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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
FORM 10-Q
----------------
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended:
September 30, 2000
Commission file number: 1-10853
BB&T CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
North Carolina 56-0939887
(State of Incorporation) (I.R.S. Employer Identification No.)
</TABLE>
<TABLE>
<S> <C>
200 West Third Street
Winston-Salem, North Carolina 27101
(Address of Principal Executive Offices) (Zip Code)
</TABLE>
(336) 733-2000
(Registrant's Telephone Number, Including Area Code)
----------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [X] No [_]
At October 31, 2000, 396,576,029 shares of the registrant's common stock, $5
par value, were outstanding.
This Form 10-Q has 31 pages. The Exhibit Index is included on page 30.
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BB&T CORPORATION
FORM 10-Q
September 30, 2000
INDEX
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)........................... 2
Consolidated Financial Statements.............................. 2
Notes to Consolidated Financial Statements..................... 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of
Operations.................................................... 14
Analysis of Financial Condition................................ 14
Market Risk Management......................................... 18
Capital Adequacy and Resources................................. 22
Analysis of Results of Operations.............................. 23
Part II. OTHER INFORMATION
Item 1. Legal Proceedings.......................................... 30
Item 6. Exhibits and Reports on Form 8-K........................... 30
SIGNATURES........................................................... 31
EXHIBIT 11 Calculation of Earnings Per Share......................... 9
EXHIBIT 27 Financial Data Schedule--Included with electronically-
filed document only.
</TABLE>
1
<PAGE>
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
BB&T CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
------------- ------------
(unaudited)
<S> <C> <C>
Assets
Cash and due from banks .......................... $ 1,283,947 $ 1,466,071
Interest-bearing deposits with banks.............. 26,613 81,927
Federal funds sold and securities purchased under
resale agreements or similar arrangements........ 310,914 432,877
Trading securities................................ 132,543 93,221
Securities available for sale..................... 13,129,528 12,257,822
Securities held to maturity (approximate market
values of $70,312 at September 30, 2000, and
$398,527 at December 31, 1999)................... 69,984 404,897
Loans held for sale............................... 505,038 367,243
Loans and leases, net of unearned income.......... 37,913,841 35,389,063
Allowance for loan and lease losses............... (505,576) (477,296)
----------- -----------
Loans and leases, net............................ 37,408,265 34,911,767
----------- -----------
Premises and equipment, net....................... 723,609 713,089
Other assets...................................... 3,080,740 2,271,922
----------- -----------
Total assets .................................... $56,671,181 $53,000,836
=========== ===========
Liabilities and Shareholders' Equity
Deposits:
Noninterest-bearing deposits..................... $ 4,856,375 $ 4,847,976
Savings and interest checking.................... 2,271,620 2,978,811
Money rate savings............................... 10,167,957 9,592,326
Other time deposits.............................. 16,932,290 16,199,129
Foreign deposits................................. 1,806,834 529,401
----------- -----------
Total deposits................................... 36,035,076 34,147,643
----------- -----------
Short-term borrowed funds......................... 6,692,661 7,971,873
Long-term debt.................................... 8,343,252 6,073,428
Accounts payable and other liabilities............ 1,263,189 744,273
----------- -----------
Total liabilities................................ 52,334,178 48,937,217
----------- -----------
Shareholders' equity:
Preferred stock, $5 par, 5,000,000 shares
authorized, none issued and outstanding......... -- --
Common stock, $5 par, 500,000,000 shares
authorized; 397,828,643 issued and outstanding
at September 30, 2000, and 398,742,188 at
December 31, 1999............................... 1,989,143 1,993,711
Additional paid-in capital....................... 335,787 379,363
Retained earnings................................ 2,146,924 2,011,627
Unearned income and unvested restricted stock.... (7,190) (11,676)
Accumulated other nonshareholder changes in
equity, net of deferred income taxes of
$(69,384) at September 30, 2000 and $(185,516)
at December 31, 1999............................ (127,661) (309,406)
----------- -----------
Total shareholders' equity....................... 4,337,003 4,063,619
----------- -----------
Total liabilities and shareholders' equity....... $56,671,181 $53,000,836
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
2
<PAGE>
BB&T CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended Ended
September 30, September 30,
------------------------ ------------------------
2000 1999 2000 1999
----------- ----------- ----------- -----------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C>
Interest Income
Interest and fees on
loans and leases........ $ 894,093 $ 750,292 $ 2,559,041 $ 2,165,725
Interest and dividends on
securities.............. 222,225 208,545 630,627 594,539
Interest on short-term
investments............. 5,084 6,038 15,975 16,077
----------- ----------- ----------- -----------
Total interest income... 1,121,402 964,875 3,205,643 2,776,341
----------- ----------- ----------- -----------
Interest Expense
Interest on deposits..... 393,197 303,596 1,077,895 887,615
Interest on short-term
borrowed funds.......... 91,328 83,576 295,067 216,928
Interest on long-term
debt.................... 126,512 85,758 312,394 241,435
----------- ----------- ----------- -----------
Total interest expense.. 611,037 472,930 1,685,356 1,345,978
----------- ----------- ----------- -----------
Net Interest Income....... 510,365 491,945 1,520,287 1,430,363
Provision for loan and
lease losses............ 38,200 24,352 92,431 74,401
----------- ----------- ----------- -----------
Net Interest Income After
Provision for Loan and
Lease Losses............. 472,165 467,593 1,427,856 1,355,962
----------- ----------- ----------- -----------
Noninterest Income
Service charges on
deposit accounts........ 69,186 60,991 196,401 178,512
Investment banking and
brokerage fees and
commissions............. 36,488 38,079 123,347 91,471
Mortgage banking income.. 24,243 37,501 76,605 133,871
Trust income............. 20,297 17,982 58,375 51,969
Agency insurance
commissions............. 34,278 20,618 94,667 54,570
Other insurance
commissions............. 3,910 3,779 11,142 10,639
Other nondeposit fees and
commissions............. 37,503 30,125 103,433 89,257
Securities gains
(losses), net........... (181,361) (1,882) (222,911) (4,180)
Other income............. 27,456 15,419 72,371 45,667
----------- ----------- ----------- -----------
Total noninterest
income................. 72,000 222,612 513,430 651,776
----------- ----------- ----------- -----------
Noninterest Expense
Personnel expense........ 238,600 218,214 699,867 618,620
Occupancy and equipment
expense................. 70,862 63,530 201,738 184,292
Amortization of
intangibles and mortgage
servicing rights........ 19,874 20,080 59,525 59,776
Other noninterest
expense................. 149,709 131,759 395,927 349,467
----------- ----------- ----------- -----------
Total noninterest
expense................ 479,045 433,583 1,357,057 1,212,155
----------- ----------- ----------- -----------
Earnings
Income before income
taxes................... 65,120 256,622 584,229 795,583
Provision for income
taxes................... 15,856 82,843 183,243 256,800
----------- ----------- ----------- -----------
Net income.............. $ 49,264 $ 173,779 $ 400,986 $ 538,783
=========== =========== =========== ===========
Per Common Share
Net income:
Basic................... $ .12 $ .44 $ 1.00 $ 1.36
=========== =========== =========== ===========
Diluted................. $ .12 $ .43 $ .99 $ 1.34
=========== =========== =========== ===========
Cash dividends paid by
BB&T Corporation........ $ .23 $ .20 $ .63 $ .55
=========== =========== =========== ===========
Weighted Average Shares
Outstanding
Basic.................... 399,662,723 394,941,799 399,588,220 395,125,226
=========== =========== =========== ===========
Diluted.................. 404,477,344 401,178,084 404,427,972 402,126,950
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE>
BB&T CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
For the Nine Months Ended September 30, 2000 and 1999
(Unaudited)
(Dollars in thousands)
<TABLE>
<CAPTION>
Accumulated
Other
Shares of Additional Retained Nonshareholder Total
Common Common Paid-In Earnings Changes in Shareholders'
Stock Stock Capital and Other* Equity Equity
----------- ---------- ---------- ---------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31,
1998, as restated...... 396,201,255 $1,981,006 $376,670 $1,600,150 $ 73,103 $4,030,929
Add (Deduct)
Nonshareholder changes
in equity:**
Net income............. -- -- -- 538,783 -- 538,783
Unrealized holding
gains (losses)
arising during the
period............... -- -- -- -- (232,219) (232,219)
Less: reclassification
adjustment, net of
tax of $(1,349)...... -- -- -- -- (2,831) (2,831)
----------- ---------- -------- ---------- --------- ----------
Net unrealized gains
(losses) on
securities............ -- -- -- -- (235,050) (235,050)
----------- ---------- -------- ---------- --------- ----------
Total nonshareholder
changes in equity..... -- -- -- 538,783 (235,050) 303,733
----------- ---------- -------- ---------- --------- ----------
Common stock issued.... 8,903,643 44,518 352,258 -- -- 396,776
Redemption of common
stock................. (8,537,631) (42,688) (344,098) -- -- (386,786)
Cash dividends declared
on common stock....... -- -- -- (277,329) -- (277,329)
Other.................. -- -- -- (12,060) -- (12,060)
----------- ---------- -------- ---------- --------- ----------
Balance, September 30,
1999................... 396,567,267 $1,982,836 $384,830 $1,849,544 $(161,947) $4,055,263
=========== ========== ======== ========== ========= ==========
Balance, December 31,
1999, as restated...... 398,742,188 $1,993,711 $379,363 $1,999,951 $(309,406) $4,063,619
Add (Deduct)
Nonshareholder changes
in equity:**
Net income............. -- -- -- 400,986 -- 400,986
Unrealized holding
gains (losses)
arising during the
period............... -- -- -- -- (334,751) (334,751)
Less: reclassification
adjustment, net of
tax of $(69,905)..... -- -- -- -- (153,006) (153,006)
----------- ---------- -------- ---------- --------- ----------
Net unrealized gains
(losses) on
securities............ -- -- -- -- 181,745 181,745
----------- ---------- -------- ---------- --------- ----------
Total nonshareholder
changes in equity..... -- -- -- 400,986 181,745 582,731
----------- ---------- -------- ---------- --------- ----------
Common stock issued.... 2,986,155 14,931 45,731 -- -- 60,662
Redemption of common
stock................. (3,899,700) (19,499) (89,307) -- -- (108,806)
Cash dividends declared
on common stock....... -- -- -- (265,689) -- (265,689)
Other.................. -- -- -- 4,486 -- 4,486
----------- ---------- -------- ---------- --------- ----------
Balance, September 30,
2000................... 397,828,643 $1,989,143 $335,787 $2,139,734 $(127,661) $4,337,003
=========== ========== ======== ========== ========= ==========
</TABLE>
--------
* Other includes unearned income and unvested restricted stock.
