<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
FORM 8-K
CURRENT REPORT
----------------
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
April 28, 2000
Date of Report (Date of earliest event recorded)
BB&T Corporation
(Exact name of registrant as specified in its charter)
Commission file number : 1-10853
----------------
North Carolina 56-0939887
(State of Incorporation) (I.R.S. Employer Identification No.)
200 West Second Street 27101
Winston-Salem, North Carolina (Zip Code)
(Address of Principal Executive
Offices)
(336) 733-2000
(Registrant's Telephone Number, Including Area Code)
----------------
This Form 8-K has 67 pages.
- --------------------------------------------------------------------------------
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<PAGE>
Item 5. Other Events
On January 13, 2000, BB&T Corporation ("BB&T") completed its merger with
Premier Bancshares, Inc., ("Premier") of Atlanta, Georgia. To consummate the
merger with Premier, their shareholders received .5155 shares of BB&T common
stock in exchange for each share of Premier common stock held, resulting in
the issuance of 16.8 million shares of BB&T common stock. This transaction was
accounted for as a pooling of interests. Accordingly, the consolidated
financial statements (including notes to consolidated financial statements),
and supplemental financial information contained in BB&T's Annual Report on
Form 10-K for the years ended December 31, 1999, 1998 and 1997, restated for
the accounts of Premier, are included in this Current Report on Form 8-K.
Item 7. Financial Statements and Exhibits
<TABLE>
<CAPTION>
Exhibit Description
<S> <C> <C>
11 Computation of Earnings Per Share. Filed herewith as Note R. of the
"Notes to Consolidated
Financial Statements."
23 Consent of Independent Public Accountants. Filed herewith on page 4.
27 Financial Data Schedule. Filed herewith as an exhibit to the
electronically filed document as required.
99.1 Report of Independent Public Accountants. Filed herewith on page 5.
99.2 BB&T's restated audited financial statements Filed herewith beginning on page 7.
and notes thereto, including the accounts
of Premier.
99.3 BB&T's restated Securities Act Guide 3 Filed herewith beginning on page 49.
statistical disclosures, including
the accounts of Premier.
</TABLE>
2
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
BB&T CORPORATION (Registrant)
/s/ Sherry A. Kellett
By: _________________________________
Sherry A. Kellett
Senior Executive Vice President and
Controller
(Principal Accounting Officer)
Date: April 28, 2000.
3
<PAGE>
Exhibit 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of
our report included in this Form 8-K into BB&T Corporation's previously filed
Registration Statement File Nos. 33-52367, 33-57865, 33-57867, 33-57871, 333-
03989, 333-50035, 333-69823 and 333-81471 filed on Form S-8 and Registration
Statement File Nos. 33-57859, 33-57861, 333-02899, 333-27755 and 333-35879
filed on Form S-3.
Arthur Andersen LLP
Charlotte, North Carolina,
April 28, 2000.
4
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
Effective December 31, 1997, BB&T adopted SFAS No. 128, "Earnings Per Share."
The lines labeled EPS-PRIMARY and EPS-FULLY DILUTED on this exhibit actually
reflect EPS-BASIC and EPS-DILUTED, respectively, as determined under SFAS No.
128.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 1,206,773
<INT-BEARING-DEPOSITS> 71,635
<FED-FUNDS-SOLD> 244,520
<TRADING-ASSETS> 93,221
<INVESTMENTS-HELD-FOR-SALE> 10,771,247
<INVESTMENTS-CARRYING> 97,122
<INVESTMENTS-MARKET> 98,070
<LOANS> 30,736,683
<ALLOWANCE> 411,188
<TOTAL-ASSETS> 45,479,056
<DEPOSITS> 28,791,574
<SHORT-TERM> 7,080,882
<LIABILITIES-OTHER> 689,705
<LONG-TERM> 5,520,484
0
0
<COMMON> 1,739,531
<OTHER-SE> 1,656,880
<TOTAL-LIABILITIES-AND-EQUITY> 45,479,056
<INTEREST-LOAN> 2,559,361
<INTEREST-INVEST> 684,356
<INTEREST-OTHER> 18,544
<INTEREST-TOTAL> 3,262,261
<INTEREST-DEPOSIT> 1,017,606
<INTEREST-EXPENSE> 1,604,179
<INTEREST-INCOME-NET> 1,658,082
<LOAN-LOSSES> 104,667
<SECURITIES-GAINS> (5,202)
<EXPENSE-OTHER> 1,436,056
<INCOME-PRETAX> 911,045
<INCOME-PRE-EXTRAORDINARY> 911,045
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 614,360
<EPS-BASIC> 1.78
<EPS-DILUTED> 1.75
<YIELD-ACTUAL> 4.28
<LOANS-NON> 108,708
<LOANS-PAST> 54,493
<LOANS-TROUBLED> 1,094
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 378,531
<CHARGE-OFFS> 112,234
<RECOVERIES> 29,527
<ALLOWANCE-CLOSE> 411,188
<ALLOWANCE-DOMESTIC> 411,188
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 102,394
</TABLE>
<PAGE>
Exhibit 99.1
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders of BB&T Corporation:
We have audited the accompanying consolidated balance sheets of BB&T
Corporation (a North Carolina corporation), and subsidiaries as of December
31, 1999 and 1998, and the related consolidated statements of income, changes
in shareholders' equity and cash flows for each of the three years in the
period ended December 31, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of BB&T Corporation and
subsidiaries as of December 31, 1999 and 1998, and the results of operations
and cash flows for each of the three years in the period ended December 31,
1999 in conformity with accounting principles generally accepted in the United
States.
