1997. The Company's allowance
for loan and lease losses was 1.31% of total loans and leases and 3.06x
nonaccrual loans and leases at the end of the first quarter of 1998, compared
to 1.31% and 3.80x, respectively, at the end of the first quarter of 1997.
Nonperforming assets were $122.3 million, or .39% of total assets, at March
31, 1998 compared to $98.5 million, or .35% of total assets, at March 31,
1997.
Total noninterest income increased 23.4% in the first quarter of 1998 to
$121.1 million from $98.1 million in the first quarter of 1997. Service
charges on deposits, the primary component of noninterest income, increased
12.1% in the first quarter of 1998 over the comparable 1997 period. Other
nondeposit fees and commissions were $24.6 million in the first quarter of
1998 compared to $18.4 million in the first quarter of 1997, an increase of
33.3%. Income from mortgage banking activities in the first quarter of 1998
increased $2.8 million, or 22.4%, over the comparable 1997 period. Insurance
agency commissions increased $2.6 million, or 23.2%, in the first quarter of
1998 over the comparable 1997 period. Total noninterest expense increased
15.3% in the first quarter of 1998 to $229.0 million from $198.7 million in
the first quarter of 1997.
PENDING ACQUISITIONS AND OTHER DEVELOPMENTS
The Company has entered into an Agreement and Plan of Reorganization, dated
as of December 16, 1997, as amended and restated, with Franklin
Bancorporation, Inc. ("Franklin"), which provides for the merger of Franklin
with and into BB&T. Franklin operates nine banking offices in the metropolitan
Washington, D.C. area through its subsidiary, Franklin National Bank. The
merger, which is expected to be accounted for as a pooling of interests, is
subject to approval of the shareholders of Franklin and other customary
closing conditions. The Company expects the merger to be effective on or
around July 1, 1998. At March 31, 1998, Franklin had assets of $659.0 million,
deposits of $433.6 million, loans of $306.9 million and shareholders' equity
of $42.5 million.
S-4
<PAGE>
The Company has entered into an Agreement and Plan of Reorganization, dated
as of February 25, 1998, as amended and restated, with Maryland Federal
Bancorp, Inc. ("Maryland Federal"), which provides for the merger of Maryland
Federal with and into BB&T. Maryland Federal operates 28 banking offices in
the Maryland metropolitan Washington, D.C. area through its subsidiary,
Maryland Federal Bank. The merger, which is expected to be accounted for as a
purchase, is subject to approval of the shareholders of Maryland Federal,
regulatory approvals and other customary closing conditions. The Company
expects the merger to be effective on or around September 30, 1998. At
February 28, 1998, Maryland Federal had assets of $1.19 billion, deposits of
$832 million, loans of $989 million and shareholders' equity of $104.5
million.
The Company expects to continue to take advantage of the consolidation of
the financial services industry by further developing its franchise through
the acquisition of financial and financial services institutions. Such
acquisitions may entail the payment by the Company of consideration in excess
of the book value of the underlying net assets acquired, may result in the
issuance of additional shares of the Company's capital stock or the incurring
of additional indebtedness by the Company, and could have a dilutive effect on
the earnings or book value per share of the Company's common stock. Moreover,
such acquisitions sometimes result in significant charges against earnings,
although cost savings, especially incident to in-market acquisitions, also are
frequently anticipated.
On February 27, 1998, the Company announced that its Board of Directors had
approved a new plan to repurchase up to 5 million shares of BB&T's common
stock. It is anticipated that share repurchases will be made periodically as
needed for issuance in specific business combinations to be accounted for as
purchases. The Company intends to repurchase up to approximately 2.1 million
shares for reissue in connection with the proposed acquisition of Maryland
Federal, which will be accounted for as a purchase. (Approximately 2.2 million
shares have previously been repurchased for this purpose, bringing the maximum
number of shares to be repurchased in connection with the proposed acquisition
of Maryland Federal to approximately 4.3 million.) The Company's previous
repurchase plan, approved in January 1997, provided for the repurchase of up
to 5 million shares of its common stock. At year-end 1997, the Company had
repurchased approximately 3.4 million shares pursuant to this plan. The 1.6
million shares remaining under this plan were combined with the 5 million
shares newly authorized for repurchase, providing the Company with the
potential of repurchasing up to approximately 6.6 million shares for issuance
in business combinations to be accounted for as purchases. Through June 12,
1998, approximately 2.6 million shares had been repurchased pursuant to these
plans at a cost of approximately $175 million.
USE OF PROCEEDS
The net proceeds from the sale of the RaPS will be approximately $362
million, based on an estimated offering price of 100% of the principal amount
thereof, after deducting the underwriting discount and estimated expenses of
the offering, and including the payment made to the Company by Bear, Stearns &
Co., Inc. as Remarketing Dealer. The Company currently intends to use (i)
approximately $145 million of the net proceeds from the offering to repurchase
shares of the Company's common stock in connection with the pending
acquisition of Maryland Federal, (ii) approximately $80 million of the net
proceeds to repay certain short-term borrowings incurred to finance the
repurchase of shares previously acquired in connection with the Maryland
Federal acquisition and other pending business combinations and (iii) the
balance of the net proceeds for general corporate purposes. See "Recent
Developments -- Pending Acquisitions and Other Developments."
Pending use as described above, the net proceeds may be temporarily invested
or used to reduce short-term indebtedness. The precise amounts and timing of
the application of proceeds will depend upon the funding requirements of the
Company and its subsidiaries and the availability of other funds.
S-5
<PAGE>
Based upon the historical and anticipated future growth of the Company and
the financial needs of the Company and its subsidiaries, the Company may
engage in additional financings of a character and amount to be determined as
the need arises.
CONSOLIDATED RATIOS OF EARNINGS TO FIXED CHARGES
The following are the Company's consolidated ratios of earnings to fixed
charges for the periods indicated:
<TABLE>
<CAPTION>
FOR THE
THREE
MONTHS
ENDED FOR THE YEARS ENDED
MARCH 31, DECEMBER 31,
---------- ----------------------------
1998 1997 1997 1996 1995 1994 1993
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings to fixed charges:
Excluding interest on deposits... 2.60x 3.27x 2.62x 3.02x 2.23x 3.59x 3.53x
Including interest on deposits... 1.56 1.60 1.49 1.51 1.35 1.60 1.41
</TABLE>
For purposes of computing these ratios, earnings represent income from
continuing operations before extraordinary items and cumulative effects of
changes in accounting principles plus income taxes and fixed charges
(excluding capitalized interest). Fixed charges, excluding interest on
deposits, represent interest (other than on deposits, but including
capitalized interest), one-third (the proportion representative of the
interest factor) of rents and all amortization of debt issuance costs. Fixed
charges, including interest on deposits, represent all interest, one-third
(the proportion representative of the interest factor) of rents and all
amortization of debt issuance costs.
S-6
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth certain consolidated financial data of the
Company for the five years ended December 31, 1997, and the three months ended
March 31, 1998 and March 31, 1997. The information is qualified in its
entirety by the detailed information and consolidated financial statements
included in the documents incorporated herein by reference. See "Incorporation
of Certain Documents by Reference" in this Prospectus Supplement and the
accompanying Prospectus.