** Comprehensive income as defined by SFAS No. 130.
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE>
BB&T CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 2000 and 1999
(Unaudited)
<TABLE>
<CAPTION>
2000 1999
----------- -----------
(Dollars in thousands)
<S> <C> <C>
Cash Flows From Operating Activities:
Net income.......................................... $ 400,986 $ 538,783
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan and lease losses................. 92,431 74,401
Depreciation of premises and equipment.............. 63,618 76,372
Amortization of intangibles and mortgage servicing
rights............................................. 59,525 59,776
Accretion of negative goodwill...................... (4,682) (4,682)
Amortization of unearned stock compensation......... 4,486 2,690
Discount accretion and premium amortization on
securities, net.................................... (3,544) (2,099)
Net decrease (increase) in trading account
securities......................................... (39,322) (303)
Loss (gain) on sales of securities, net............. 222,911 4,180
Loss (gain) on disposals of premises and equipment,
net................................................ 1,554 (4,400)
Proceeds from sales of loans held for sale.......... 1,565,184 3,390,074
Purchases of loans held for sale.................... (492,272) (827,952)
Origination of loans held for sale, net of
principal collected................................ (1,201,669) (1,692,671)
Decrease (increase) in:
Accrued interest receivable........................ (95,550) (30,468)
Other assets....................................... (957,178) (116,410)
Increase (decrease) in:
Accrued interest payable........................... (1,886) 48,292
Accounts payable and other liabilities............. 716,049 204,972
Other, net.......................................... (10,138) (24,619)
----------- -----------
Net cash provided by (used in) operating
activities....................................... 320,503 1,695,936
----------- -----------
Cash Flows From Investing Activities:
Proceeds from sales of securities available for
sale............................................... 4,741,468 606,883
Proceeds from maturities, calls and paydowns of
securities available for sale...................... 1,194,716 2,424,883
Purchases of securities available for sale.......... (5,735,017) (4,831,017)
Proceeds from maturities, calls and paydowns of
securities held to maturity........................ 37,260 57,403
Purchases of securities held to maturity............ (10,219) (13,844)
Leases made to customers............................ (87,474) (93,096)
Principal collected on leases....................... 67,786 53,819
Loan originations, net of principal collected....... (2,951,873) (2,671,106)
Purchases of loans.................................. (386,619) (83,139)
Net cash (paid) acquired in transactions accounted
for under the purchase method...................... (10,467) 311,975
Purchases and originations of mortgage servicing
rights............................................. (40,880) (48,934)
Proceeds from disposals of premises and equipment... 8,600 18,842
Purchases of premises and equipment................. (82,088) (90,694)
Proceeds from sales of foreclosed property.......... 18,654 22,878
Proceeds from sales of other real estate held for
development or sale................................ 3,520 9,916
Other, net.......................................... -- (38)
----------- -----------
Net cash used in investing activities............. (3,232,633) (4,325,269)
----------- -----------
Cash Flows From Financing Activities:
Net increase (decrease) in deposits................. 1,887,433 (156,024)
Net increase (decrease) in short-term borrowed
funds.............................................. (1,279,212) 2,066,207
Proceeds from long-term debt........................ 6,068,460 2,285,482
Repayments of long-term debt........................ (3,798,636) (879,547)
Net proceeds from common stock issued............... 26,653 43,534
Redemption of common stock.......................... (108,806) (386,786)
Cash dividends paid on common stock................. (243,163) (208,837)
Other, net.......................................... -- 452
Net cash provided by financing activities......... 2,552,729 2,764,481
Net Decrease in Cash and Cash Equivalents............ (359,401) 135,148
Cash and Cash Equivalents at Beginning of Period..... 1,980,875 1,795,851
----------- -----------
Cash and Cash Equivalents at End of Period........... $ 1,621,474 $ 1,930,999
=========== ===========
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for:
Interest............................................ $ 1,642,141 $ 1,101,854
Income taxes........................................ 65,224 69,182
Noncash financing and investing activities:
Transfer of securities held to maturity to
available for sale................................. 307,775 231,529
Transfer of loans to foreclosed property............ 22,184 20,664
Transfer of other real estate owned to fixed
assets............................................. 3,675 1,255
Transfer of fixed assets to other real estate
owned.............................................. 1,471 3,940
Tax benefit from exercise of stock options.......... 3,672 14,787
Securitization of mortgage loans.................... 747,067 --
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
<PAGE>
BB&T CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2000
(Unaudited)
A. Basis of Presentation
In the opinion of management, the accompanying unaudited consolidated
financial statements contain all adjustments necessary to present fairly the
consolidated balance sheets of BB&T Corporation and subsidiaries (referred to
herein as "BB&T", "the Corporation" or "the Company") as of September 30, 2000
and December 31, 1999; the consolidated statements of income for the three and
nine months ended September 30, 2000 and 1999; the consolidated statements of
changes in shareholders' equity for the nine months ended September 30, 2000
and 1999; and the consolidated statements of cash flows for the nine months
ended September 30, 2000 and 1999.
The consolidated financial statements and notes are presented in accordance
with the instructions for Form 10-Q. The information contained in the
footnotes included in BB&T's 1999 Annual Report on Form 10-K, as restated in
BB&T's Current Report on Form 8-K filed on October 27, 2000, should be
referred to in connection with the reading of these unaudited interim
consolidated financial statements. In certain instances, amounts reported in
the 1999 financial statements have been reclassified to conform to the 2000
statement presentation. Such reclassifications had no effect on shareholders'
equity or net income.
Use of Estimates
The preparation of financial statements 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 period. Actual results could differ from those estimates.
Forward-Looking Statements
This report contains forward-looking statements with respect to the
financial condition, results of operations and business of BB&T. These
forward-looking statements involve risks and uncertainties and are based on
the beliefs and assumptions of the management of BB&T, and on the information
available to management at the time that these disclosures were prepared.
Factors that may cause actual results to differ materially from those
contemplated by such forward-looking statements include, among others, the
following possibilities: (1) competitive pressures among depository and other
financial institutions may increase significantly; (2) changes in the interest
rate environment may reduce margins; (3) general economic conditions, either
nationally or regionally, may be less favorable than expected, resulting in,
among other things, a deterioration in credit quality and/or a reduced demand
for credit; (4) legislative or regulatory changes, including changes in
accounting standards, may adversely affect the businesses in which BB&T is
engaged; (5) costs or difficulties related to the integration of the
businesses of BB&T and its merger partners may be greater than expected;
(6) expected cost savings associated with pending mergers may not be fully
realized or realized within the expected time frame; (7) deposit attrition,
customer loss or revenue loss following pending mergers may be greater than
expected; (8) competitors may have greater financial resources and develop
products that enable such competitors to compete more successfully than BB&T;
and (9) adverse changes may occur in the securities markets.
B. Nature of Operations
BB&T Corporation is a financial holding company headquartered in Winston-
Salem, North Carolina. BB&T conducts its operations in North Carolina, South
Carolina, Virginia, Maryland, Georgia, West Virginia, Kentucky and Washington,
D.C. through its subsidiaries. BB&T's principal banking subsidiaries, Branch
Banking and
6
<PAGE>
Trust Company ("BB&T-NC"), Branch Banking and Trust Company of South Carolina
("BB&T-SC") and Branch Banking and Trust Company of Virginia ("BB&T-VA"),
provide a wide range of traditional banking services to individuals and
commercial customers. BB&T is also the parent company for fifteen subsidiary
banks acquired through mergers with Hardwick Holding Company, First Banking
Company of Southeast Georgia and One Valley Bancorp, Inc. These banks are
expected to be merged with and into BB&T-NC or BB&T-VA based on their states
of operation. Substantially all of BB&T's loans are to individuals residing in
the market areas described above or to businesses that are located in this
geographic area. Subsidiaries of BB&T's commercial banking units offer lease
financing to commercial businesses and municipal governments, investment
services, (including discount brokerage services, annuities, mutual funds and
government and municipal bonds), life insurance and property and casualty
insurance on an agency basis and insurance premium financing. Direct nonbank
subsidiaries of BB&T provide a variety of financial services including
automobile lending, equipment financing, factoring, full-service securities
brokerage, investment banking and corporate finance services.
C. New Accounting Pronouncements
In June, 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities," which establishes accounting
and reporting standards requiring that every derivative instrument (including
certain derivative instruments embedded in other contracts) be recorded in the
balance sheet as either an asset or liability measured at its fair value. The
Statement requires that changes in a derivative's fair value be recognized
currently in earnings unless specific hedge accounting criteria are met.
Special accounting for qualifying hedges allows a derivative's gains and
losses to offset related results on the hedged item in the income statement,
and requires that a company must formally document, designate and assess the
effectiveness of transactions that receive hedge accounting. In June 1999, the
FASB issued SFAS No. 137, "Accounting for Derivative Instruments and Hedging
Activities--Deferral of the Effective Date of FASB Statement No. 133," which
delayed the original effective date of SFAS No. 133 until fiscal years
beginning after June 15, 2000. In June 2000, the FASB issued SFAS No. 138,
"Accounting for Certain Derivative Instruments and Certain Hedging
Activities," which amends SFAS No. 133. SFAS No. 138 addresses a limited
number of issues related to the implementation of SFAS No. 133.
The notional amount of derivative financial instruments held by BB&T at
September 30, 2000, was $2.7 billion with unrealized net losses of $1.4
million compared to $2.0 billion with unrealized net gains of $4.5 million at
December 31, 1999. The transition obligation related to the adoption of SFAS
No. 133, as amended, is not expected to have a material effect on BB&T's
consolidated financial position or consolidated results of operations.
Additionally, management believes that substantially all of BB&T's derivatives
should qualify for hedge accounting and be highly effective in offsetting the
hedged risk. Accordingly, the adoption of SFAS No. 133, as amended, is not
expected to have a material impact on BB&T's consolidated financial position
or consolidated results of operations.
On January 1, 1999, BB&T adopted the provisions of SFAS No. 134, "Accounting
for Mortgage-Backed Securities Retained after the Securitization of Mortgage
Loans Held for Sale by a Mortgage Banking Enterprise." The statement amends
SFAS No. 65, "Accounting for Certain Mortgage Banking Activities." The
implementation of the statement did not have a material impact on BB&T's
consolidated financial position or consolidated results of operations.
In September 2000, the FASB issued SFAS No. 140, "Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities," which
replaces SFAS No. 125. SFAS No. 140 revises the standards for accounting for
securitizations and other transfers of financial assets and collateral and
requires certain disclosures, but it carries over most of SFAS No. 125's
provisions without reconsideration. The statements provide accounting and
reporting standards for such transactions based on consistent application of a
financial components approach that focuses on control. Under this approach,
after a transfer of financial assets, an entity recognizes the financial and
servicing assets it controls and the liabilities it has incurred, derecognizes
financial assets when control has been surrendered, and derecognizes
liabilities when extinguished. Portions of the
7
<PAGE>
statement are effective immediately and have been adopted by BB&T. Other
portions become effective for transactions occurring after March 31, 2001. The
adoption of the continuing provisions of SFAS No. 125 did not have a material
impact on BB&T's consolidated financial position or consolidated results of
operations. Management does not anticipate that the adoption of the new
provisions of SFAS No. 140 will have a material impact on BB&T's consolidated
financial position or consolidated results of operations.
D. Mergers and Acquisitions
The following table presents summary information with respect to mergers and
acquisitions completed by BB&T Corporation during 1999 and 2000:
SUMMARY OF COMPLETED MERGERS AND ACQUISITIONS
<TABLE>
<CAPTION>
Goodwill
Date of Accounting Goodwill Amoritization
Acquisition Acquired Institution Headquarters Total Assets Method Recorded Period
----------------- ------------------------------------ ----------------- -------------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
July 6, 2000 One Valley Bancorp, Inc. Charleston, W.Va. $ 6.4 billion Pooling $ N/A N/A
June 15, 2000 First Banking Company of
Southeast Georgia Statesboro, Ga. 420.0 million Pooling N/A N/A
June 13, 2000 Hardwick Holding Company Dalton, Ga. 507.2 million Pooling N/A N/A
January 13, 2000 Premier Bancshares, Inc. Atlanta, Ga. 2.0 billion Pooling N/A N/A
--------------------------------------------------------------------------------------------------------------------------------
November 10, 1999 First Liberty Financial Corp. Macon, Ga. $ 1.7 billion Pooling $ N/A N/A
August 27, 1999 Matewan BancShares, Inc. Williamson, W.Va. 734.7 million Purchase 92.8 million 15 Years
July 14, 1999 Mason-Dixon Bancshares, Inc. Westminster, Md. 1.2 billion Pooling N/A N/A
July 9, 1999 First Citizens Corporation Newnan, Ga. 417.8 million Pooling N/A N/A
March 26, 1999 Scott & Stringfellow Financial, Inc. Richmond, Va. 262.1 million Purchase 72.8 million 15 Years
March 5, 1999 MainStreet Financial Corporation Martinsville, Va. 2.0 billion Pooling N/A N/A
--------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
BB&T Common
Shares
Issued in
Date of Complete
Acquisition Transaction
------------------- -----------
<S> <C>
July 6, 2000 43.1 million
June 15, 2000
4.1 million
June 13, 2000 3.9 million
January 13, 2000 16.8 million
--------------------------------------------------------------------------------------------------------------------------------
November 10, 1999 12.4 million
August 27, 1999 3.2 million
July 14, 1999 6.6 million
July 9, 1999 3.2 million
March 26, 1999 3.6 million
March 5, 1999 16.8 million
--------------------------------------------------------------------------------------------------------------------------------
</TABLE>
N/A--Not Applicable
The table above does not include mergers and acquisitions of acquired
companies or insurance agency acquisitions, which are summarized below.