Arthur Andersen LLP
Charlotte, North Carolina,
April 27, 2000.
5
<PAGE>
MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL REPORTING
The management of BB&T is responsible for the preparation of the financial
statements, related financial data and other information in this Current
Report on Form 8-K. The financial statements are prepared in accordance with
generally accepted accounting principles and include amounts based on
management's estimates and judgment where appropriate. Financial information
appearing throughout this Current Report on Form 8-K is consistent with the
financial statements.
BB&T's accounting system, which records, summarizes and reports financial
transactions, is supported by an internal control structure which provides
reasonable assurance that assets are safeguarded and that transactions are
recorded in accordance with BB&T's policies and established accounting
procedures. As an integral part of the internal control structure, BB&T
maintains a professional staff of internal auditors who monitor compliance
with and assess the effectiveness of the internal control structure.
The Audit Committee of BB&T's Board of Directors, composed solely of outside
directors, meets regularly with BB&T's management, internal auditors and
independent public accountants to review matters relating to financial
reporting, internal control structure and the nature, extent and results of
the audit effort. The independent public accountants and the internal auditors
have access to the Audit Committee with or without management present.
The financial statements have been audited by Arthur Andersen LLP,
independent public accountants, who render an independent opinion on
management's financial statements. Their appointment was recommended by the
Audit Committee, approved by the Board of Directors and ratified by the
shareholders. Their examination provides an objective assessment of the degree
to which BB&T's management meets its responsibility for financial reporting.
Their opinion on the financial statements is based on auditing procedures,
which include reviewing the internal control structure to determine the timing
and scope of audit procedures and performing selected tests of transactions
and records as they deem appropriate. These auditing procedures are designed
to provide a reasonable level of assurance that the financial statements are
fairly presented in all material respects.
John A. Allison Scott E. Reed Sherry A. Kellett
Chairman and Chief Financial Officer Controller
Chief Executive Officer
6
<PAGE>
Exhibit 99.2
BB&T CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
----------- -----------
(Dollars in thousands,
except per share data)
<S> <C> <C>
Assets
Cash and due from banks............................. $ 1,206,773 $ 1,165,068
Interest-bearing deposits with banks................ 71,635 28,011
Federal funds sold and securities purchased under
resale agreements or similar arrangements.......... 244,520 263,085
Trading securities at market value.................. 93,221 60,422
Securities available for sale at market value....... 10,771,247 9,659,333
Securities held to maturity at amortized cost
(market value: $98,070 at December 31, 1999 and
$381,532 at December 31, 1998)..................... 97,122 373,472
Loans held for sale................................. 363,255 1,296,315
Loans and leases, net of unearned income............ 30,373,428 26,649,782
Allowance for loan and lease losses................. (411,188) (378,531)
----------- -----------
Loans and leases, net.............................. 29,962,240 26,271,251
----------- -----------
Premises and equipment, net......................... 589,629 559,898
Other assets........................................ 2,079,414 1,566,894
----------- -----------
Total assets....................................... $45,479,056 $41,243,749
=========== ===========
Liabilities and Shareholders' Equity
Deposits:
Noninterest-bearing deposits........................ $ 4,139,422 $ 3,986,589
Savings and interest checking....................... 1,980,944 2,526,754
Money rate savings.................................. 8,480,285 7,584,793
Other time deposits................................. 13,661,522 13,106,174
Foreign deposits.................................... 529,401 638,676
----------- -----------
Total deposits..................................... 28,791,574 27,842,986
----------- -----------
Short-term borrowed funds........................... 7,080,882 4,057,776
Long-term debt...................................... 5,520,484 5,445,800
Accounts payable and other liabilities.............. 689,705 570,585
----------- -----------
Total liabilities.................................. 42,082,645 37,917,147
----------- -----------
Shareholders' equity:
Preferred stock, $5 par, 5,000,000 shares
authorized, none issued or outstanding............. -- --
Common stock, $5 par, 500,000,000 shares authorized;
issued and outstanding, 347,906,156 at December 31,