<TABLE>
<CAPTION>
AS OF OR FOR
THE THREE
MONTHS ENDED AS OF OR FOR THE YEARS ENDED DECEMBER
MARCH 31, 31,
---------------- ------------------------------------------
1998 1997 1997 1996 1995 1994 1993
------- ------- ------ ------- ------- ------- -------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS:
Interest income........ $ 592 $ 527 $2,230 $ 2,030 $ 1,957 $ 1,644 $ 1,480
Interest expense....... 296 253 1,093 988 997 714 623
------- ------- ------ ------- ------- ------- -------
Net interest income.... 296 274 1,137 1,042 960 930 857
Provision for loan and
lease losses.......... 22 21 98 62 42 25 61
------- ------- ------ ------- ------- ------- -------
Net interest income
after provision for
loan and lease losses. 274 253 1,039 980 918 905 796
Noninterest income..... 121 98 456 339 255 270 268
Noninterest expense.... 229 199 955 815 818 743 802
------- ------- ------ ------- ------- ------- -------
Income before income
taxes................. 166 152 540 504 355 432 262
Provision for income
taxes................. 52 52 186 165 119 150 97
------- ------- ------ ------- ------- ------- -------
Income before
cumulative effect of
changes in accounting
principles............ 114 100 354 339 236 282 165
Less: cumulative effect
of changes in
accounting principles,
net of income taxes... -- -- -- -- -- -- (33)
------- ------- ------ ------- ------- ------- -------
Net income............. $ 114 $ 100 $ 354 $ 339 $ 236 $ 282 $ 132
======= ======= ====== ======= ======= ======= =======
SELECTED PERIOD END
BALANCES:
Total assets........... $31,536 $27,921 30,643 $27,127 $25,768 $24,495 $23,044
Earning assets......... 29,362 26,310 28,448 25,381 24,180 23,047 21,516
Securities............. 7,780 6,981 7,415 6,935 6,807 6,589 6,195
Loans and leases(1).... 21,532 19,220 20,933 18,379 17,257 16,046 14,872
Deposits............... 20,795 20,337 20,948 19,736 18,929 18,046 18,123
Long-term debt......... 3,769 2,581 3,576 2,321 1,542 1,096 1,010
Shareholders' equity... 2,440 2,256 2,400 2,223 2,186 1,952 1,734
SELECTED FINANCIAL
RATIOS:
PROFITABILITY RATIOS:
Return on average
assets................ 1.50% 1.49% 1.25% 1.30% 0.94% 1.21% 0.63%
Return on average
common shareholders'
equity................ 18.77 17.98 15.60 15.94 11.69 15.89 7.85
Net interest margin.... 4.36 4.46 4.45 4.39 4.18 4.38 4.53
CAPITAL RATIOS:
Equity to assets
(period end).......... 7.74% 8.08% 7.83% 8.19% 8.48% 7.97% 7.52%
Tier 1 capital......... 10.4 11.1 10.3 11.8 13.1 12.5 11.4
Total capital.......... 14.1 13.7 14.0 14.5 14.4 13.7 13.0
Leverage............... 7.1 7.8 7.2 7.9 8.0 7.9 7.3
Efficiency(2).......... 51.3 51.9 51.1 55.0 55.4 60.0 63.9
LOAN QUALITY RATIOS:
Nonaccrual loans and
leases as a percentage
of total loans and
leases................ 0.43% 0.33% 0.47% 0.35% 0.41% 0.46% 0.63%
Nonperforming assets as
a percentage of:
Total assets.......... 0.39 0.35 0.44 0.36 0.37 0.39 0.58
Loans and leases plus
foreclosed property... 0.57 0.51 0.64 0.52 0.55 0.58 0.89
Net charge-offs as a
percentage of average
loans and leases...... 0.29 0.27 0.41 0.29 0.23 0.15 0.29
Allowance for loan and
lease losses as a
percentage of loans
and leases............ 1.31 1.31 1.32 1.30 1.29 1.36 1.45
Ratio of allowance for
loan and lease losses
to:
Net charge-offs........ 4.65x 5.01x 3.47x 4.68x 5.76x 9.84x 5.40x
Nonaccrual loans and
leases................ 3.06 3.80 2.78 3.70 3.18 2.97 2.30
</TABLE>
__________
(1) Loans and leases are net of unearned income and the allowance for losses.
Amounts include loans held for sale.
(2) Calculations exclude nonrecurring charges.
S-7
<PAGE>
DESCRIPTION OF RAPS
GENERAL
The following description of the particular terms of the RaPS supplements
and, to the extent inconsistent therewith, replaces, the description of the
Debt Securities and the specific terms and conditions of the Subordinated Debt
Securities set forth in the accompanying Prospectus. Except as expressly
provided in this Prospectus Supplement, the terms and conditions set forth in
the Prospectus will apply to the RaPS offered hereby.
The RaPS offered hereby will be issued under the Indenture regarding
Subordinated Securities dated as of May 24, 1996 between the Company and State
Street Bank and Trust Company, as trustee (the "Trustee") (the "Indenture"),
and constitute a single series of Subordinated Debt Securities thereunder.
Capitalized terms used herein but not otherwise defined have the meanings
assigned to such terms in the Indenture. The following summaries of certain
provisions of the Indenture do not purport to be complete and are subject to,
and are qualified in their entirety by reference to, the provisions of the
Indenture. The Indenture permits the issuance from time to time of various
series of Debt Securities, and each series may differ as to terms, including
maturity, interest rate, redemption and sinking fund provisions, covenants and
events of default. The Indenture does not limit the aggregate principal amount
of Debt Securities that may be issued thereunder.
The RaPS will mature on , 2028 (the "Stated Maturity Date")
and are limited to $350,000,000 in aggregate principal amount. The RaPS will
be issued in denominations of $100,000 or integral multiples of $1,000 in
excess thereof. All payments on the RaPS will be made in U.S. dollars.
On , 2008 (the "Remarketing Date"), the RaPS will either be
(i) mandatorily tendered to and purchased by Bear, Stearns & Co. Inc., or its
successor, as Remarketing Dealer (the "Remarketing Dealer"), in which case the
Remarketing Dealer will pay 100% of the principal amount of the RaPS and the
Company will pay accrued interest, if any, to the Remarketing Date, or (ii)
redeemed by the Company at 100% of the principal amount thereof plus accrued
interest, if any, to the Remarketing Date.
SUBORDINATION
As described in the accompanying Prospectus relating to Subordinated Debt
Securities, the RaPS are subordinate and subject in right of payment to the
prior payment in full of all existing and future Senior Indebtedness of the
Company. See "Subordinated Debt Securities--Subordination" in the accompanying
Prospectus. The Indenture does not limit or prohibit the incurrence of
additional Senior Indebtedness.
As described in the accompanying Prospectus relating to Subordinated Debt
Securities, payment of the principal of RaPS may be accelerated in the case of
certain events involving the bankruptcy, insolvency or reorganization of the
Company. There is no right of acceleration in the case of a default by the
Company in the performance of any covenant or agreement in the RaPS or the
Indenture, including the failure to pay principal of or interest on the RaPS
when due. See "Subordinated Debt Securities--Limited Rights of Acceleration"
and "--Events of Default" in the accompanying Prospectus.