In addition to the transactions included in the table above, BB&T acquired
five insurance agencies during 2000, which were accounted for as purchases. In
conjunction with these transactions, BB&T issued 1.1 million shares of common
stock and recorded $30.4 million in goodwill, which is being amortized using
the straight-line method over 15 years. During 1999, BB&T acquired eleven
insurance agencies and the book of business from another agency. These
acquisitions were accounted for as purchases. In conjunction with the
transactions, BB&T issued a total of 1.5 million shares of common stock and
recorded $52.8 million of goodwill, which is being amortized using the
straight-line method over 15 years.
Under the provisions of SFAS No. 38, "Accounting for Preacquisition
Contingencies of Purchase Enterprises," BB&T typically provides an allocation
period, not to exceed one year, to identify and quantify the assets acquired
and liabilities assumed in business combinations accounted for as purchases.
Management currently does not anticipate any material adjustments to the
assigned values of the assets and liabilities of acquired companies.
Pending Mergers and Acquisitions
On July 27, 2000, BB&T announced plans to merge with FCNB Corp ("FCNB"), of
Frederick, Maryland. FCNB has approximately $1.6 billion in assets and
operates 34 banking offices, primarily in central Maryland. FCNB's
shareholders will receive .725 shares of BB&T common stock in exchange for
each share of FCNB held. The transaction is expected to be accounted for as a
pooling of interests and projected to close in the first quarter of 2001.
8
<PAGE>
On August 23, 2000, BB&T announced plans to acquire BankFirst Corporation
("BankFirst"), of Knoxville, Tennessee. BankFirst has approximately $848.8
million in assets and operates 32 banking offices in eastern Tennessee. In
conjunction with the acquisition, shareholders of BankFirst will receive .4554
shares of BB&T common stock in exchange for each share of BankFirst common
stock held. The transaction is expected to be accounted for as a purchase and
projected to close in the fourth quarter of 2000. BB&T anticipates
repurchasing substantially all of the shares projected to be issued in
connection with this transaction prior to the acquisition.
On September 6, 2000, BB&T announced plans to acquire FirstSpartan Financial
Corp. ("FirstSpartan"), of Spartanburg, South Carolina. FirstSpartan has
approximately $586 million in assets and operates 11 banking offices in the
Upstate Region of South Carolina. In conjunction with the acquisition,
shareholders of FirstSpartan will receive 1.0 share of BB&T common stock in
exchange for each share of FirstSpartan common stock held. The transaction is
expected to be accounted for as a purchase and is projected to close in the
first quarter of 2001. BB&T anticipates repurchasing substantially all of the
shares projected to be issued in connection with this transaction prior to the
acquisition.
E. Calculation of Earnings Per Common Share
BB&T's basic and diluted earnings per common share amounts were calculated
as follows:
BB&T CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
For the Periods as Indicated
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
----------------------- -----------------------
2000 1999 2000 1999
----------- ----------- ----------- -----------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C>
Basic Earnings Per Share:
Weighted average number of
common shares outstanding
during the period........... 399,662,723 394,941,799 399,588,220 395,125,226
=========== =========== =========== ===========
Net income................... $ 49,264 $ 173,779 $ 400,986 $ 538,783
=========== =========== =========== ===========
Basic earnings per share..... $ .12 $ .44 $ 1.00 $ 1.36
=========== =========== =========== ===========
Diluted Earnings Per Share:
Weighted average number of
common shares............... 399,662,723 394,941,799 399,588,220 395,125,226
Add:
Dilutive effect of
outstanding options (as
determined by application
of treasury stock method).. 4,814,621 6,236,285 4,839,752 7,001,724
Weighted average number of
common shares, as adjusted.. 404,477,344 401,178,084 404,427,972 402,126,950
=========== =========== =========== ===========
Net income................... $ 49,264 $ 173,779 $ 400,986 $ 538,783
=========== =========== =========== ===========
Diluted earnings per share... $ .12 $ .43 $ .99 $ 1.34
=========== =========== =========== ===========
</TABLE>
F. Segment Disclosures
BB&T's operations are divided into six reportable business segments: the
Banking Network, Mortgage Banking, Trust Services, Agency Insurance,
Investment Banking and Brokerage, and Treasury. These operating segments have
been identified based primarily on BB&T's existing organizational structure.
The segments
9
<PAGE>
require unique technology and marketing strategies and offer different
products and services. While BB&T is managed as an integrated organization,
individual executive managers are held accountable for the operations of the
business segments that report to them.
BB&T's strategies for revenue growth are focused on developing and expanding
client relationships through quality service delivery and an effective sales
culture. The segment results presented herein are based on internal management
accounting policies that are designed to support these strategic objectives.
Unlike financial accounting, there is no comprehensive authoritative body of
guidance for management accounting equivalent to generally accepted accounting
principles. Therefore, the performance of the individual segments is not
comparable with BB&T's consolidated results or with similar information
presented by any other financial institution. Additionally, because of the
interrelationships of the various segments, the information presented is not
necessarily indicative of the segments' financial performance if they operated
as independent entities.
Please refer to BB&T's Annual Report on Form 10-K, as restated in BB&T's
Current Report on Form 8-K, filed on October 27, 2000, for a description of
internal accounting policies and the basis of segmentation, including a
description of the segments presented in the accompanying tables. There have
been no significant changes from the methods used to develop the segment
disclosures contained therein.
10
<PAGE>
The following tables disclose selected financial information for BB&T's
reportable business segments for the periods as indicated:
BB&T CORPORATION
REPORTABLE SEGMENTS
For the Three Months Ended September 30, 2000 and 1999
<TABLE>
<CAPTION>
Investment
Agency Banking and
Banking Network Mortgage Banking Trust Services Insurance Brokerage
----------------------- ---------------------- ----------------- --------------- ------------------
2000 1999 2000 1999 2000 1999 2000 1999 2000 1999
----------- ----------- ---------- ---------- -------- ------- ------- ------- -------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net interest
income (expense)
from external
customers........ $ 281,219 $ 315,194 $ 117,994 $ 104,806 $(10,154) $(8,584) $ -- $ -- $ 2,810 $ 2,209
Net intersegment
interest income
(expense)........ 124,240 75,851 (97,597) (77,281) 13,830 10,651 -- -- -- --
----------- ----------- ---------- ---------- -------- ------- ------- ------- -------- --------
Net interest
income.......... 405,459 391,045 20,397 27,525 3,676 2,067 -- -- 2,810 2,209
----------- ----------- ---------- ---------- -------- ------- ------- ------- -------- --------
Provision for
loan and lease
losses........... 46,273 31,758 757 688 -- -- -- -- -- --
Noninterest
income from
external
customers........ 100,142 130,193 18,952 31,636 17,527 6,976 30,941 20,377 36,980 39,047
Intersegment
noninterest
income........... 30,320 29,547 -- -- -- -- -- -- -- --
Noninterest
expense.......... 198,243 252,180 12,578 20,242 10,938 1,789 21,392 15,928 39,087 39,375
Intersegment
noninterest
expense.......... 84,686 71,853 5,594 4,875 922 466 1,027 688 373 448
----------- ----------- ---------- ---------- -------- ------- ------- ------- -------- --------
Income before
income taxes..... 206,719 194,994 20,420 33,356 9,343 6,788 8,522 3,761 330 1,433
Provision for
income taxes.... 78,156 79,100 6,677 4,105 3,051 2,135 3,326 1,480 753 1,072
----------- ----------- ---------- ---------- -------- ------- ------- ------- -------- --------
Net income....... $ 128,563 $ 115,894 $ 13,743 $ 29,251 $ 6,292 $ 4,653 $ 5,196 $ 2,281 $ (423) $ 361
=========== =========== ========== ========== ======== ======= ======= ======= ======== ========
Identifiable
segment assets... $32,074,412 $32,217,107 $6,424,395 $5,789,834 $ 32,737 $12,361 $87,455 $53,863 $853,657 $601,525
=========== =========== ========== ========== ======== ======= ======= ======= ======== ========
<CAPTION>
All Other
Treasury Segments(1) Total Segments
------------------------- --------------------- -----------------------
2000 1999 2000 1999 2000 1999
------------ ------------ ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net interest
income (expense)
from external
customers........ $ 24,823 $ 52,198 $ 68,047 $ 59,972 $ 484,739 $ 525,795
Net intersegment
interest income
(expense)........ 23,301 (6,021) -- -- 63,774 3,200
------------ ------------ ---------- ---------- ----------- -----------
Net interest
income.......... 48,124 46,177 68,047 59,972 548,513 528,995
------------ ------------ ---------- ---------- ----------- -----------
Provision for
loan and lease
losses........... 30 22 12,015 4,042 59,075 36,510
Noninterest
income from
external
customers........ (174,183) (286) 28,860 7,175 59,219 235,118
Intersegment
noninterest
income........... -- -- -- -- 30,320 29,547
Noninterest
expense.......... 1,704 1,428 23,947 13,566 307,889 344,508
Intersegment
noninterest
expense.......... 139 2,517 2,234 1,222 94,975 82,069
------------ ------------ ---------- ---------- ----------- -----------
Income before
income taxes..... (127,932) 41,924 58,711 48,317 176,113 330,573
Provision for
income taxes.... (43,106) 5,366 17,898 7,827 66,755 101,085
------------ ------------ ---------- ---------- ----------- -----------
Net income....... $ (84,826) $ 36,558 $ 40,813 $ 40,490 $ 109,358 $ 229,488
============ ============ ========== ========== =========== ===========
Identifiable
segment assets... $14,775,241 $12,006,225 $3,193,114 $2,741,083 $57,441,011 $53,421,998
============ ============ ========== ========== =========== ===========
</TABLE>
11
<PAGE>
BB&T CORPORATION
REPORTABLE SEGMENTS
For the Nine Months Ended September 30, 2000 and 1999
<TABLE>
<CAPTION>
Investment
Agency Banking and
Banking Network Mortgage Banking Trust Services Insurance Brokerage
----------------------- ---------------------- ------------------ --------------- -----------------
2000 1999 2000 1999 2000 1999 2000 1999 2000 1999
----------- ----------- ---------- ---------- -------- -------- ------- ------- -------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net interest
income (expense)
from external
customers........ $ 1,016,678 $ 925,814 $ 342,170 $ 320,639 $(29,406) $(25,067) $ -- $ -- $ 8,840 $ 4,722
Net intersegment
interest income
(expense)........ 335,688 242,749 (262,796) (230,194) 39,685 30,843 -- -- -- --
----------- ----------- ---------- ---------- -------- -------- ------- ------- -------- --------
Net interest
income.......... 1,352,366 1,168,563 79,374 90,445 10,279 5,776 -- -- 8,840 4,722
----------- ----------- ---------- ---------- -------- -------- ------- ------- -------- --------
Provision for
loan and lease
losses........... 110,519 85,248 2,137 2,178 -- -- -- -- -- --
Noninterest
income from
external
customers........ 275,397 331,389 54,605 111,376 49,712 35,446 84,399 53,257 122,979 94,794
Intersegment
noninterest
income........... 86,644 99,222 -- -- -- -- -- -- -- --
Noninterest
expense.......... 660,936 671,769 35,031 62,518 32,970 20,618 59,422 42,045 123,618 87,317
Intersegment
noninterest
expense.......... 240,109 192,593 16,078 14,222 2,736 1,902 3,076 2,061 1,125 1,344
----------- ----------- ---------- ---------- -------- -------- ------- ------- -------- --------
Income before
income taxes..... 702,843 649,564 80,733 122,903 24,285 18,702 21,901 9,151 7,076 10,855
Provision for
income taxes.... 231,861 215,354 25,276 37,965 8,074 5,625 8,636 3,646 4,052 5,243
----------- ----------- ---------- ---------- -------- -------- ------- ------- -------- --------
Net income....... $ 470,982 $ 434,210 $ 55,457 $ 84,938 $ 16,211 $ 13,077 $13,265 $ 5,505 $ 3,024 $ 5,612
=========== =========== ========== ========== ======== ======== ======= ======= ======== ========
Identifiable
segment assets... $32,074,412 $32,217,107 $6,424,395 $5,789,834 $ 32,737 $ 12,361 $87,455 $53,863 $853,657 $601,525
=========== =========== ========== ========== ======== ======== ======= ======= ======== ========
<CAPTION>
Treasury All Other Segments(1) Total Segments
------------------------- --------------------- -----------------------