1999 and 343,724,018 at December 31, 1998.......... 1,739,531 1,718,620
Additional paid-in capital.......................... 258,221 210,882
Retained earnings................................... 1,691,044 1,332,093
Loan to employee stock ownership plan and unvested
restricted stock................................... (10,891) (14)
Accumulated other nonshareholder changes in equity,
net of deferred income taxes of $(168,019) at
December 31, 1999 and $41,293 at December 31,
1998............................................... (281,494) 65,021
----------- -----------
Total shareholders' equity......................... 3,396,411 3,326,602
----------- -----------
Total liabilities and shareholders' equity......... $45,479,056 $41,243,749
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
7
<PAGE>
BB&T CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
For the Years Ended December 31, 1999, 1998 and 1997
<TABLE>
<CAPTION>
1999 1998 1997
----------- ---------- ----------
(Dollars in thousands, except per
share data)
<S> <C> <C> <C>
Interest Income
Interest and fees on loans and leases...... $ 2,559,361 $2,362,229 $2,132,539
Interest and dividends on securities....... 684,356 616,779 569,978
Interest on short-term investments......... 18,544 20,387 14,333
----------- ---------- ----------
Total interest income...................... 3,262,261 2,999,395 2,716,850
----------- ---------- ----------
Interest Expense
Interest on deposits....................... 1,017,606 999,332 958,556
Interest on short-term borrowed funds...... 266,275 237,158 183,814
Interest on long-term debt................. 320,298 265,418 190,682
----------- ---------- ----------
Total interest expense..................... 1,604,179 1,501,908 1,333,052
----------- ---------- ----------
Net Interest Income......................... 1,658,082 1,497,487 1,383,798
Provision for loan and lease losses........ 104,667 103,148 113,679
----------- ---------- ----------
Net Interest Income After Provision for Loan
and Lease Losses........................... 1,553,415 1,394,339 1,270,119
----------- ---------- ----------
Noninterest Income
Service charges on deposits................ 211,491 190,394 170,375
Mortgage banking income.................... 153,020 118,200 75,973
Trust income............................... 55,416 42,603 36,849
Investment banking and brokerage fees and
commissions............................... 127,366 44,326 27,180
Agency insurance commissions............... 78,945 52,186 40,149
Other insurance commissions................ 11,814 11,284 14,069
Bankcard fees and merchant discounts....... 37,707 30,579 24,104
Other nondeposit fees and commissions...... 67,734 61,733 47,722
Securities (losses) gains, net............. (5,202) 8,841 4,843
Other income............................... 55,395 61,386 87,842
----------- ---------- ----------
Total noninterest income................... 793,686 621,532 529,106
----------- ---------- ----------
Noninterest Expense
Personnel expense.......................... 730,702 604,787 566,873
Occupancy and equipment expense............ 215,283 182,403 186,894
Federal deposit insurance expense.......... 9,406 5,522 6,975
Amortization of intangibles and mortgage
servicing rights.......................... 74,267 54,769 27,729
Advertising and public relations expense... 23,880 29,441 31,231
Professional services...................... 72,354 54,514 53,600
Other expense.............................. 310,164 251,788 278,006
----------- ---------- ----------
Total noninterest expense.................. 1,436,056 1,183,224 1,151,308
----------- ---------- ----------
Earnings
Income before income taxes................. 911,045 832,647 647,917
Provision for income taxes................. 296,685 265,699 221,706
----------- ---------- ----------
Net income................................. 614,360 566,948 426,211
Preferred dividend requirements............ -- -- 113
----------- ---------- ----------
Income applicable to common shares......... $ 614,360 $ 566,948 $ 426,098
=========== ========== ==========
Per Common Share
Net income:
Basic...................................... $ 1.78 $ 1.67 $ 1.26
=========== ========== ==========
Diluted.................................... $ 1.75 $ 1.63 $ 1.23
=========== ========== ==========
Cash dividends paid by BB&T Corporation.... $ .75 $ .66 $ .58
=========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
8
<PAGE>
BB&T CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
For the Years Ended December 31, 1999, 1998 and 1997
<TABLE>
<CAPTION>
Accumulated
Other
Shares of Additional Retained Nonshareholder Total
Common Preferred Common Paid-In Earnings Changes in Shareholders'
Stock Stock Stock Capital and Other* Equity Equity
----------- --------- ---------- ---------- ---------- -------------- -------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31,
1996, as previously
reported............... 162,835,879 $ 7,564 $ 814,181 $ 316,742 $1,437,865 $ 14,005 $2,590,357
Merger with Premier
Bancshares, Inc.