INTEREST AND INTEREST PAYMENT DATES
The RaPS will bear interest at % per annum for the period from
, 1998 to the Remarketing Date. If the RaPS are purchased by the Remarketing
Dealer on the Remarketing Date, on and after the Remarketing Date the RaPS
will bear interest at the rate determined by the Remarketing Dealer in
accordance with the procedures set forth below (the "Interest Rate to
Maturity"). See "--Interest Rate to Maturity."
The RaPS will bear interest from , 1998, payable semi-annually
on and of each year (each, an "Interest Payment Date"),
commencing , 1998, to the persons in
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whose names the RaPS are registered at the close of business on the preceding
and , respectively, whether or not a Business Day (each,
a "Regular Record Date"); provided, however, that (i) the first payment of
interest on RaPS with an original issue date between a Regular Record Date and
an Interest Payment Date following the next succeeding Regular Record Date
will be payable to the registered holder on such next succeeding Regular
Record Date and (ii) interest payable on the Remarketing Date and on the
Stated Maturity Date will be payable to the person to whom principal shall be
payable. Interest payments will be in the amount of interest accrued from and
including the next preceding Interest Payment Date (or from and including
, 1998 if no interest has been paid or duly provided for with
respect to the RaPS) to but excluding the relevant Interest Payment Dates, the
Remarketing Date or the Stated Maturity Date, as the case may be. Interest on
the RaPS will be computed on the basis of a 360-day year of twelve 30-day
months. "Business Day" means each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banking institutions in New York, New York
are authorized or obligated by law or executive order to close.
INTEREST RATE TO MATURITY
Absent the occurrence of a No-Bid Event (as defined below), the Interest
Rate to Maturity on the RaPS will be determined by the Remarketing Dealer by
3:30 p.m., New York City time, on the fifth Business Day immediately preceding
the Remarketing Date (the "Determination Date") to the nearest one-hundred
thousandth (0.00001) of one percent per annum, and will be equal to the sum of
% per annum (the "Base Rate") and the Applicable Spread (as defined below).
The Applicable Spread will be based on the Dollar Price (as defined below) of
the RaPS.
For this purpose, the following terms have the following meanings:
"Applicable Spread" means the lowest firm price bid, solicited in accordance
with the then-standard market methodology for soliciting firm price bids but
expressed as a spread (in the form of a percentage or in basis points) above
the Base Rate, obtained by the Remarketing Dealer on the Determination Date
from the bids quoted by five Reference Corporate Dealers (as defined below)
for the full aggregate outstanding principal amount of the RaPS at the Dollar
Price, but assuming (i) an issue date that is the Remarketing Date, with
settlement on such date without accrued interest, (ii) a maturity date that is
the Stated Maturity Date and (iii) a stated annual interest rate equal to the
Base Rate plus the spread bid by the applicable Reference Corporate Dealer. If
fewer than five Reference Corporate Dealers bid as described above, then the
Applicable Spread will be the lowest of such bid indications obtained as
described above. If none of the Reference Corporate Dealers provides a bid as
described above, then such occurrence will be deemed a "No-Bid Event." The
Interest Rate to Maturity announced by the Remarketing Dealer, absent manifest
error, will be binding and conclusive upon the holders of beneficial interests
in the RaPS (the "Beneficial Owners"), the Holders (as defined in the
Indenture) of the RaPS, the Company and the Trustee.
"Comparable Treasury Issues" means the United States Treasury security or
securities selected by the Remarketing Dealer as having an actual or
interpolated maturity or maturities comparable to the remaining term of the
RaPS being purchased by the Remarketing Dealer.
"Comparable Treasury Price" means, with respect to the Remarketing Date: (i)
the offer prices for the Comparable Treasury Issues (expressed in each case as
a percentage of its principal amount) on the Determination Date as of such
time prior to 3:30 p.m. New York City time as the Remarketing Dealer in its
sole discretion may elect, as set forth on "Telerate Page 500" (or such other
page as may replace Telerate Page 500); or (ii) if such page (or any successor
page) is not displayed or does not contain such offer prices on such Business
Day (a) the average of the Reference Treasury Dealer Quotations (as defined
below) for such Remarketing Date, after excluding the highest and lowest of
such Reference Treasury Dealer Quotations, or (b) if the Remarketing Dealer
obtains fewer than four such Reference Treasury Dealer Quotations, the average
of all such Reference Treasury Dealer Quotations. "Telerate Page 500" means
the display designated as "Telerate Page 500" on Dow Jones Markets (or such
other page as may replace Telerate Page 500 on such service) or such other
service displaying the offer prices specified in clause (i) above as may
replace Dow Jones Markets.
"Dollar Price" means, with respect to the RaPS, the present value, as of the
Remarketing Date, of the Remaining Scheduled Payments (as defined below)
discounted to the Remarketing Date on a semi-annual basis (assuming a 360-day
year consisting of twelve 30-day months) at the Treasury Rate (as defined
below).
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"Reference Corporate Dealer" means each of Bear, Stearns & Co. Inc. and four
leading dealers of publicly traded debt securities of the Company, and their
respective successors, designated by the Company not later than a Business Day
immediately preceding the Determination Date and reasonably acceptable to the
Remarketing Dealer, or, failing such designation by the Company, as designated
by the Remarketing Dealer (a "Primary Corporate Dealer").
"Reference Treasury Dealer" means each of Bear, Stearns & Co. Inc. and four
primary U.S. Government securities dealers designated by the Company, and
their respective successors, not later than a Business Day immediately
preceding the Determination Date and reasonably acceptable to the Remarketing
Dealer, or, failing such designation by the Company, as designated by the
Remarketing Dealer (a "Primary Treasury Dealer").
"Reference Treasury Dealer Quotations" means, with respect to each Reference
Treasury Dealer and the Remarketing Date, the firm offer prices for the
Comparable Treasury Issues (expressed in each case as a percentage of its
principal amount and exclusive of accrued interest) quoted to the Remarketing
Dealer by such Reference Treasury Dealer as of such time prior to 3:30 p.m.
New York City time as the Remarketing Dealer in its sole discretion may elect,
on the Determination Date.
"Remaining Scheduled Payments" means, with respect to the RaPS, the
remaining scheduled payments of the principal thereof and interest thereon,
calculated at the Base Rate only, that would be due after the Remarketing Date
to and including the Stated Maturity Date; provided that if the Remarketing
Date is not an Interest Payment Date with respect to the RaPS, the amount of
the next succeeding scheduled interest payment thereon, calculated at the Base
Rate only, will be reduced by the amount of interest accrued thereon,
calculated at the Base Rate only, to the Remarketing Date.
"Treasury Rate" means, with respect to the Remarketing Date, the rate per
annum equal to the semi-annual equivalent yield to maturity or interpolated
(on a day count basis) yield to maturity of the Comparable Treasury Issues,
assuming a price for the Comparable Treasury Issues (expressed as a percentage
of its principal amount), equal to the Comparable Treasury Price (plus accrued
interest to the first day following the Determination Date on which a sale of
Comparable Treasury Issues entered into on such date would customarily settle)
for such Remarketing Date.
MANDATORY TENDER
If the Remarketing Dealer gives notice to the Company and the Trustee on the
fifth Business Day prior to the Remarketing Date at not later than 4:00 p.m.