2000 1999 2000 1999 2000 1999
------------ ------------ ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net interest
income (expense)
from external
customers........ $ 70,761 $ 131,414 $ 196,081 $ 170,702 $ 1,605,124 $ 1,528,224
Net intersegment
interest income
(expense)........ 56,987 (15,823) -- -- 169,564 27,575
------------ ------------ ---------- ---------- ----------- -----------
Net interest
income.......... 127,748 115,591 196,081 170,702 1,774,688 1,555,799
------------ ------------ ---------- ---------- ----------- -----------
Provision for
loan and lease
losses........... 91 67 31,497 12,279 144,244 99,772
Noninterest
income from
external
customers........ (160,952) (591) 90,646 20,792 516,786 646,463
Intersegment
noninterest
income........... -- -- -- -- 86,644 99,222
Noninterest
expense.......... 4,292 4,046 65,653 39,342 981,922 927,655
Intersegment
noninterest
expense.......... 415 6,529 6,690 4,260 270,229 222,911
------------ ------------ ---------- ---------- ----------- -----------
Income before
income taxes..... (38,002) 104,358 182,887 135,613 981,723 1,051,146
Provision for
income taxes.... (22,807) 27,766 54,471 21,175 309,563 316,774
------------ ------------ ---------- ---------- ----------- -----------
Net income....... $ (15,195) $ 76,592 $ 128,416 $ 114,438 $ 672,160 $ 734,372
============ ============ ========== ========== =========== ===========
Identifiable
segment assets... $14,775,241 $12,006,225 $3,193,114 $2,741,083 $57,441,011 $53,421,998
============ ============ ========== ========== =========== ===========
</TABLE>
12
<PAGE>
The following table presents a reconciliation of total segment results to
consolidated results:
<TABLE>
<CAPTION>
For the Three
Months Ended For the Nine Months
September 30, Ended September 30,
------------------- ----------------------
2000 1999 2000 1999
-------- --------- ---------- ----------
<S> <C> <C> <C> <C>
Net Interest Income
Net interest income from
segments........................ $548,513 $ 528,995 $1,774,688 $1,555,799
Other net interest income(2)..... 25,322 17,093 80,845 48,460
Elimination of net intersegment
interest income(3).............. (63,470) (54,143) (335,246) (173,896)
-------- --------- ---------- ----------
Consolidated net interest
income......................... $510,365 $ 491,945 $1,520,287 $1,430,363
======== ========= ========== ==========
Net income
Net income from segments......... $109,358 $ 229,488 $ 672,160 $ 734,372
Other net income (loss)(2)....... (44,087) (102,013) (30,250) (131,026)
Elimination of intersegment net
income(3)....................... (16,007) 46,304 (240,924) (64,563)
-------- --------- ---------- ----------
Consolidated net income......... $ 49,264 $ 173,779 $ 400,986 $ 538,783
======== ========= ========== ==========
</TABLE>
<TABLE>
<CAPTION>
September 30, September 30,
2000 1999
------------- -------------
<S> <C> <C>
Total Assets
Total assets from segments......................... $57,441,011 $53,421,998
Other assets(2).................................... 3,369,176 2,702,465
Elimination of intersegment assets(3).............. (4,139,006) (3,741,233)
----------- -----------
Consolidated total assets......................... $56,671,181 $52,383,230
=========== ===========
</TABLE>
--------
(1) Financial data from segments below the quantitative thresholds requiring
disclosure are attributable to nonbank consumer finance operations,
factoring, lawn care equipment financing, leasing and other smaller
banking subsidiaries.
(2) Other net interest income, other net income (loss) and other assets
include amounts by BB&T's support functions not allocated to the various
segments.
(3) BB&T's reconciliation of total segment results to consolidated results
requires the elimination of internal management accounting practices.
These adjustments include the elimination of funds transfer pricing
credits and charges and the elimination of intersegment noninterest income
and noninterest expense, which are allocated to the various segments using
BB&T's internal accounting methods.
13
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
ANALYSIS OF FINANCIAL CONDITION
BB&T's total assets at September 30, 2000, were $56.7 billion, a $3.7
billion increase from the balance at December 31, 1999. The balance sheet
categories that produced the majority of the increase were loans and leases,
including loans held for sale, which grew $2.7 billion; securities available
for sale, which increased $871.7 million; and other assets, which increased
$808.8 million. These increases were partially offset by declines in interest-
bearing deposits with banks and securities held to maturity, which declined by
a collective $390.2 million compared to year-end 1999; cash and due from
banks, which decreased $182.1 million; and other earning assets, which include
federal funds sold and securities purchased under resale agreements or similar
arrangements, which decreased $122.0 million.
Total deposits at September 30, 2000, increased $1.9 billion from December
31, 1999, while short-term borrowed funds declined $1.3 billion and long-term
debt increased $2.3 billion during the first nine months of 2000. Total
shareholders' equity increased $273.4 million during the same time frame.
The factors causing the fluctuations in these balance sheet categories are
further discussed in the following sections.
Loans and Leases
BB&T continued to enjoy strong loan growth during the third quarter and
first nine months of 2000, with end of period loans, excluding loans held for
sale, increasing 9.5% on an annualized basis since the end of 1999. Average
total loans for the quarter ended September 30, 2000 increased 11.2% compared
to the same period of 1999. Average total loans for the nine months ended
September 30 were $37.1 billion, or 11.0% greater than the average for the
first nine months of 1999.
Management has emphasized increasing the commercial and consumer loan
portfolios at a faster rate than mortgage loans in order to improve the
profitability of the overall loan portfolio. BB&T acquired a number of
community banks and thrift institutions in recent years, which resulted in a
significant percentage of the consolidated loan portfolio being composed of
mortgages. Through the use of securitization programs and the sale of fixed-
rate mortgage loan originations, combined with BB&T's commercial and consumer
lending focus, the mix of the loan portfolio has changed in recent periods
compared to prior years. Also, higher mortgage rates during 2000 have slowed
mortgage lending substantially compared to 1999, although the pace of mortgage
loan originations increased during the third quarter. The loan portfolio now
includes a higher percentage of commercial and consumer loans and lower
percentage of mortgage loans compared to prior years. Average mortgage loans
decreased 3.9% during the first nine months of 2000 compared to the same
period of 1999 and represented 20.3% of average total loans at September 30,
2000, compared to 23.4% a year ago. Average commercial loans, including lease
receivables, increased 16.1% during the first nine months of 2000 compared to
1999, and now compose 51.9% of the loan portfolio. Average consumer loans,
which includes sales finance, revolving credit and direct retail, increased
14.7% for the nine months ended September 30, 2000 compared to the same period
in 1999 and compose the remaining 27.8% of average loans.
Similar growth trends are also evident in the average balances for the third
quarter of 2000, except that average mortgage loans actually increased
compared to the third quarter of 1999. Average total loans were $38.0 billion,
an increase of 11.2% compared to the third quarter of 1999. Average commercial
loans and leases increased 14.4% in the third quarter of 2000 to a total of
$19.8 billion; average consumer loans increased 12.3% to total $10.5 billion;
while average mortgage loans increased 2.5% to a balance of $7.7 billion
compared to the third quarter of 1999.
The growth rates of average loans for the third quarter of 2000 include the
full effect of loan portfolios held by companies that were acquired during
1999 and accounted for as purchases. Also, the securitization of
$304.8 million of mortgage loans during 1999 and $747.1 million in 2000
affected the reported growth in average mortgage loans. During 1999, loans
totaling $414.1 million were acquired through the purchase of Matewan
14
<PAGE>
Bancshares, Inc. ("Matewan") and $75.9 million in loans were added as a result
of Premier Bancshares, Inc.'s acquisition of Farmers and Merchants Bank.
Excluding the effect of these purchase accounting transactions and the loan
securitizations, average "internal" loan growth for the three months ended
September 30, 2000, was 12.8% compared to the third quarter of 1999. Excluding
the effects of purchase accounting transactions and loan securitizations,
average mortgage loans, including loans held for sale, increased 13.0%,
commercial loans grew 13.9%, and consumer loans increased 10.4% in the third
quarter of 2000 compared to 1999.
The change in loan mix to a higher percentage of commercial and consumer
loans, the growth of the overall loan portfolio and the increase in the yield
of the portfolio, from 8.82% in the third quarter and 8.74% in the first nine
months of 1999 to 9.44% in the third quarter and 9.28% in the first nine
months of 2000, resulted in a 19.2% increase in interest income from loans and
leases in the current quarter and a 18.2% increase in interest income from
loans and leases during the first nine months of 2000 compared to the 1999
periods. The average annualized fully taxable equivalent ("FTE") yields on
commercial, consumer and mortgage loans for the first nine months of 2000 were
9.45%, 10.10%, and 7.71%, respectively, resulting in an average yield on the
total loan portfolio of 9.28%. This reflects an increase of 54 basis points
over the 8.74% earned on total average loans during the first nine months of
1999. The increase in yields during 2000 resulted from generally higher
interest rates prevalent in the debt markets, including a higher average prime
rate, compared to 1999. During the three months ended September 30, 2000, the
prime rate, which is the basis for pricing many commercial and consumer loans,
averaged 9.50%, compared to 8.15% for the comparable period of 1999. For the
first nine months of 2000, the prime rate averaged 9.10%, compared to 7.87%
during the first nine months of 1999.
Securities
Securities available for sale totaled $13.1 billion at September 30, 2000,
an increase of $871.7 million from December 31, 1999. Securities available for
sale had net unrealized losses, net of deferred income taxes, of $127.7
million at September 30, 2000, compared to unrealized losses of $309.4 million
at December 31, 1999. The significant improvement in the net unrealized losses
reflects the impact of a restrucuring of the bond portfolio, and the resulting
realization of a substantial portion of these losses. The bond restructuring
is discussed in further detail in the following paragraphs. Securities held to
maturity totaled $70.0 million, down $334.9 million from year-end 1999.
Trading securities totaled $132.5 million, an increase of $39.3 million
compared to the balance at December 31, 1999.
Average total securities for the first nine months totaled $13.4 billion, up
1.7% from the average during the first nine months of 1999. For the third
quarter of 2000, average securities totaled $13.5 billion, basically unchanged
from the average balance for the third quarter of 1999.
The annualized FTE yield on the average total securities portfolio for the
first nine months of 2000 was 6.88%, an increase of 33 basis points from the
yield earned in the first nine months of 1999. The increase in the yield on
securities reflects the generally higher interest rate environment that has
existed during 2000 compared to 1999 and the positive effects from a
restructuring of the securities portfolio during the third quarter, as
discussed below.
During the second and third quarters of 2000, BB&T restructured the
available-for-sale securities portfolio. This restructuring was undertaken to
improve the overall yield of the portfolio, improve the liquidity and reduce
the average duration of the portfolio. BB&T sold $5.9 billion of U.S.
Treasuries, obligations of U.S. government agencies and mortgage-backed
securities. BB&T incurred approximately $222 million in pretax losses as a
result of these sales. The proceeds from these sales were reinvested in higher
yielding securities, primarily obligations of U.S. government agencies. The
restructuring improved the yield on the restructured portion of the portfolio
by 133 basis points, from 6.31% to 7.64%. Management expects to recover the
losses incurred over a three-year period through increased interest income
generated as a result of the restructuring. As of September 30, 2000, the
securities acquired as a part of the restructuring had unrealized pretax gains
of $37.5 million.