accounted for as a
pooling-of-interests.. 5,800,045 -- 28,999 58,845 28,592 (262) 116,174
----------- ------- ---------- --------- ---------- --------- ----------
Balance, December 31,
1996, restated......... 168,635,924 7,564 843,180 375,587 1,466,457 13,743 2,706,531
----------- ------- ---------- --------- ---------- --------- ----------
Add (Deduct):
Nonshareholder changes
in equity:**
Net income............. -- -- -- -- 426,211 -- 426,211
Unrealized holding
gains arising during
the period........... -- -- -- -- -- 45,539 45,539
Less: reclassification
adjustment, net of
tax of ($1,889)...... -- -- -- -- -- (2,954) (2,954)
---------- --------- ----------
Total nonshareholder
changes in equity..... -- -- -- -- 426,211 42,585 468,796
---------- --------- ----------
Common stock issued.... 8,312,437 -- 41,564 239,128 5,456 -- 286,148
Redemption of common
stock................. (7,163,258) -- (35,818) (292,165) -- -- (327,983)
Preferred stock
redemptions and
conversions........... 350,610 (7,564) 1,753 5,811 -- -- --
Cash dividends declared
on common stock....... -- -- -- -- (187,260) -- (187,260)
Other, net............. -- -- -- (2,786) 2,060 -- (726)
----------- ------- ---------- --------- ---------- --------- ----------
Balance, December 31,
1997................... 170,135,713 -- 850,679 325,575 1,712,924 56,328 2,945,506
Add (Deduct):
Nonshareholder changes
in equity:**
Net income............. -- -- -- -- 566,948 -- 566,948
Unrealized holding
gains arising during
the period........... -- -- -- -- -- 14,102 14,102
Less: reclassification
adjustment, net of
tax of ($3,448)...... -- -- -- -- -- (5,393) (5,393)
---------- --------- ----------
Total nonshareholder
changes in equity..... -- -- -- -- 566,948 8,709 575,657
---------- --------- ----------
Common stock issued.... 11,800,665 -- 59,004 314,137 (1,045) -- 372,096
Redemption of common
stock................. (6,736,880) -- (33,684) (311,345) -- -- (345,029)
2-for-1 stock split
effective August 3,
1998.................. 168,557,252 -- 842,786 (120,111) (721,913) -- 762
Reconciliation of
fiscal year of First
Citizens to calendar
year.................. (32,732) -- (165) (211) (1,193) (16) (1,585)
Cash dividends declared
on common stock....... -- -- -- -- (222,039) -- (222,039)
Other, net............. -- -- -- 2,837 (1,603) -- 1,234
----------- ------- ---------- --------- ---------- --------- ----------
Balance, December 31,
1998................... 343,724,018 -- 1,718,620 210,882 1,332,079 65,021 3,326,602
Add (Deduct):
Nonshareholder changes
in equity:**
Net income............. -- -- -- -- 614,360 -- 614,360
Unrealized holding
losses arising during
the period........... -- -- -- -- -- (348,769) (348,769)
Less: reclassification
adjustment, net of
tax benefit of
$2,029............... -- -- -- -- -- 3,173 3,173
---------- --------- ----------
Total nonshareholder
changes in equity..... -- -- -- -- 614,360 (345,596) 268,764
---------- --------- ----------
Common stock issued.... 12,713,594 -- 63,569 330,669 9,885 -- 404,123
Redemption of common
stock................. (8,535,544) -- (42,678) (283,330) -- -- (326,008)
Reconciliation of
fiscal year of First
Liberty to calendar
year.................. 4,088 -- 20 -- 2,541 (919) 1,642
Cash dividends declared
on common stock....... -- -- -- -- (268,558) -- (268,558)
Other, net............. -- -- -- -- (10,154) -- (10,154)
----------- ------- ---------- --------- ---------- --------- ----------
Balance, December 31,
1999................... 347,906,156 $ -- $1,739,531 $ 258,221 $1,680,153 $(281,494) $3,396,411
=========== ======= ========== ========= ========== ========= ==========
</TABLE>
- -------
* Other includes unearned income, unvested restricted stock and a loan to the
employee stock ownership plan.