New York City time of its intention to purchase the RaPS for remarketing (the
"Notification Date"), each of the RaPS will be automatically tendered, or
deemed tendered, to the Remarketing Dealer for purchase on the Remarketing
Date, except in the circumstances described under "--Mandatory Redemption" or
"--Optional Redemption." The purchase price for the RaPS to be paid by the
Remarketing Dealer will be equal to 100% of the principal amount thereof, and
the Company will pay accrued interest, if any, to the Remarketing Date. See
"--Settlement."
If the RaPS are tendered for remarketing, the Remarketing Dealer may
remarket the RaPS for its own account at varying prices to be determined by
the Remarketing Dealer at the time of each sale. From and after the
Remarketing Date, the RaPS will bear interest at the Interest Rate to
Maturity.
The obligation of the Remarketing Dealer to purchase the RaPS on the
Remarketing Data following the Remarketing Dealer's election on the
Notification Date to remarket the RaPs is subject to terminating conditions
set forth in the Remarketing Agreement (as defined below). The occurrence of
certain terminating conditions may require the Company to settle in cash the
fair market value of the Remarketing Dealer's remarketing option based on a
market quotation on the date of settlement. See "--Remarketing Dealer".
If for any reason the Remarketing Dealer does not purchase all RaPS on the
Remarketing Date, the Company will be required to redeem the RaPS on the
Remarketing Date at a price equal to 100% of the principal
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amount thereof plus all accrued and unpaid interest, if any, on the RaPS to
the Remarketing Date. See "--Mandatory Redemption."
NOTIFICATION OF INTEREST RATE TO MATURITY
If the Remarketing Dealer has previously notified the Company and the
Trustee on the Notification Date of its intention to purchase the RaPS on the
Remarketing Date, the Remarketing Dealer will notify the Company, the Trustee
and the Depositary by telephone, confirmed in writing, by 4:00 p.m., New York
City time, on the Determination Date, of the Interest Rate to Maturity.
MANDATORY REDEMPTION
The Company will redeem the RaPS as a whole on the Remarketing Date at a
price equal to 100% of the aggregate principal amount of the RaPS plus all
accrued and unpaid interest, if any, on the RaPS to the Remarketing Date in
the event that: (i) the Remarketing Dealer for any reason (other than the
occurrence of a No-Bid Event) does not notify the Company of the Interest Rate
to Maturity by 4:00 p.m., New York City time, on the Determination Date; (ii)
prior to the Remarketing Date, the Remarketing Dealer has resigned and no
successor has been appointed on or before the Determination Date; (iii) at any
time after the Remarketing Dealer elects on the Notification Date to remarket
the RaPS, the Remarketing Dealer elects to terminate the Remarketing Agreement
(as described below--see "--Remarketing Dealer") in accordance with the terms
thereof; (iv) the Remarketing Dealer does not give notice to the Company and
the Trustee by the Notification Date of its intention to purchase the RaPS for
remarketing on the Remarketing Date; or (v) the Remarketing Dealer for any
reason does not purchase all of the RaPS on the Remarketing Date. In any such
case, payment will be made by the Company to the Depositary participant of
each Beneficial Owner of RaPS, by book-entry through the Depositary by the
close of business on the Remarketing Date against delivery through the
Depositary of such Beneficial Owner's RaPS.
OPTIONAL REDEMPTION
Notwithstanding an election by the Remarketing Dealer to remarket the RaPS,
the Company may irrevocably elect to exercise its right to redeem the RaPS, in
whole but not in part, on the Remarketing Date by notifying the Remarketing
Dealer and the Trustee of such election not later than 4:00 P.M. New York City
time on the Business Day immediately preceding the Determination Date. If the
Company so elects to redeem the RaPS, the Company shall redeem the RaPS as a
whole on the Remarketing Date at a price equal to 100% of the aggregate
principal amount of the RaPS plus all accrued and unpaid interest, if any, on
the RaPS to the Remarketing Date. In such case, payment will be made by the
Company to the Depositary participant of each Beneficial Owner's RaPS. In
addition, the Remarketing Dealer will be deemed to have elected not to
remarket the RaPS and the Company will pay to the Remarketing Dealer the fair
market value, calculated as set forth in the Remarketing Agreement, of the
Remarketing Dealer's right to purchase and remarket the RaPS pursuant to the
Remarketing Agreement. Except in the limited circumstances described above,
the RaPS are not subject to redemption at the option of the Company.
SETTLEMENT
If the RaPS are automatically tendered or deemed tendered to the Remarketing
Dealer for purchase on the Remarketing Date, all RaPS will be delivered to the
account of the Trustee, by book-entry through the Depositary pending payment
of the purchase price therefor, on the Remarketing Date. The Remarketing
Dealer will make or cause the Trustee to make payment to the Depositary
participant (each, a "Participant") of each Beneficial Owner of RaPS, by book-
entry through the Depositary by the close of business on the Remarketing
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Date against delivery through the Depositary of such Beneficial Owner's RaPS,
of the purchase price for the RaPS. The purchase price of the RaPS will be
100% of the principal amount thereof plus accrued and unpaid interest on the
RaPS to the Remarketing Date. If the Remarketing Dealer does not purchase all
of the RaPS on the Remarketing Date, the Company will be obligated to make or
cause to be made such payment for the RaPS, as described under "--Mandatory
Redemption." In any case, the Company will make or cause the Trustee to make
payment of interest due on the Remarketing Date to each Beneficial Owner of
RaPS by book-entry through the Depositary by the close of business on the
Remarketing Date.
The transactions described above will be executed on the Remarketing Date
through the Depositary in accordance with the procedures of the Depositary,
and the accounts of the respective Participants will be debited and credited
and the RaPS delivered by book-entry as necessary to effect the purchases and
sales thereof.
The tender and settlement procedures described above, including provisions
for payment to selling Beneficial Owners of tendered RaPS or for payment by
purchasers of RaPS in the remarketing, may be modified to the extent required
by the Depositary or, if the book-entry system is no longer available for the
RaPS at the time of the remarketing, to the extent required to facilitate the
tendering and remarketing of RaPS in certificated form. In addition, the
Remarketing Dealer may modify the settlement procedures set forth above in
order to facilitate the settlement process.
As long as the Depositary or its nominee holds the certificates representing
any RaPS in the book-entry system of the Depositary, no certificates for such
RaPS will be delivered by any selling Beneficial Owner to reflect any transfer
of such RaPS effected in the remarketing. In addition, under the terms of the
RaPS and the Remarketing Agreement (as defined below), the Company has agreed
that (i) it will use its best efforts to maintain the RaPS in book-entry form
with the Depositary or any successor thereto and to appoint a successor
depositary to the extent necessary to maintain the RaPS in book-entry form and
(ii) it will waive any discretionary right it otherwise has under the
Indenture to cause the RaPS to be issued in certificated form.
Settlement for the RaPS will be made by the Underwriters in immediately
available funds. All payments of principal and interest in respect of the RaPS
in book-entry form will be made in immediately available funds. The RaPS will
trade in the Depositary's Same-Day Funds Settlement System until the Stated
Maturity Date, or until the RaPS are issued in definitive form, and secondary
market trading activity in the RaPS will therefore be required by the
Depositary to settle in immediately available funds.