15
<PAGE>
Other Interest-Earning Assets
Federal funds sold and securities purchased under resale agreements or
similar arrangements totaled $310.9 million at September 30, 2000, a decrease
of $122.0 million, or 28.2% compared to December 31, 1999. Interest-bearing
deposits with banks declined $55.3 million from December 31, 1999. These
categories of earning assets are subject to large daily fluctuations based on
the availability of these types of funds. The average yield on other interest-
earning assets for the first nine months of 2000 was 6.57%, an increase from
the 4.77% earned during the first nine months of 1999. The increase in the
yield on other interest earning assets is principally the result of the
increase in the average Federal funds rate to 6.10% for the first nine months
of 2000 compared to 4.87% for the comparable period of 1999.
Other Assets
BB&T's other noninterest-earning assets, excluding premises and equipment
and noninterest bearing cash and due from banks, increased $808.8 million from
December 31, 1999 to September 30, 2000. The increase resulted primarily from
the purchases of additional bank-owned life insurance, which is used as a
funding source for certain post-retirement benefits, at a cost of $500
million. On average, BB&T's investment in bank owned life insurance during the
third quarter of 2000 totaled $763.9 million, compared to $230.9 million for
the third quarter of 1999. For the first nine months of 2000, the average
investment in bank owned life insurance totaled $592.6 million, up from $227.7
million during the first nine months of last year.
Deposits
Total end of period deposits increased $1.9 billion from December 31, 1999
to September 30, 2000. Average deposits for the first nine months of 2000
increased $2.2 billion, or 6.5%, compared to the first nine months of 1999.
The categories of deposits with the highest average rates of growth in 2000
compared to 1999 were: certificates of deposit and other time deposits, which
grew $1.4 billion, or 8.5%; money rate savings accounts, including investor
deposit accounts, which increased $906.3 million, or 10.5%; and noninterest-
bearing deposits, which grew $291.6 million, or 6.3%. The growth realized in
these deposit categories was partially offset by declines of $473.3 million,
or 14.6%, in savings and interest checking.
For the third quarter, average deposits increased 7.2%. Average transaction
accounts, which include noninterest-bearing deposits, savings, interest
checking and money rate savings, totaled $17.2 billion for the third quarter,
an increase of 2.8% compared to the third quarter of 1999. Average
certificates of deposits and other time deposits for the third quarter totaled
$19.2 billion, an increase of 11.4% compared to the third quarter of 1999.
The growth in average deposits includes the effect of deposits acquired in
purchase accounting transactions completed in the latter quarters of 1999. The
August 27, 1999 purchase of Matewan resulted in the addition of $575.1 million
in deposits, while Farmers and Merchants Bank, which was purchased by Premier
on November 5, 1999, accounted for $151.1 million in deposit growth. Excluding
the effects of these purchase accounting transactions, average deposits for
the nine months ended September 30, 2000 would have increased 5.0% compared to
the first nine months of 1999. Excluding purchase accounting, transaction
account deposits, which include noninterest-bearing deposits, savings,
interest checking and money rate savings, would have increased 3.0%, compared
to 4.4% including deposits acquired through purchase accounting transactions.
Certificate accounts and other time deposits, including foreign deposits,
would have increased 2.5% excluding purchase accounting transactions. For the
third quarter, total average deposits, excluding the effects of purchase
accounting transactions, would have increased 6.2% compared to the third
quarter of 1999.
The annualized average cost of total interest-bearing deposits for the first
nine months of 2000 was 4.68%, an increase of 58 basis points compared to
1999.
16
<PAGE>
Short-Term Borrowed Funds
The growth in loans, securities and other assets in recent years have
exceeded the growth of total deposits. As a result, cost-effective alternative
funding sources, such as Federal Home Loan Bank ("FHLB") advances, master
notes, purchases of Federal funds and sales of securities under repurchase
agreements have been increasingly utilized to support balance sheet growth.
At September 30, 2000, short-term borrowed funds totaled $6.7 billion, a
decrease of $1.3 billion, or 16.0%, compared to December 31, 1999. For the
third quarter of 2000, average short-term borrowed funds totaled $5.8 billion,
a decrease of $920.1 million, or 13.8%, from the comparable period of 1999.
For the nine months ended September 30, 2000, average short-term borrowed
funds totaled $6.7 billion, an increase of $636.6 million, or 10.5%, compared
to the first nine months of 1999.
The average annualized rate paid on short-term borrowed funds was 6.31% for
the third quarter of 2000, an increase of 134 basis points from the average
rate of 4.97% paid in the third quarter of 1999. For the nine months ended
September 30, 2000, the cost of average short-term borrowed funds was 5.90%,
compared to 4.80% for the first nine months of last year. The increase in the
cost of short-term borrowed funds results from the higher interest rate
environment during 2000, which included a 135 basis point increase in the
quarterly average Federal funds rate and a 123 basis point increase in the
year-to-date average Federal funds rate.
Long-Term Debt
Long-term debt consists primarily of FHLB advances, medium term bank notes
and corporate subordinated debt. These borrowings are relatively cost-
effective funding sources and provide BB&T with the flexibility to structure
borrowings in a manner that aids in the management of interest rate risk and
liquidity. Long-term debt totaled $8.3 billion at September 30, 2000, an
increase of $2.3 billion, or 37.4%, from the balance at December 31, 1999.
Long-term debt averaged $8.2 billion in the third quarter of 2000, an increase
of $1.9 billion, or 29.4%, compared to the third quarter of 1999. For the
first nine months of 2000, average long-term debt totaled $6.9 billion, an
increase of $984.4 million, or 16.5%, compared to the prior year. Long-term
debt has been utilized for a variety of funding needs, including the
repurchase of common stock in conjunction with certain acquisitions. The
substantial increase in long-term borrowings during the year reflects the
funding to support investments and loan growth.
Asset Quality
BB&T's asset quality, as measured by relative levels of nonperforming assets
and net charge-offs, has remained excellent compared to published industry
averages. Nonperforming assets, composed of foreclosed real estate,
repossessions, nonaccrual loans and restructured loans, totaled $159.3 million
at September 30, 2000, compared to $152.6 million at December 31, 1999.
Nonperforming assets, as a percentage of loan-related assets, were .41% at
September 30, 2000, compared to .43% at December 31, 1999. Loans 90 days or
more past due and still accruing interest totaled $74.9 million compared to
$60.0 million at year-end 1999.
BB&T's net charge-offs totaled $21.7 million for the third quarter and
amounted to .23% of average loans and leases, on an annualized basis, compared
to $23.4 million, or .27% of average loans and leases, in the corresponding
period in 1999. For the nine months ended September 30, 2000, net charge-offs
totaled $64.2 million, or .23% of average loans and leases, compared to $59.2
million, or .24% of average loans and leases, in 1999.
The allowance for loan and lease losses was $505.6 million, or 1.32% of
loans and leases, at September 30, 2000, compared to $477.3 million, or 1.33%
of loans and leases, at December 31, 1999. The allowance has declined slightly
as a percentage of the loan portfolio during 2000, reflecting the continued
positive overall asset quality trends.
17
<PAGE>
The provision for loan and lease losses for the third quarter of 2000 was
$38.2 million, compared to $24.4 million in the comparable quarter of 1999.
For the nine months, the provision for loan and lease losses totaled $92.4
million compared to $74.4 million in 1999. The increased provisions during
2000 were necessary to cover the net charge-offs, to maintain the allowance at
a level considered adequate to absorb losses inherent in the loan portfolio at
the balance sheet date given the growth in the loan portfolio, and to provide
additional provisions for acquired entities to align their collection and
charge-off policies and procedures with those of BB&T.
Asset quality statistics for the last five calendar quarters are presented
in the accompanying table.
ASSET QUALITY ANALYSIS
(Dollars in thousands)
<TABLE>
<CAPTION>
For the Three Months Ended
------------------------------------------------
9/30/00 6/30/00 3/31/00 12/31/99 9/30/99
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Allowance For Loan & Lease
Losses
Beginning balance........... $489,067 $484,441 $477,296 $467,106 $458,689
Allowance for acquired
loans...................... -- -- -- 1,120 7,473
Provision for loan and lease
losses..................... 38,200 27,914 26,317 40,032 24,352
Net charge-offs............. (21,691) (23,288) (19,172) (30,962) (23,408)
-------- -------- -------- -------- --------
Ending balance............. $505,576 $489,067 $484,441 $477,296 $467,106
======== ======== ======== ======== ========
Risk Assets
Nonaccrual loans and
leases..................... $124,276 $122,559 $117,607 $118,975 $104,086
Foreclosed real estate...... 18,535 16,044 17,679 17,015 20,902
Other foreclosed property... 16,042 13,694 16,105 14,879 12,044
Restructured loans.......... 445 501 1,471 1,681 1,951
-------- -------- -------- -------- --------
Total nonperforming
assets.................... $159,298 $152,798 $152,862 $152,550 $138,983
======== ======== ======== ======== ========
Loans 90 days or more past
due and still accruing..... $ 74,922 $ 62,602 $ 48,668 $ 59,974 $ 57,215
======== ======== ======== ======== ========
Asset Quality Ratios
Nonaccrual loans and leases
as a percentage of total
loans and leases*.......... .32% .33% .33% .34% .30%
Total nonperforming assets
as a percentage of:
Total assets............... .28 .28 .28 .29 .27
Loans and leases plus
foreclosed property*...... .41 .41 .42 .43 .40
Annualized net charge-offs
as a percentage of average
loans and leases*.......... .23 .25 .21 .35 .27
Allowance for loan and lease
losses as a percentage of
loans and leases*.......... 1.32 1.30 1.33 1.33 1.34
Ratio of allowance for loan
and lease losses to:
Net charge-offs............ 5.86x 5.22x 6.28x 3.89x 5.03x
Nonaccrual and restructured
loans and leases.......... 4.05 3.97 4.07 3.96 4.41
</TABLE>
--------
* All items referring to loans and leases include loans held for sale and are
net of unearned income.
MARKET RISK MANAGEMENT
As a financial institution, BB&T's most significant market risk exposure is
interest rate risk. The primary objective of interest rate risk management is
to minimize the effect that changes in interest rates have on net interest
income. This is accomplished through active management of asset and liability
portfolios with a focus on the strategic pricing of asset and liability
accounts and management of maturity mixes for assets and liabilities. The goal
of these activities is the development of appropriate maturity and repricing
opportunities in BB&T's portfolios of assets and liabilities that will produce
consistent net interest income during periods of changing interest rates.
BB&T's Asset / Liability Management Committee ("ALCO") monitors loan,
investment and liability portfolios to ensure comprehensive management of
interest rate risk.
18
<PAGE>
The asset/liability management process is designed to achieve relatively
stable net interest margins and assure liquidity by coordinating the volumes,
maturities or repricing opportunities of earning assets, deposits and borrowed
funds. It is the responsibility of the ALCO to determine and achieve the most
appropriate volume and mix of earning assets and interest-bearing liabilities,
as well as ensure an adequate level of liquidity and capital, within the
context of corporate performance goals. The ALCO also sets policy guidelines
and establishes long-term strategies with respect to interest rate risk
exposure and liquidity. The ALCO meets regularly to review BB&T's interest
rate risk and liquidity positions in relation to present and prospective
market and business conditions, and adopts funding and balance sheet
management strategies that are intended to ensure that the potential impact on
earnings and liquidity as a result of fluctuations in interest rates is within
acceptable standards.
The majority of assets and liabilities of financial institutions are
monetary in nature and differ greatly from most commercial and industrial
companies that have significant investments in fixed assets and inventories.
Fluctuations in interest rates and actions of the Board of Governors of the
Federal Reserve System ("FRB") to regulate the availability and cost of credit
have a greater effect on a financial institution's profitability than do the
effects of higher costs for goods and services. Through its balance sheet
management function, BB&T is positioned to respond to changing interest rates
and inflationary trends.
Management uses Interest Sensitivity Simulation Analysis ("Simulation") to
measure the sensitivity of projected earnings to changes in interest rates.