** Comprehensive income as defined by SFAS No. 130.
The accompanying notes are an integral part of these consolidated financial
statements.
9
<PAGE>
BB&T CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1999, 1998 and 1997
<TABLE>
<CAPTION>
1999 1998 1997
----------- ----------- -----------
(Dollars in thousands)
<S> <C> <C> <C>
Cash Flows From Operating Activities:
Net income............................. $ 614,360 $ 566,948 $ 426,211
Adjustments to reconcile net income to
net cash provided by operating
activities:
Provision for loan and lease losses.... 104,667 103,148 113,679
Depreciation of premises and
equipment............................. 86,099 75,322 69,045
Amortization of intangibles and
mortgage servicing rights............. 74,267 54,769 27,729
Accretion of negative goodwill......... (6,243) (6,243) (6,180)
Amortization of unearned stock
compensation.......................... 3,873 1,171 8,133
Discount accretion and premium
amortization on securities, net....... 1,190 1,984 3,598
Net decrease (increase) in trading
account securities.................... (20,774) 7,456 (25,688)
Loss (gain) on sales of securities,
net................................... 5,202 (8,841) (4,843)
Loss (gain) on sales of loans and
mortgage loan servicing rights, net... (26,213) (36,227) (17,687)
Loss (gain) on disposals of premises
and equipment, net.................... (5,754) (15,352) 28,263
Proceeds from sales of loans held for
sale.................................. 3,920,896 5,119,437 1,903,172
Purchases of loans held for sale....... (961,404) (1,811,810) (934,992)
Origination of loans held for sale, net
of principal collected................ (2,000,219) (3,887,322) (1,167,108)
Reconciliation of fiscal year of merged
companies to calendar year............ 3,216 4,991 --
Decrease (increase) in:
Accrued interest receivable........... (45,015) (21,376) (2,989)
Other assets.......................... (181,109) (80,846) (124,075)
Increase (decrease) in:
Accrued interest payable.............. 38,871 18,427 8,934
Accounts payable and other
liabilities.......................... 110,181 76,824 102,266
Other, net............................. 21,916 (5,381) (10,455)
----------- ----------- -----------
Net cash provided by operating
activities........................... 1,738,007 157,079 397,013
----------- ----------- -----------
Cash Flows From Investing Activities:
Proceeds from sales of securities
available for sale.................... 774,053 1,554,857 1,941,115
Proceeds from maturities, calls and
paydowns of securities available for
sale.................................. 2,705,481 2,610,043 1,886,661
Purchase of securities available for
sale.................................. (4,351,282) (4,324,642) (4,555,761)
Proceeds from sales of securities held
to maturity........................... -- -- 26,170
Proceeds from maturities, calls and
paydowns of securities held to
maturity.............................. 36,985 168,509 88,876
Purchases of securities held to
maturity.............................. (5,343) (97,882) (101,769)
Leases made to customers............... (126,066) (94,615) (74,420)
Principal collected on leases.......... 74,314 65,186 57,581
Loan originations, net of principal
collected............................. (3,221,285) (1,400,799) (1,446,199)
Purchases of loans..................... (364,663) (341,812) (447,963)
Net cash acquired in transactions
accounted for under the purchase
method................................ 302,032 73,369 95,205
Purchases and originations of mortgage
servicing rights...................... (78,527) (85,113) (42,599)
Proceeds from disposals of premises and
equipment............................. 37,540 25,559 14,579
Purchases of premises and equipment.... (125,433) (122,954) (164,703)
Proceeds from sales of foreclosed
property.............................. 28,190 28,902 17,333
Proceeds from sales of other real
estate held for development or sale... 11,927 3,922 16,916
Other, net............................. -- (41,067) 5,135
----------- ----------- -----------
Net cash used in investing
activities........................... (4,302,077) (1,978,537) (2,683,843)
----------- ----------- -----------
Cash Flows From Financing Activities:
Net increase in deposits............... 183,916 1,157,460 792,249
Net increase (decrease) in short-term
borrowed funds........................ 2,914,825 (319,350) 603,124
Proceeds from long-term debt........... 2,658,991 3,428,689 6,328,829
Repayments of long-term debt........... (2,592,003) (2,034,525) (4,734,838)
Net proceeds from common stock issued.. 42,337 38,417 29,851