For further information with respect to transfers and settlement through the
Depositary, see "--Book-Entry System."
REMARKETING DEALER
On or prior to the date of original issuance of the RaPS, the Company and
the Remarketing Dealer will enter into a Remarketing Agreement (the
"Remarketing Agreement"). The Remarketing Dealer will not receive any fees or
reimbursement of expenses from the Company in connection with the remarketing.
The proceeds to the Company from the sales of the RaPS will include an amount
paid by the Remarketing Dealer for its right to remarket the RaPS.
If the Remarketing Dealer elects to remarket the RaPS, its obligation to
purchase the RaPS on the Remarketing Date will be subject to several
conditions precedent set forth in the Remarketing Agreement, including, among
others, the conditions that, since the time that the Remarketing Dealer
elected to remarket the RaPS, (i) no material adverse change in the condition,
financial or otherwise, earnings, affairs or business of the Company and its
subsidiaries taken as a whole shall have occurred, the effect of which is such
as to make it, in the reasonable judgment of the Remarketing Dealer,
impracticable to remarket the RaPS or to enforce contracts for sale of the
RaPS, (ii) no Event of Default, or any event that, with the giving of notice
or passage of time or both, would constitute an Event of Default, with respect
to the RaPS shall have occurred and be continuing, (iii) the credit rating of
any of the Company's securities shall have been downgraded or put under
surveillance or review with negative implications, (iv) the RaPS or the
Indenture shall have been amended, without the consent of the Remarketing
Dealer, in any manner that materially and adversely changes the nature of the
RaPS or the remarketing procedures, and (v) a Change of Control (as defined in
the Remarketing Agreement) shall have
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occurred. The Remarketing Dealer also may terminate its obligations under the
Remarketing Agreement at any time on or before the Remarketing Date if, among
other things, a No-Bid Event shall have occurred. If the Remarketing Dealer
elects to remarket the RaPS, upon the occurrence of certain terminating events
described above, the Remarketing Dealer will have the right to terminate the
Remarketing Agreement or, until 3:30 p.m. New York City time on the Business
Day immediately preceding the Remarketing Date, redetermine the Interest Rate
to Maturity.
If the Remarketing Agreement is terminated at the option of the Remarketing
Dealer based upon the occurrence of any of certain specified termination
events, the Company will be obligated thereunder to reimburse the Remarketing
Dealer for all of its reasonable out-of-pocket expenses. In addition, in the
event of the occurrence of any of the terminating events referred to in the
preceding paragraph or the occurrence, prior to the Remarketing Dealer's
election on the Notification Date to remarket the RaPS, of any event of the
type described in clauses (ii), (iv) or (v) in the preceding paragraph, the
Company will be obligated to pay to the Remarketing Dealer the fair market
value, calculated as set forth in the Remarketing Agreement, of the
Remarketing Dealer's right to purchase and remarket the RaPS pursuant to the
Remarketing Agreement (the "Call Price") provided, any election by the
Remarketing Dealer to terminate the Remarketing Agreement as described above
must be made within 45 days after it obtains actual knowledge of the
terminating event.
The Company will agree to indemnify the Remarketing Dealer against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended (the "Securities Act"), arising out of or in connection with its
duties under the Remarketing Agreement.
No Beneficial Owner of any RaPS will have any right or claim under the
Remarketing Agreement or against the Company or the Remarketing Dealer as a
result of the Remarketing Dealer not purchasing such RaPS.
The Remarketing Agreement provides that the Remarketing Dealer may resign at
any time as Remarketing Dealer, such resignation to be effective ten Business
Days after the delivery to the Company and the Trustee of notice of such
resignation. In such case, the Company will appoint a successor Remarketing
Dealer. The Remarketing Dealer, in its individual or any other capacity, may
buy, sell, hold and deal in RaPS. The Remarketing Dealer, either as principal
or agent, may exercise any vote or join in any action that any Beneficial
Owner of RaPS may be entitled to exercise or take, and may engage in or have
an interest in any financial or other transaction with the Company, as freely
as if it did not act in any capacity under the Remarketing Agreement.
As long as the Remarketing Agreement is in effect, neither the Company nor
any of its affiliates (other than Craigie Incorporated in its capacity as
underwriter or market-maker for the RaPS) will subordinate or acquire any of
the RaPS prior to the remarketing thereof by the Remarketing Dealer, other
than in connection with the fulfillment of the Company's obligation to redeem
the RaPS, or the exercise of its right to redeem the RaPS on the Remarketing
Date. After the Remarketing Date, or termination of the Remarketing Agreement
prior thereto, the Company and its subsidiaries and affiliates may at any time
purchase RaPS at any price in the open market or otherwise. The RaPS so
purchased by the Company, at its discretion, may be held, resold or
surrendered to the Trustee for cancellation.
PAYMENT AND PAYMENT AGENTS
Principal of and interest on the RaPS will be payable, subject to any
applicable laws and regulations, at the offices of such paying agents as the
Company may designate from time to time pursuant to the Indenture ("Paying
Agents"), except that, at the option of the Company, payment of any interest
may be made by check mailed to the address of the person entitled thereto as
such address shall appear in the Security Register (as defined in the
Indenture).
The Company has designated the Corporate Trust Office of the Trustee in New
York, New York as the Paying Agent and as the place where the RaPS may be
presented for payment. The Company at any time may designate one or more
additional Paying Agents or rescind the designation of any Paying Agent or
approve a change in the office through which any Paying Agent acts, except
that the Company will be required to maintain a Paying Agent in each Place of
Payment.
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Notwithstanding the foregoing, payments of principal and interest on Book-
Entry Securities will be made in accordance with the arrangements from time to
time in place between the Paying Agents and the Depositary or its nominee, as
holder. See "--Book-Entry System."
Any payment due on any day that is not a Business Day need not be made on
such day, but may be made on the next succeeding Business Day, with the same
force and effect as if made on the due date, and no interest will be payable
on the date of payment for the period from and after the due date.
BOOK-ENTRY SYSTEM
The RaPS will be issued only in fully registered form without coupons and
will be a "Registered Security" under the Indenture. The RaPS will be issued
in fully registered book-entry form, will be a "Book-Entry Security" under the
Indenture and will be represented by one or more fully registered global
securities (the "Global Securities") deposited with or on behalf of the
Depositary and registered in the name of the Depositary or its nominee.
Interests in the Global Securities will be shown on, and transfers thereof
will be effected only through, records maintained by the Depositary (with
respect to its participants' interests) and the Depositary's participants
(with respect to Beneficial Owners). So long as the Depositary or its nominee
is the registered owner of a Global Security, such registered owner will be
considered the sole owner or Holder of the RaPS represented by such Global
Security for all purposes under the Indenture. Except as otherwise provided
below, Beneficial Owners will not be entitled to have any of the individual
RaPS represented by such Global Security registered in their names, will not
receive or be entitled to receive physical delivery of any such RaPS in
definitive form and will not be considered the owners or Holders thereof under
the Indenture.