Simulation takes into account the current contractual agreements that BB&T has
made with its customers on deposits, borrowings, loans, investments and any
commitments to enter into those transactions. Management monitors BB&T's
interest sensitivity by means of a computer model that incorporates the
current volumes, average rates and scheduled maturities and payments of asset
and liability portfolios, together with multiple scenarios of projected
prepayments, repricing opportunities and anticipated volume growth. Using this
information, the model projects earnings based on projected portfolio balances
under multiple interest rate scenarios. This level of detail is needed to
simulate the effect that changes in interest rates and portfolio balances may
have on the earnings of BB&T. This method is subject to the accuracy of the
assumptions that underlie the process, however, it provides a better
illustration of the sensitivity of earnings to changes in interest rates than
other analyses such as static or dynamic gap.
The asset/liability management process requires the determination of a
number of key assumptions. Management determines the most likely outlook for
the economy and interest rates by analyzing external factors, including
published economic projections and data, the effects of likely monetary and
fiscal policies as well as any enacted or prospective regulatory changes.
BB&T's current and prospective liquidity position, current balance sheet
volumes and projected growth, accessibility of funds for short-term needs and
capital maintenance are also considered. This data is combined with various
interest rate scenarios to provide management with information necessary to
analyze interest sensitivity and to aid in the development of strategies to
reach performance goals.
19
<PAGE>
The following table represents the interest sensitivity of BB&T as of
September 30, 2000. Key assumptions in the preparation of the table include
prepayment speeds of mortgage-related assets; cash flows and maturities of
derivative financial instruments; changes in market conditions, loan and
deposit volumes and pricing; customer preferences; and capital plans. This
tabular data does not reflect the impact of any changes in the credit quality
of BB&T's assets. In an attempt to quantify the potential change in net
interest income given hypothetical changes in interest rates, various interest
rate scenarios are applied to projected balances of assets and liabilities
incorporating the projected effect of maturities and repricing opportunities.
The resulting change in net interest income reflects the level of sensitivity
that net interest income has in relation to changing interest rates.
INTEREST SENSITIVITY SIMULATION ANALYSIS
<TABLE>
<CAPTION>
Annualized
Hypothetical
Interest Rate Scenario Percentage
--------------------------------- Change in
Change in Prime Net Interest
Prime Rate Rate Income
---------- ----- ------------
<S> <C> <C>
+3.00% 12.50% -2.09%
+1.50 11.00 -1.63
-1.50 8.00 1.21
-3.00 6.50 1.18
</TABLE>
Management has established parameters for asset/liability management which
prescribe a maximum impact on net interest income of 3% for a 150 basis point
parallel change in interest rates over three months from the most likely
interest rate scenario, and a maximum of 6% for a 300 basis point change over
12 months. It is management's ongoing objective to effectively manage the
impact of changes in interest rates and minimize the resulting effect on
earnings as evidenced by the preceding table. At September 30, 2000, the
sensitivity of BB&T's net interest income to changes in interest rates was
within management's targets, as illustrated in the accompanying table.
Derivatives and Off-Balance Sheet Financial Instruments
BB&T utilizes a variety of off-balance sheet financial instruments to manage
interest rate sensitivity and net interest income. These instruments, commonly
referred to as derivatives, primarily consist of interest rate swaps, caps,
floors, financial forward and futures contracts and options written and
purchased. 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 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.
A derivative is a financial instrument that derives its cash flows, and
therefore its value, by reference to an underlying instrument, index or
reference rate. Credit risk arises when amounts receivable from a counterparty
exceed those payable. The risk of loss with any counterparty is limited to a
small fraction of the notional amount.
20
<PAGE>
BB&T deals only with national market makers with strong credit ratings in its
derivatives activities. BB&T further controls the risk of loss by subjecting
counterparties to credit reviews and approvals similar to those used in making
loans and other extensions of credit. All of the derivative contracts to which
BB&T is a party settle monthly, quarterly or semiannually. Accordingly, the
amount of off-balance sheet credit risk to which BB&T is exposed at any time
is immaterial. Further, BB&T has netting agreements with the dealers with
which it does business. Because of these factors, BB&T's off-balance sheet
credit risk exposure at September 30, 2000 was immaterial.
Derivative contracts are written in amounts referred to as notional amounts.
Notional amounts only provide the basis for calculating payments between
counterparties and do not represent amounts to be exchanged between parties
and are not a measure of financial risks. On September 30, 2000, BB&T had
outstanding interest rate swaps, caps, floors and collars outstanding with
notional amounts totaling $1.8 billion. The estimated fair value of open
contracts used for risk management purposes reflected net unrealized gains of
$5.9 million at September 30, 2000.
BB&T uses derivative contracts as synthetic instruments to hedge specified
assets or groups of assets, liabilities or groups of liabilities, forward
commitments and anticipated transactions. BB&T's derivatives are primarily
used to hedge specific assets or groups of assets, specific liabilities or
groups of liabilities, forward commitments and anticipated transactions.
BB&T's derivatives are primarily used to hedge variable rate commercial loans,
adjustable rate mortgage loans, retail certificates of deposit and floating
rate notes. These hedges resulted in a $2.0 million increase in net interest
income in the third quarter of 2000 compared to an increase of $.6 million in
the comparable period of 1999. For the nine months, hedge activity resulted in
a $5.6 million increase in net interest income compared to a prior year
reduction in net interest income of $2.2 million.
21
<PAGE>
SFAS No. 119, "Disclosures About Derivative Financial Instruments and Fair
Value of Financial Instruments," requires, among other things, certain
quantitative and qualitative disclosures with regard to the amounts, nature
and terms of derivative financial instruments. The following tables set forth
certain information concerning BB&T's interest rate swaps, caps, floors and
collars at September 30, 2000:
INTEREST RATE SWAPS, CAPS, FLOORS AND COLLARS
September 30, 2000
(Dollars in thousands)
<TABLE>
<CAPTION>
Notional Receive Net Unrealized
Type Amount Rate Pay Rate Gains (Losses)
---- ---------- ----------- ------------ --------------
<S> <C> <C> <C> <C>
Receive fixed swaps......... $1,423,000 7.32% 7.12% $ 931
Pay fixed swaps............. 253,036 6.69 5.55 4,933
Caps, floors & collars...... 76,050 -- -- --
---------- --------- -------- ----------
Total..................... $1,752,086 6.91% 6.58% $ 5,864
========== ========= ======== ==========
<CAPTION>
Receive
Fixed Pay Caps, Floors
Year-to-date Activity Swaps Fixed Swaps & Collars Total
--------------------- ---------- ----------- ------------ --------------
<S> <C> <C> <C> <C>
Balance, December 31, 1999.. $ 945,000 $ 644,361 $112,250 $1,701,611
Additions................... 948,000 14,100 28,800 990,900
Maturities/amortizations.... (470,000) (405,425) (65,000) (940,425)
---------- --------- -------- ----------
Balance, September 30,
2000....................... $1,423,000 $ 253,036 $ 76,050 $1,752,086
========== ========= ======== ==========
<CAPTION>
One Year One to After
Maturity Schedule* or Less Five Years Five Years Total
------------------ ---------- ----------- ------------ --------------
<S> <C> <C> <C> <C>
Receive fixed swaps......... $ 550,000 $ 530,000 $343,000 $1,423,000
Pay fixed swaps............. -- 219,512 33,524 253,036
Caps, floors & collars...... -- 76,050 -- 76,050
---------- --------- -------- ----------
Total..................... $ 550,000 $ 825,562 $376,524 $1,752,086
========== ========= ======== ==========
</TABLE>
--------
* Maturities are based on full contract extensions.
CAPITAL ADEQUACY AND RESOURCES
The maintenance of appropriate levels of capital is a management priority
and is monitored on an ongoing basis. BB&T's principal goals related to
capital are to provide an adequate return to shareholders, while retaining a
sufficient base to support future growth and comply with all regulatory
standards.
Total shareholders' equity was $4.3 billion at September 30, 2000 and $4.1
billion at December 31, 1999. BB&T's book value per common share at September
30, 2000 was $10.90 compared to $10.19 at December 31, 1999.
Financial holding companies and their subsidiaries are subject to regulatory
requirements with respect to risk-based capital adequacy. Risk-based capital
ratios measure capital as a percentage of a combination of risk-weighted
balance sheet and off-balance sheet risk. The risk-weighted values of both
balance sheet and off-balance sheet items are determined in accordance with
risk factors specified by Federal regulatory pronouncements.
Tier 1 capital (total shareholders' equity excluding unrealized gains or
losses on debt securities available for sale, net of tax effect, plus certain
mandatorily redeemable capital securities, less nonqualifying intangible
assets) is required to be at least 4% of risk-weighted assets, and total
capital (Tier 1 capital, a qualifying portion of the allowance for loan and
lease losses and qualifying subordinated debt) must be at least 8% of risk-
weighted assets, with one half of the minimum consisting of Tier 1 capital.
22
<PAGE>
In addition to the risk-based capital measures described above, regulators
have also established minimum leverage capital requirements for banking
organizations. This is the primary measure of capital adequacy used by BB&T's
management, and is calculated by dividing period-end Tier 1 capital by average
tangible assets for the most recent quarter. The minimum required Tier 1
leverage ratio ranges from 3% to 5% depending upon Federal bank regulatory
agency evaluation of an organization's overall safety and soundness.
BB&T's capital adequacy ratios for the last five quarters are presented in
the accompanying table:
CAPITAL ADEQUACY RATIOS
<TABLE>
<CAPTION>
2000 1999
----------------------- ---------------
Third Second First Fourth Third
Quarter Quarter Quarter Quarter Quarter
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Risk-based capital ratios:
Tier 1 capital...................... 9.3% 10.0% 10.1% 9.9% 10.1%
Total capital....................... 12.1 12.9 13.3 13.2 13.4
Tier 1 leverage ratio................ 6.9 7.2 7.3 7.1 7.0
</TABLE>
ANALYSIS OF RESULTS OF OPERATIONS
Net income for the third quarter of 2000 totaled $49.3 million, a decrease
of 71.7% compared to the $173.8 million earned during the comparable quarter
of 1999. On a diluted per share basis, earnings for the three months ended
September 30, 2000 were $.12, compared to $.43 for the same period in 1999, a
decrease of 72.1%. BB&T's operating results for the third quarter of 2000
produced an annualized return on average assets of .35% and an annualized
return on average shareholders' equity of 4.44% compared to prior year ratios
of 1.33% and 17.38%, respectively.
BB&T's earnings for the third quarter of 2000 was adversely affected by
costs primarily associated with consummating the merger with One Valley,
converting the systems of previously acquired institutions, and losses
incurred as a result of the previously discussed bond portfolio restructuring.
During the third quarter of 2000, BB&T incurred $57.9 million in after-tax
merger-related charges. Charges related to the One Valley merger included
professional fees, costs in connection with the reduction of staffing levels,
early retirement packages and other personnel-related expenses, losses related
to facilities and equipment write-offs, an additional provision for loan and
lease losses to align the collection and charge-off policies and procedures
with those of BB&T. Also included were costs to convert the systems of
previously acquired institutions and $117.8 million in after-tax losses
related to the restructuring of the bond portfolio discussed in "Securities"
above.
For the nine months ended September 30, 2000, BB&T incurred $98.0 million in
after-tax merger-related charges and $143.5 million in after-tax losses from
restructuring the bond portfolios of BB&T and One Valley. During the first
nine months of 1999, BB&T incurred $30.1 million in after-tax merger-related
charges associated primarily with the acquisitions of MainStreet Financial
Corporation, Mason-Dixon Bancshares and First Citizens Corporation. Of these
costs, $19.7 million, relating primarily to these same mergers, were incurred
in the third quarter of 1999.
Excluding the effect of the bond restructuring losses and the merger-related
charges on 2000 and 1999 operating results, BB&T would have had net income for
the third quarter of 2000 totaling $225.0 million, an increase of 16.3% over
the $193.5 million that would have been earned during the third quarter of
1999. On a diluted per share basis, earnings for the three months ended
September 30, 2000, excluding merger charges and bond losses, were $.56,
compared to $.48 for the same period in 1999, an increase of 16.7%. BB&T's
recurring operating results for the third quarter of 2000 produced an
annualized return on average assets of 1.61% and an annualized return on
average shareholders' equity of 20.25% compared to prior year ratios of 1.49%
and 19.35%, respectively.