The Depositary has advised the Company and the Underwriters as follows: The
Depositary is a limited-purpose trust company organized under New York Banking
Law, a "banking organization" within the meaning of New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the Uniform Commercial Code as in effect in the State of New York
and a "clearing agency" registered pursuant to the provisions of Section 17A
of the Securities Exchange Act of 1934, as amended. The Depositary holds
securities deposited by its participants with the Depositary, and facilitates
the clearance and settlement of securities transactions among its participants
in such securities through electronic book-entry changes in participants'
accounts, thereby eliminating the need for physical movement of securities
certificates. The Depositary's direct participants include securities brokers
and dealers (including one or more of the Underwriters), banks, trust
companies, clearing corporations, and certain other organizations, some of
which (and/or their representatives) have ownership interests in the
Depositary. Indirect access to the Depositary's book-entry system is also
available to others, such as banks, brokers, dealers and trust companies that
clear through or maintain a custodial relationship with a participant, either
directly or indirectly. The rules applicable to the Depositary and its
participants are on file with the Securities and Exchange Commission.
The Indenture provides that if at any time the Depositary for any series of
Debt Securities (as defined in the Indenture) is unwilling, unable or
ineligible to continue to serve as such, the Company will appoint a successor
Depositary with respect to such series of Debt Securities. If a successor
Depositary is not appointed by the Company by the effective date of the
resignation of the Depositary, the Company will issue individual Debt
Securities in exchange for the Global Security or Securities representing such
Debt Securities. In addition, the Indenture provides that the Company at any
time and in its sole discretion may determine not to have any Global Security
representing such Debt Securities. However, under the terms of the RaPS and
the Remarketing Agreement, the Company has agreed that (i) it will use its
best efforts to maintain the RaPS in book-entry form with the Depositary or
any successor thereto and to appoint a successor depositary to the extent
necessary to maintain the RaPS in book-entry form and (ii) it will waive any
discretionary right it otherwise has under the Indenture to cause the RaPS to
be issued in a form other than global form.
Payments of principal of and interest on RaPS represented by a Global
Security registered in the name of the Depositary or its nominee will be made
to the Depositary or its nominee, as the case may be, as the registered
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owner of the Global Security representing such RaPS. None of the Company, the
Trustee, any Paying Agent or the Security Registrar for such RaPS will have
any responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests of the Global
Security for such RaPS or for maintaining, supervising or reviewing any
records relating to such beneficial ownership interests. The RaPS may be
transferred or exchanged only through a participant in the Depositary.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
GENERAL
The following summary of certain United States Federal income tax
consequences of the purchase, ownership and disposition of the RaPS is based
upon laws, regulations, rulings and decisions now in effect, all of which are
subject to change (including changes in effective dates) or possible differing
interpretations. It deals only with initial purchasers who hold RaPS as
capital assets and does not purport to deal with persons in special tax
situations, such as financial institutions, insurance companies, regulated
investment companies, dealers in securities or currencies, persons holding
RaPS as a hedge or as a position in a "straddle" for tax purposes, or persons
whose functional currency is not the U.S. dollar. In addition, this discussion
only addresses the Federal income tax consequences of the RaPS until the
Remarketing Date. Persons considering the purchase of RaPS must consult their
own tax advisors concerning the application of United States Federal income
tax laws to their particular situations as well as any consequences of the
purchase, ownership and disposition of the RaPS arising under the laws of any
other jurisdiction.
As used herein, the term "U.S. Holder" means a beneficial owner of a RaPS
that is for United States Federal income tax purposes (i) an individual who is
a citizen or resident of the United States, (ii) an entity which is a
corporation or a partnership for United States Federal income tax purposes
created or organized in or under the laws of the United States or of any State
thereof (other than a partnership that is not treated as a United States
person under any applicable Treasury regulations), (iii) an estate whose
income is subject to United States Federal income tax regardless of its
source, (iv) a trust if a court within the United States is able to exercise
primary supervision over the administration of the trust and one or more
United States persons have the authority to control all substantial decisions
of the trust or (v) any other person whose income or gain in respect of a RaPS
is effectively connected with the conduct of a United States trade or
business. Notwithstanding the preceding sentence, to the extent provided in
Treasury regulations, certain trusts in existence on August 20, 1996, and
treated as United States persons prior to such date, that elect to continue to
be treated as United States persons also will be U.S. Holders. As used herein,
the term "non-U.S. Holder" means a Beneficial Owner of a RaPS that is not a
U.S. Holder.
U.S. HOLDERS
The United States Federal income tax treatment of debt obligations such as
the RaPS is not certain. Because the RaPS are subject to mandatory tender on
the Remarketing Date, the Company intends to treat the RaPS as maturing on the
Remarketing Date for United States Federal income tax purposes. By purchasing
the RaPS, a U.S. Holder agrees to follow such treatment for United States
Federal income tax purposes. Based on such treatment, interest on the RaPS
will constitute "qualified stated interest" and generally will be taxable to a
U.S. Holder as ordinary interest income at the time such payments are accrued
or received (in accordance with the U.S. Holder's regular method of tax
accounting). Under the foregoing, if the RaPS are issued to a U.S. Holder at
par value, or if the excess of the par value over the issue price is less than
the statutory de minimis amount (generally 1/4 of 1% of the RaPS' stated
redemption price at the Remarketing Date multiplied by the number of complete
years to the Remarketing Date from its issue date), the RaPS will not be
treated as having original issue discount.
If the RaPS are issued at a discount greater than the statutory de minimis
amount, a U.S. Holder must include original issue discount in income as
ordinary interest for United States Federal income tax purposes as it
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accrues under a constant yield method in advance of receipt of the cash
payments attributable to such income, regardless of the U.S. Holder's regular
method of accounting. In general, the amount of original issue discount
included in income by an initial U.S. Holder of a RaPS would be the sum of the
daily portions of original issue discount with respect to such RaPS for each
day during the taxable year (or portion of the taxable year) on which such
U.S. Holder held such RaPS. The "daily portion" of original issue discount on
any RaPS is determined by allocating to each day in any accrual period a
ratable portion of the original issue discount allocable to that accrual
period. An "accrual period" may be of any length and the accrual periods may
vary in length over the term of the RaPS, provided that each accrual period is
no longer than one year and each scheduled payment of principal or interest
occurs either on the final day of an accrual period or on the first day of an
accrual period. The amount of original issue discount allocable to each
accrual period is generally equal to the difference between (i) the product of
(x) the RaPS' adjusted issue price at the beginning of such accrual period and
appropriately adjusted to take into account the length of the particular
accrual period, and (y) the yield of the RaPS and (ii) the amount of any
qualified stated interest payments allocable to such accrual period. The
"adjusted issue price" of a RaPS at the beginning of any accrual period is the
sum of the issue price of the RaPS plus the amount of original issue discount
allocable to all prior accrual periods minus the amount of any prior payments
on the RaPS that were not qualified stated interest payments. Under these
rules, U.S. Holders generally will have to include in income increasingly
greater amounts of original issue discount in successive accrual periods.
Under the foregoing treatment, upon the sale, exchange or retirement of
RaPS, a U.S. Holder generally will recognize taxable gain or loss equal to the
difference between the amount realized on the sale, exchange or retirement
(other than amounts representing accrued and unpaid interest which is taxable
as ordinary income) and such U.S. Holder's adjusted tax basis in the RaPS. A
U.S. Holder's adjusted tax basis in the RaPS generally will equal such U.S.
Holder's initial investment in the RaPS increased by any original issue
discount included in income (and accrued market discount, if any, if the U.S.
Holder has included such market discount in income) and decreased by the
amount of any payments, other than qualified stated interest payments,
received and amortizable bond premium taken with respect to such RaPS. Subject
to the application of the market discount rules, such gain or loss will be
capital if the RaPS are held as a capital asset.
The Taxpayer Relief Act of 1997 (the "1997 Act") reduces the maximum rates
on long-term capital gains recognized on capital assets held by individual
taxpayers for more than 18 months as of the date of disposition (and would
further reduce the maximum rates on such gains in the year 2001 and thereafter
for certain individual taxpayers who meet specified conditions). The capital
gains rate for capital assets held by individual taxpayers for more than 12
months but not more than 18 months ("mid-term") was not changed by the 1997
Act. The 1997 Act does not change the capital gains rates for corporations.
Prospective investors should consult their own tax advisors concerning these
tax law changes.
There can be no assurance that the Internal Revenue Service (the "IRS") will
agree with the Company's treatment of RaPS, and the IRS could seek to treat
the RaPS as maturing on the Stated Maturity. In the event the RaPS were
treated as maturing on the Stated Maturity for United States Federal income
tax purposes, because the Interest Rate to Maturity will not be determined
until the Determination Date, the RaPS would be treated as having contingent
interest under the Code; and the payment by the Remarketing Dealer to the
Company might also affect the issue price of the RaPS and collateral
consequences. Furthermore, under Treasury Regulations governing debt
instruments that provide for contingent payments (the "Contingent Payment
Regulations"), the Company would be required to construct a projected payment
schedule for the RaPS based upon the Company's current borrowings costs for
comparable debt instruments of the Company, from which an estimated yield on
the RaPS would be calculated. A U.S. Holder would be required to include in
income as ordinary interest an amount equal to the sum of the daily portions
of interest on the RaPS that would be deemed to accrue at this estimated yield
for each day during the U.S. Holder's taxable year on which the U.S. Holder
holds the RaPS. Adjustments would be made if payments are not made as
contemplated in the projected payment schedule. As a result of the application
of the Contingent Payment Regulations, it is possible that a U.S. Holder would
be required to include interest in income in excess of actual cash payments
received for certain taxable years.
S-16
<PAGE>
Under the Contingent Payment Regulations, upon the sale, exchange or
redemption of RaPS (including a sale pursuant to the mandatory tender on the
Remarketing Date), a U.S. Holder would be required to recognize taxable income
or loss in an amount equal to the difference, if any, between the amount
realized by the U.S. Holder upon such sale or exchange and the U.S. Holder's
adjusted tax basis in the RaPS as of the date of disposition. Any taxable
income generally would be treated as ordinary income. Any taxable loss
generally would be treated (i) first as an offset to any interest otherwise
includible in income by a U.S. Holder with respect to the RaPS for the taxable
year in which the sale or exchange occurs to the extent of the amount of such
includible interest, and (ii) then as an ordinary loss to the extent of the
U.S. Holder's total interest inclusions on the RaPS in previous taxable years.
Any remaining loss in excess of the amounts described in clauses (i) and (ii)
above generally would be treated as short-term, mid-term or long-term capital
loss (depending upon the U.S. Holder's holding period for the RaPS). All
amounts includible in income by a U.S. Holder as ordinary income pursuant to
the Contingent Payment Regulations would be treated as original issue
discount.
NON-U.S. HOLDERS
A non-U.S. Holder generally will not be subject to United States Federal
income taxes on payments of principal or interest (including original issue
discount and accruals under the Treasury regulations applicable to contingent
payment debt obligations, if any) on RaPS, unless such non-U.S. Holder owns
actually or constructively 10% or more of the total combined voting power of
the Company, is a controlled foreign corporation related to the Company
through stock ownership or is a bank receiving interest described in Section
881(c)(3)(A) of the Internal Revenue Code of 1986, as amended (the "Code"). To
qualify for the exemption from taxation, the last United States payor in the
chain of payment prior to payment to a non-U.S. Holder (the "Withholding
Agent") must have received in the year in which a payment of interest or
principal occurs, or in either of the two preceding calendar years, a
statement that (i) is signed by the Beneficial Owner of the RaPS under
penalties of perjury, (ii) certifies that such owner is not a U.S. Holder and
(iii) provides the name and address of the Beneficial Owner. The statement may
be made on an IRS Form W-8 or a substantially similar form, and the Beneficial
Owner must inform the Withholding Agent of any change in the information on
the statement within 30 days of such change. If RaPS are held through a
securities clearing organization or certain other financial institutions, the
organization or institution may provide a signed statement to the Withholding
Agent. However, in such case, the signed statement must be accompanied by a
copy of the IRS Form W-8 or the substitute form provided by the Beneficial
Owner to the organization or institution.
Generally, a non-U.S. Holder will not be subject to United States Federal
income taxes on any amount which constitutes gain upon the sale or disposition
of RaPS. However, certain exceptions may be applicable, and a non-U.S. Holder
should consult its tax advisor in this regard.
BACKUP WITHHOLDING
Backup withholding of United States Federal income tax at a rate of 31% may
apply to payments made in respect of the RaPS to owners who are not "exempt
recipients" and who fail to provide certain identifying information (such as
the owner's taxpayer identification number) in the required manner. Generally,
individuals are not exempt recipients, whereas corporation and certain other
entities generally are exempt recipients. Payments made in respect of the RaPS
to a U.S. Holder must be reported to the IRS, unless the U.S. Holder is an
exempt recipient or establishes an exemption. Compliance with the
identification procedures described in the preceding section would establish
an exemption from backup withholding for the non-U.S. Holders who are not
exempt recipients.
In addition, upon the sale of RaPS to or through a broker, the broker must
withhold 31% of the entire purchase price, unless either (i) the broker
determines that the seller is a corporation or other exempt recipient or (ii)
the seller provides, in the required manner, certain identifying information
and, in the case of a non-U.S. Holder, certifies that such seller is a non-
U.S. Holder (and certain other conditions are met). Such a sale must be
reported by the broker to the IRS, unless either (i) the broker determines
that the seller is an exempt recipient or
S-17
<PAGE>
(ii) the seller certifies its non-U.S. Holder status (and certain other
conditions are met). Certification of the registered owner's non-U.S. Holder
status normally would be made on an IRS Form W-8 under penalties of perjury,
although in certain cases it may be possible to submit other documentary
evidence.
Any amounts withheld under the backup withholding rules from a payment to a
Beneficial Owner generally would be allowed as a refund or a credit against
such Beneficiary Owner's United States Federal income tax provided the
required information is furnished to the IRS. A U.S. Holder as defined in
clause (v) above, even exempt from backup withholding, may be subject to a 30%
withholding tax if it does not properly certify that its income is effectively
connected to a U.S. trade or business.
NEW WITHHOLDING REGULATIONS
On October 6, 1997, the Treasury Department issued new regulations (the "New
Regulations") which make certain modifications to the withholding, backup
withholding and information reporting rules described above. The New
Regulations attempt to unify certification requirements and modify reliance
standards. The New Regulations generally will be effective for payments made
after December 31, 1999, subject to certain transition rules. Prospective
investors are urged to consult their own tax advisors regarding the New
Regulations.