23
<PAGE>
FTE net interest income increased 4.1% during the third quarter and 6.3% for
the nine months due to solid growth in average loans, greater overall returns
on the loan and securities portfolio and a more profitable mix of loans.
Fluctuations in net interest income, noninterest income and noninterest
expenses will be further discussed in the following paragraphs.
PROFITABILITY MEASURES*
<TABLE>
<CAPTION>
2000 1999
----------------------- ---------------
Third Second First Fourth Third
Quarter Quarter Quarter Quarter Quarter
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Return on average
assets................. 1.61% 1.57% 1.56% 1.50% 1.49%
Return on average
equity................. 20.25 20.12 20.13 19.19 19.35
Net interest margin..... 4.16 4.20 4.24 4.28 4.26
Fee income ratio
(taxable equivalent)... 31.9 31.7 30.9 29.9 30.3
Efficiency ratio
(taxable equivalent)... 51.3 53.1 53.2 53.8 54.6
</TABLE>
--------
* Table excludes securities gains (losses), foreclosed property expense and
nonrecurring items.
Net Interest Income and Net Interest Margin
Net interest income on an FTE basis was $538.7 million for the third quarter
of 2000 compared to $517.6 million for the same period in 1999, a 4.1%
increase. For the three months ended September 30, 2000, average earning
assets increased $3.3 billion, or 6.8%, compared to the same period of 1999,
while average interest-bearing liabilities increased by $3.2 billion, or 7.5%,
and the net interest margin decreased from 4.26% in the third quarter of 1999
to 4.16% in the current quarter. The ten basis point decline in the net
interest margin was primarily the result of increased costs of interest-
bearing deposits and borrowed funds, as well as the previously mentioned
investments in bank owned life insurance products, which add to the cost of
funds, but produce revenue that is classified as noninterest income. These
additional investments resulted in a decline in the quarterly net interest
margin of approximately 8 basis points.
For the nine months ended September 30, 2000, FTE net interest income
increased 6.3%. Over the first nine months of 2000, average interest earning
assets increased $3.8 billion, or 8.0%, while interest-bearing liabilities
increased $3.5 billion, or 8.5%, compared to the first nine months of 1999.
The net interest margin for the nine months ended September 30, 2000, was
4.20%, down from 4.27% in the first nine months of 1999. The decrease in net
interest margin resulted from the same factors that affected the third quarter
results.
The following tables set forth the major components of net interest income
and the related yields for the third quarter and first nine months of 2000
compared to the same periods in 1999 and the variances between the periods
caused by changes in interest rates versus changes in volumes.
24
<PAGE>
NET INTEREST INCOME AND RATE/VOLUME ANALYSIS
For the Three Months Ended September 30, 2000 and 1999
<TABLE>
<CAPTION>
Average Balances Yield/Rate Income/Expense Change due to
----------------------- ------------ ------------------- Increase -----------------
2000 1999 2000 1999 2000 1999 (Decrease) Rate Volume
----------- ----------- ----- ----- ---------- -------- ---------- ------- --------
Fully Taxable Equivalent--(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Assets
Securities(1):
U.S. Treasury, government
and other(5)................ $12,528,056 $12,819,041 7.23% 6.49% $ 226,328 $208,082 $ 18,246 $23,098 $ (4,852)
States and political
subdivisions................ 951,816 995,459 7.50 7.60 17,853 18,920 (1,067) (239) (828)
----------- ----------- ----- ----- ---------- -------- -------- ------- --------
Total securities(5)......... 13,479,872 13,814,500 7.25 6.51 244,181 227,002 17,179 22,859 (5,680)
Other earning assets(2)...... 269,495 499,254 7.50 4.80 5,084 6,038 (954) 2,529 (3,483)
Loans and leases, net of
unearned income(1)(3)(4)(5).. 37,970,855 34,133,559 9.44 8.82 900,423 757,455 142,968 56,559 86,409
----------- ----------- ----- ----- ---------- -------- -------- ------- --------
Total earning assets........ 51,720,222 48,447,313 8.86 8.13 1,149,688 990,495 159,193 81,947 77,246
----------- ----------- ----- ----- ---------- -------- -------- ------- --------
Non-earning assets.......... 3,859,313 3,219,292
----------- -----------
Total assets............... $55,579,535 $51,666,605
=========== ===========
Liabilities and Shareholders'
Equity
Interest-bearing deposits:
Savings and interest-
checking.................... $ 2,486,434 $ 3,120,399 1.60 1.86 10,013 14,619 (4,606) (1,880) (2,726)
Money rate savings.......... 9,774,421 8,892,400 3.79 2.98 93,044 66,741 26,303 19,202 7,101
Other time deposits......... 19,216,597 17,251,262 6.01 5.11 290,140 222,236 67,904 40,838 27,066
----------- ----------- ----- ----- ---------- -------- -------- ------- --------
Total interest-bearing
deposits.................... 31,477,452 29,264,061 4.97 4.12 393,197 303,596 89,601 58,160 31,441
Short-term borrowed funds.... 5,756,069 6,676,203 6.31 4.97 91,328 83,576 7,752 20,323 (12,571)
Long-term debt............... 8,173,862 6,316,154 6.17 5.41 126,512 85,758 40,754 13,450 27,304
----------- ----------- ----- ----- ---------- -------- -------- ------- --------
Total interest-bearing
liabilities................. 45,407,383 42,256,418 5.36 4.44 611,037 472,930 138,107 91,933 46,174
----------- ----------- ----- ----- ---------- -------- -------- ------- --------
Noninterest-bearing
deposits.................... 4,948,690 4,727,917
Other liabilities........... 804,884 714,964
Shareholders' equity........ 4,418,578 3,967,306
----------- -----------
Total liabilities and
shareholders' equity....... $55,579,535 $51,666,605
=========== ===========
Average interest rate
spread....................... 3.50 3.69
Net yield on earning assets.. 4.16% 4.26% $ 538,651 $517,565 $ 21,086 $(9,986) $ 31,072
===== ===== ========== ======== ======== ======= ========
Taxable equivalent
adjustment................... $ 28,286 $ 25,620
========== ========
</TABLE>
----
(1) Yields related to securities, loans and leases exempt from income taxes
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.
25
<PAGE>
NET INTEREST INCOME AND RATE/VOLUME ANALYSIS
For the Nine Months Ended September 30, 2000 and 1999
<TABLE>
<CAPTION>
Average Balances Yield/Rate Income/Expense Change due to
----------------------- ------------ --------------------- Increase ------------------
2000 1999 2000 1999 2000 1999 (Decrease) Rate Volume
----------- ----------- ----- ----- ---------- ---------- ---------- -------- --------
Fully Taxable Equivalent--(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Assets
Securities(1):
U.S. Treasury,
government and
other(5)............... $12,382,596 $12,202,336 6.83% 6.46% $ 634,299 $ 591,427 $ 42,872 $ 34,057 $ 8,815
States and political
subdivisions........... 977,820 937,842 7.53 7.67 55,215 53,922 1,293 (974) 2,267
----------- ----------- ----- ----- ---------- ---------- -------- -------- --------
Total securities(5).... 13,360,416 13,140,178 6.88 6.55 689,514 645,349 44,165 33,083 11,082
Other earning
assets(2)............... 324,560 450,516 6.57 4.77 15,975 16,077 (102) 5,115 (5,217)
Loans and leases, net of
unearned
income(1)(3)(4)(5)...... 37,099,461 33,418,166 9.28 8.74 2,577,125 2,186,848 390,277 137,593 252,684
----------- ----------- ----- ----- ---------- ---------- -------- -------- --------
Total earning assets... 50,784,437 47,008,860 8.63 8.09 3,282,614 2,848,274 434,340 175,791 258,549
----------- ----------- ----- ----- ---------- ---------- -------- -------- --------
Non-earning assets..... 3,576,861 3,257,727
----------- -----------
Total assets........... $54,361,298 $50,266,587
=========== ===========
Liabilities and
Shareholders' Equity
Interest-bearing
deposits:
Savings and interest-
checking............... $ 2,774,643 $ 3,247,926 1.69 1.88 35,091 45,744 (10,653) (4,389) (6,264)
Money rate savings..... 9,573,843 8,667,572 3.55 2.90 254,719 187,959 66,760 45,703 21,057
Other time deposits.... 18,440,684 17,000,937 5.71 5.14 788,085 653,912 134,173 76,145 58,028
----------- ----------- ----- ----- ---------- ---------- -------- -------- --------
Total interest-bearing
deposits............... 30,789,170 28,916,435 4.68 4.10 1,077,895 887,615 190,280 117,459 72,821
Short-term borrowed
funds................... 6,681,733 6,045,154 5.90 4.80 295,067 216,928 78,139 53,647 24,492
Long-term debt.......... 6,943,975 5,959,604 6.00 5.41 312,394 241,435 70,959 28,168 42,791
----------- ----------- ----- ----- ---------- ---------- -------- -------- --------
Total interest-bearing
liabilities............ 44,414,878 40,921,193 5.07 4.40 1,685,356 1,345,978 339,378 199,274 140,104
----------- ----------- ----- ----- ---------- ---------- -------- -------- --------
Noninterest-bearing
deposits................ 4,916,887 4,625,242
Other liabilities....... 774,305 695,708
Shareholders' equity.... 4,255,228 4,024,444
----------- -----------
Total liabilities and
shareholders' equity... $54,361,298 $50,266,587
=========== ===========
Average interest rate
spread.................. 3.56 3.69
Net yield on earning
assets.................. 4.20% 4.27% $1,597,258 $1,502,296 $ 94,962 $(23,483) $118,445
===== ===== ========== ========== ======== ======== ========
Taxable equivalent
adjustment.............. $ 76,971 $ 71,933
========== ==========
</TABLE>
----
(1) Yields related to securities, loans and leases exempt from income taxes
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.
26
<PAGE>
Noninterest Income
Noninterest income for the three months ended September 30, 2000, was $72.0
million compared to $222.6 million for the same period in 1999, a decrease of
67.7%. Excluding the bond losses discussed previously, noninterest income
would have totaled $252.4 million for the third quarter of 2000, an increase
of 12.7% compared to 1999. Excluding purchase accounting transactions and the
bond losses, noninterest income would have increased 9.2% in the third quarter
compared to the third quarter of 1999.
Noninterest income as a percentage of net interest income plus noninterest
income, or the "fee income ratio", was 31.9% for the third quarter of 2000,
compared to 30.3% in the third quarter of 1999. For the nine months,
noninterest income, excluding nonrecurring items and bond losses, totaled
$734.9 million, an increase of $81.8 million, or 12.5%, compared to 1999. The
fee income ratio for the first nine months of 2000 was 31.5% compared to 30.4%
for the first nine months of 1999.
Service charges on deposits totaled $69.2 million for the third quarter of
2000, an increase of $8.2 million, or 13.4%, compared to the third quarter of
1999. For the nine months, service charges on deposits totaled $196.4 million,
an increase of 10.0% compared to the first nine months of 1999. The largest
components of the growth within service charges on deposits included account
analysis fees on commercial transaction accounts, service charges on demand
deposit accounts and NSF and overdraft charges on personal and commercial
accounts, as well as higher transaction volume. Also, in June 2000, a new rate
schedule for deposit-related services became effective.
Trust income totaled $20.3 million for the current quarter, an increase of
$2.3 million, or 12.9%, compared to the same period a year ago. The increase
in trust income reflects a record quarter of institutional trust sales, as
well as healthy growth in personal and corporate trust fees compared to 1999.
Assets under management totaled $15.4 billion at September 30, 2000, up from
$14.4 billion at September 30, 1999. For the nine months, trust income totaled
$58.4 million, an increase of $6.4 million, or 12.3%, compared to the same
period in 1999. The full year growth principally resulted from the same
factors that created the quarterly increase.
Investment banking and brokerage fees and commissions totaled $36.5 million
during the third quarter of 2000, a decrease of $1.6 million, or 4.2%,
compared to the third quarter of 1999. The decrease resulted from a $3.5
million decline in trading income and fee income at BB&T's full-service
brokerage operation, partially offset by higher commission revenue generated
by BB&T's limited service brokerage subsidiary. For the nine months,
investment banking and brokerage fees and commissions totaled $123.3 million,
an increase of 34.8% compared to the same period in 1999. This significant
increase was primarily the result of the timing of the acquisition of Scott &
Stringfellow, which was completed on March 26, 1999. This acquisition was
accounted for as a purchase; therefore, its operating results were only
included in BB&T's accounts in periods following the acquisition.
Agency insurance commissions totaled $34.3 million for the third quarter of
2000, an increase of $13.7 million, or 66.3%, compared to the same three-month
period of 1999. This substantial growth in revenue resulted from the purchase
of additional agencies during 1999 and 2000, internal growth in property and
casualty insurance commissions, which increased $4.3 million, life insurance
commissions, up $1.4 million, and increased contingent insurance commissions,
group health and other fees, up a collective $5.4 million. Excluding the
effects of purchase accounting transactions, agency insurance commissions for
the third quarter of 2000 would have increased 36.0% compared to 1999. For the
nine months, agency insurance commissions totaled $94.7 million, an increase
of $40.1 million, or 73.5%. Excluding purchase accounting transactions, growth
in agency insurance commissions for the nine months would have been 42.6%. The
increase in year-to-date revenue was produced by similar growth in the types
of commissions outlined above.
Income from mortgage banking activities totaled $24.2 million for the third
quarter of 2000, a decrease of $13.3 million, or 35.4%, from the same period
of 1999. This decline resulted from losses on sales of mortgage loans totaling
$15.4 million, lower origination fees compared to 1999, and the recapture in
1999 of $5 million in valuation allowances related to capitalized mortgage
servicing rights. The recapture of valuation allowances
27
<PAGE>
during the 1999 period, which were established in 1998, resulted from a
slowing in prepayment speeds related to the mortgage loans underlying the
capitalized servicing rights. For the nine months ended September 30, 2000,
mortgage banking income totaled $76.6 million, a decrease of $57.3 million, or
42.8%, compared to 1999, principally due to lower mortgage loan originations
during 2000 and the recapture in 1999 of $13 million in valuation allowances
related to mortgage servicing rights established in 1998.
Other nondeposit fees and commissions totaled $37.5 million for the third
quarter of 2000, an increase of $7.4 million, or 24.5%, compared to the three
months ended September 30, 1999. The principal drivers of the increase were:
income from the outsourcing of official checks, which added $1.9 million to
revenue for the quarter; ATM network fees and debit card income, which
increased $1.6 million; and debit card interchange fees, which were up $1.9
million. For the nine months, other nondeposit fees and commissions totaled
$103.4 million, up $14.2 million, or 15.9%, compared to 1999. The increase was
created by similar growth in the types of commission and fee income that
affected the quarterly increase.
Other income totaled $27.5 million for the quarter, an increase of $12.0
million, or 78.1%, compared to the third quarter of 1999. Included in this
total is the cash value buildup of bank-owned life insurance, which increased
$8.7 million as a result of additional purchases during 2000. BB&T also
recorded $3.4 million in fee income from termination of Federal Home Loan Bank
advances. For the nine months, other income totaled $72.4 million, an increase
of $26.7 million, or 58.5%, compared to 1999. The increase in revenues during
the nine months was principally the result of the income items that favorably
affected the third quarter.
Noninterest Expense
Noninterest expenses totaled $479.0 million for the third quarter of 2000
compared to $433.6 million for the same period a year ago, an increase of
10.5%. Noninterest expense for the third quarter of 2000 includes $72.5
million of nonrecurring expenses principally associated with the acquisition
of One Valley. Excluding these costs, noninterest expenses would have totaled
$406.5 million, basically unchanged from the noninterest expenses incurred in
the third quarter of 1999. Excluding the effects of business combinations
accounted for as purchases that were completed in 1999, and the aforementioned
merger-related expenses, noninterest expenses for the third quarter of 2000
would have actually decreased 2.4% from the comparable period of 1999. For the
nine months ended September 30, 2000, noninterest expense totaled $1.4
billion, an increase of $144.9 million, or 12.0%, compared to the first nine
months of 1999. Excluding $129.0 million in nonrecurring charges from 2000 and
$43.1 million of similar merger-related charges from 1999, noninterest
expenses would have increased 5.0%. Excluding these charges and the effect of
acquisitions accounted for as purchases, noninterest expense for the first
nine months of 2000 would have decreased less than 1% compared to 1999.
BB&T's efficiency ratio (noninterest expenses, excluding the nonrecurring
expenses referred to above and costs related to foreclosed assets, as a
percentage of FTE net interest income plus noninterest income excluding
securities gains and losses) improved to 51.3% for the third quarter of 2000
compared to 54.6% for the third quarter of 1999. For the nine months, the
efficiency ratio improved to 52.6% compared to 54.0% in 1999.
Personnel expense, the largest component of noninterest expense, was $238.6
million for the third quarter of 2000 compared to $218.2 million for the same
period in 1999, an increase of $20.4 million, or 9.3%. These amounts include
merger-related costs of $17.2 million in the third quarter of 2000. Excluding
the merger-related charges, personnel expense in the 2000 quarter would have
increased $6.5 million, or 3.0%, from the 1999 period. This growth included
the effect of acquisitions completed in the fourth quarter of 1999 and 2000
that were accounted for as purchases. Excluding the effects of the merger-
related charges and the purchase acquisitions, personnel expense for the third
quarter of 2000 would have increased $2.3 million, or 1.1%, over the third
quarter of 1999. This increase was primarily the result of a 4% average annual
salary adjustment, higher social security taxes, staff relocation expenses,
fringe benefits and 401(k) plan contributions. For the nine months, personnel
expense totaled $700.0 million, an increase of $81.2 million, or 13.1%,
compared to 1999. Excluding nonrecurring charges, personnel expense for the
first nine months of 2000 would have increased 9.7% compared to 1999.
Excluding nonrecurring charges and purchase accounting transactions, personnel
expense would have increased only 3.7% for the reasons outlined above.
28
<PAGE>
Occupancy and equipment expense for the three months ended September 30,
2000, totaled $70.9 million, an increase of $7.3 million, or 11.5%, compared
to 1999. These amounts include merger-related charges of $8.3 million in the
third quarter of 2000. Excluding the merger-related charges, occupancy and
equipment expense would have been basically unchanged compared to the 1999
period. For the nine months, occupancy and equipment expense totaled $201.7
million, an increase of $17.4 million, or 9.5%. Excluding nonrecurring merger-
related charges, occupancy and equipment expense would have increased $5.5
million, or 3.1%. This increase was principally the result of higher rent
expenses for both the quarter and the nine months.
The amortization of intangible assets and mortgage servicing rights totaled
$20.0 million for the three months ended September 30, 2000, a decrease of
$206,000, or 1.0%, from the amount incurred in the third quarter of 1999. This
decrease was the result of a $2.0 million decline in mortgage servicing rights
amortization. The majority of the reduction in the amortization of mortgage
servicing rights resulted from lower volumes of loan prepayments in 2000
compared to the third quarter of 1999. BB&T amortizes the full amount of any
unamortized capitalized mortgage servicing rights associated with the prepaid
loan in the period the prepayment occurs. As mortgage rates have increased
during 2000, loan prepayments have significantly decreased, and the
accelerated amortization of mortgage servicing rights has substantially
decreased compared to 1999. This decrease in the amortization of mortgage
servicing was largely offset by a $1.8 million increase in amortization of
goodwill and other intangibles, due to acquisitions consummated using purchase
accounting. Total goodwill and other intangibles, including mortgage servicing
rights, have increased from $848.2 million at September 30, 1999, to $908.4
million at September 30, 2000. For the nine months ended September 30, 2000,
amortization of intangibles and mortgage servicing rights totaled $59.5
million, a decrease of $251,000, or less than one percent, compared to 1999.
Other noninterest expenses for the third quarter of 2000 totaled $149.7
million, an increase of $18.0 million, or 13.6%, compared to 1999. These
amounts include merger-related costs of $47.0 million in the third quarter of
2000. Excluding these costs, other noninterest expenses for the three months
ended September 30, 2000 would have decreased $6.1 million, or 5.9%, from the
comparable 1999 period. This decrease is entirely related to lower
professional services expenses, which were elevated in 1999 because of costs
associated with BB&T's Year 2000 readiness program, and lower advertising and
public relations expenses. For the nine months ended September 30, 2000, other
expense totaled $395.9 million, an increase of $46.5 million, or 13.3%.
Excluding nonrecurring charges from both 2000 and 1999, other expense would
have decreased $5.7 million, or 1.8%, compared to last year.
Provision for Income Taxes
The provision for income taxes totaled $15.9 million for the third quarter
of 2000, a decrease of $67.0 million, or 80.9%, compared to the third quarter
of 1999. For the first nine months of 2000, the provision for income taxes
totaled $183.2 million, a decrease of $73.6 million, or 28.6%, compared to
1999. Excluding the tax benefits associated with the merger-related charges
from 2000 and 1999 and bond losses from 2000, the provision for income taxes
would have been $107.3 million during the third quarter and $311.7 million for
the nine months ended September 30, 2000. These amounts represent increases of
$15.5 million, or 16.8%, compared to the third quarter of 1999, and an
increase of $40.5 million, or 14.9%, compared to the first nine months of
1999. Excluding the effect of nonrecurring items on pretax income and the
income tax provision, BB&T's effective income tax rate was 32.3% for the third
quarter and 32.7% for the first nine months of 2000 compared to effective tax
rates of 32.2% for the third quarter of 1999 and 32.3% for the first nine
months of 1999.
29
<PAGE>
PART II. OTHER INFORMATION
Item 1. 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.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 11--"Computation of Earnings Per Share" is included herein as
Note E.
Exhibit 27--"Financial Data Schedule" is included in the electronically-
filed document as required.
(b) Current Reports on Form 8-K during and following the quarter ended
September 30, 2000.
On July 18, 2000, BB&T filed a Current Report on Form 8-K under Item 5
to report the financial condition and results of operations for the
second quarter of 2000. On July 27, 2000, BB&T filed a Current Report on
Form 8-K under Item 5 to announce plans to acquire FCNB Corp of
Frederick, Maryland. On August 23, 2000, BB&T filed a Current Report on
Form 8-K under Item 5 to report plans to acquire BankFirst Corp., of
Knoxville, Tennessee. On September 6, 2000, BB&T filed a Current Report
on Form 8-K under Item 5 to report plans to acquire FirstSpartan
Financial Corp., of Spartanburg, South Carolina. On October 12, 2000,
BB&T filed a Current Report on Form 8-K under Item 5 to report the
financial condition and results of operations for the third quarter of
2000. On October 26, 2000, BB&T filed a Current Report on Form 8-K under
Item 5 to announce the authorization of the board of directors to
repurchase up to 20 million shares of BB&T's common stock to be reissued
in acquisitions to be accounted for as purchases. On October 27, 2000,
BB&T filed a Current Report on Form 8-K under Item 5 to restate BB&T's
1999 Annual Report on Form 10-K for the accounts of Hardwick Holding
Company, First Banking Company of Southeast Georgia and One Valley
Bancorp, Inc. On October 30, 2000, BB&T filed a Current Report on Form
8-K under Item 5 to restate the first and second quarters of 1999 for
the merger with One Valley Bancorp, Inc.
30
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
BB&T CORPORATION (Registrant)
/s/ Scott E. Reed
Date: November 14, 2000 By: _________________________________
Scott E. Reed
Senior Executive Vice President
and
Chief Financial Officer
/s/ Sherry A. Kellett
Date: November 14, 2000 By: _________________________________
Sherry A. Kellett
Senior Executive Vice President
and Controller
(Principal Accounting Officer)
31