UNDERWRITING
Bear, Stearns & Co. Inc., Craigie Incorporated, Keefe, Bruyette & Woods,
Inc. and Donaldson, Lufkin & Jenrette Securities Corporation (the
"Underwriters") have severally agreed, subject to the terms and conditions of
the Underwriting Agreement, to purchase from the Company the principal amounts
of the RaPS set forth opposite their respective names below:
<TABLE>
<CAPTION>
PRINCIPAL
UNDERWRITER AMOUNT
----------- ------------
<S> <C>
Bear, Stearns & Co. Inc...................................... $
Craigie Incorporated.........................................
Keefe, Bruyette & Woods, Inc.................................
Donaldson, Lufkin & Jenrette Securities Corporation..........
------------
Total.................................................... $350,000,000
============
</TABLE>
In the Underwriting Agreement, the Underwriters have agreed, subject to the
terms and conditions set forth therein, to purchase all the RaPS offered
hereby if any RaPS are purchased. The Underwriters have advised the Company
that the Underwriters propose to offer the RaPS from time to time for sale in
negotiated transactions or otherwise, at prices relating to prevailing market
prices determined by the Underwriters at the time of each sale. The
Underwriters may effect such transactions by selling RaPS to or through
dealers and such dealers may receive compensation in the form of underwriting
discounts, concessions or commissions from the Underwriters and any purchasers
of RaPS for whom they may act as agent. The Underwriters and any dealers that
participate with the Underwriters in the distribution of the RaPS may be
deemed to be underwriters, and any discounts or commissions received by them
and any profit on the resale of the RaPS by them may be deemed to be
underwriting compensation.
The RaPS are a new issue of securities with no established trading market.
The Company has been advised by the Underwriters that the Underwriters intend
to make a market in the RaPS, but they are not obligated to do so and may
discontinue market making at any time without notice. No assurance can be
given as to the liquidity of the trading market for the RaPS.
The Underwriters are permitted to engage in certain transactions that
maintain or otherwise affect the price of the RaPS. Such transactions may
include over-allotment transactions and purchases to cover short positions
S-18
<PAGE>
created by the Underwriters in connection with the offering. If the
Underwriters create a short position in the RaPS in connection with the
offering, i.e., if they sell RaPS in an aggregate principal amount exceeding
that set forth on the cover page of this Prospectus Supplement, the
Underwriters may reduce that short position by purchasing RaPS in the open
market. In general, purchases of a security to reduce a short position could
cause the price of the security to be higher than it might be in the absence
of such purchases. Neither the Company nor the Underwriters make any
representation or prediction as to the direction or magnitude of any effect
that any such transactions may have on the price of the RaPS. In addition,
neither the Company nor the Underwriters make any representation that the
Underwriters will engage in such transactions or that such transactions, once
commenced, will not be discontinued without notice.
In the ordinary course of business, the Underwriters and their affiliates
have engaged and may in the future engage in investment banking transactions
with the Company and certain of its affiliates. Bear, Stearns & Co. Inc. has
been appointed as the Remarketing Dealer for the RaPS. See "Description of
RaPS--Remarketing."
Craigie Incorporated, one of the Underwriters, is an affiliate of the
Company. Accordingly, this Offering will be made pursuant to Rule 2720 of the
Conduct Rules of the National Association of Securities Dealers, Inc.
The Company has agreed to indemnify the Underwriters and certain other
persons against certain liabilities, including liabilities under the
Securities Act, or to make contribution to certain payments in respect
thereof.
VALIDITY OF RAPS
The validity of the RaPS will be passed upon for the Company by Womble
Carlyle Sandridge & Rice, PLLC, Charlotte, North Carolina, and for the
Underwriters by Gibson, Dunn & Crutcher LLP, New York, New York. Gibson, Dunn
& Crutcher LLP will rely on the opinion of Womble Carlyle Sandridge & Rice,
PLLC, as to matters of North Carolina law, and Womble Carlyle Sandridge &
Rice, PLLC will rely on the opinion of Gibson, Dunn & Crutcher LLP as to
matters of New York law.
EXPERTS
The consolidated financial statements of the Company and its subsidiaries
which are incorporated by reference in the Prospectus as supplemented by this
Prospectus Supplement from the Company's Current Report on Form 8-K dated May
13, 1998, which restates the consolidated financial statements that are
incorporated by reference from the Company's Annual Report on Form 10-K for
the year ended December 31, 1997, to reflect the acquisition of Life Bancorp,
Inc. by the Company on March 1, 1998, have been audited by Arthur Andersen
LLP, independent public accountants, as indicated in their report with respect
thereto, and are incorporated by reference herein upon the authority of said
firm as experts in giving said report.
S-19
<PAGE>
================================================================================
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR IN-
CORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS IN
CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS SUPPLEMENT AND THE PROSPEC-
TUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RE-
LIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. NEITHER
THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS NOR ANY SALE
MADE HEREUNDER AND THEREUNDER SHALL UNDER ANY CIRCUMSTANCE CREATE AN IMPLICA-
TION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE
DATE HEREOF. THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO NOT CONSTITUTE
AN OFFER OR SOLICITATION BY ANYONE IN ANY STATE IN WHICH SUCH OFFER OR SOLICI-
TATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITA-
TION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE
SUCH OFFER OR SOLICITATION.
_______________
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
PROSPECTUS SUPPLEMENT
<S> <C>
Incorporation of Certain Documents by Reference............................ S-2
The Company................................................................ S-3
Recent Developments........................................................ S-4
Use of Proceeds............................................................ S-5
Consolidated Ratios of Earnings to Fixed Charges........................... S-6
Selected Consolidated Financial Data....................................... S-7
Description of RaPS........................................................ S-8
Certain United States Federal Income Tax Considerations.................... S-15
Underwriting............................................................... S-18
Validity of RaPS........................................................... S-19
Experts.................................................................... S-19
PROSPECTUS
Available Information...................................................... 2
Incorporation of Certain Documents by Reference............................ 2
The Company................................................................ 3
Use of Proceeds............................................................ 4
Consolidated Ratios of Earnings to Fixed Charges........................... 4
Certain Regulatory Considerations.......................................... 4
Description of the Debt Securities......................................... 10
Senior Debt Securities..................................................... 15
Subordinated Debt Securities............................................... 17
Validity of Offered Securities............................................. 19
Experts.................................................................... 19
Plan of Distribution....................................................... 20
</TABLE>
$350,000,000
BB&T CORPORATION
SUBORDINATED NOTES
% REDEEMABLE AND PUTABLE SECURITIESSM ("RAPS")
DUE , 2028
(REMARKETING DATE , 2008)
_____________________
PROSPECTUS SUPPLEMENT
_____________________
BEAR, STEARNS & CO. INC.
CRAIGIE INCORPORATED
A BB&T COMPANY
KEEFE, BRUYETTE & WOODS, INC.
DONALDSON, LUFKIN & JENRETTE
JUNE , 1998
SMService Mark of Bear, Stearns & Co. Inc.
================================================================================