Redemption of common stock............. (326,008) (345,029) (327,983)
Preferred stock cancellations and
conversions........................... -- -- (38)
Cash dividends paid on common and
preferred stock....................... (249,969) (211,171) (175,331)
Other, net............................. (1,255) 1,161 (21,689)
----------- ----------- -----------
Net cash provided by financing
activities........................... 2,630,834 1,715,652 2,494,174
----------- ----------- -----------
Net Increase (Decrease) in Cash and Cash
Equivalents............................ 66,764 (105,806) 207,344
Cash and Cash Equivalents at Beginning
of Year................................ 1,456,164 1,561,970 1,354,626
----------- ----------- -----------
Cash and Cash Equivalents at End of
Year................................... $ 1,522,928 $ 1,456,164 $ 1,561,970
=========== =========== ===========
Supplemental Disclosure of Cash Flow
Information:
Cash paid during the year for:
Interest............................... $ 1,502,714 $ 1,477,807 $ 1,274,711
Income taxes........................... 109,667 162,723 171,704
Noncash financing and investing
activities:
Transfer of securities from held to
maturity to available for sale........ 231,529 114,401 --
Transfer of securities from available
for sale to held to maturity.......... -- -- 1,493
Transfer of loans to foreclosed
property.............................. 25,644 26,211 23,476
Transfer of fixed assets to other real
estate owned.......................... 7,405 14,165 15,429
Restricted stock issued................ -- -- 74
Securitization of mortgage loans....... 304,795 478,768 --
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
10
<PAGE>
BB&T CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BB&T Corporation ("BB&T" or "Parent Company") is a bank holding company
organized under the laws of North Carolina and registered with the Federal
Reserve Board under the Bank Holding Company Act of 1956, as amended. Branch
Banking and Trust Company ("BB&T-NC"); BB&T Financial Corporation of South
Carolina, parent company of Branch Banking and Trust Company of South Carolina
("BB&T-SC"); BB&T Financial Corporation of Virginia, parent company of Branch
Banking and Trust Company of Virginia ("BB&T-VA"), (collectively, the
"Banks"), Regional Acceptance Corporation ("Regional Acceptance") and Scott &
Stringfellow Financial, Inc., ("Scott & Stringfellow") comprise BB&T's
principal direct subsidiaries.
The accounting and reporting policies of BB&T Corporation and its
subsidiaries are in accordance with generally accepted accounting principles
and conform to general practices within the banking industry. The following is
a summary of the more significant policies.
NOTE A. Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements of BB&T include the accounts of BB&T
Corporation and its subsidiaries. In consolidation, all significant
intercompany accounts and transactions have been eliminated. Prior period
financial statements have been restated to include the accounts of companies
acquired in material transactions accounted for as poolings of interests. The
results of operations of companies acquired in transactions accounted for as
purchases are included only from the dates of acquisition. (See Note B).
In certain instances, amounts reported in prior years' consolidated
financial statements have been reclassified to conform to statement
presentations selected for 1999. Such reclassifications had no effect on
previously reported shareholders' equity or net income.
Nature of Operations
BB&T is a multi-bank holding company headquartered in Winston-Salem, North
Carolina. BB&T conducts its operations in North Carolina, South Carolina,
Virginia, Maryland, Georgia, West Virginia, Kentucky and the metropolitan
Washington, D.C. area primarily through its commercial banking subsidiaries
and, to a lesser extent, through its other subsidiaries. BB&T's subsidiaries
provide a full range of traditional commercial banking services and additional
services including investment brokerage, investment banking, trust services,
agency insurance, credit-related insurance and leasing.
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities as of the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting periods. Actual results could differ from those estimates.
Cash and Cash Equivalents
Cash and cash equivalents include cash and due from banks, interest-bearing
bank balances, Federal funds sold and securities purchased under resale
agreements or similar arrangements. Generally, both cash and cash equivalents
are considered to have maturities of three months or less. Accordingly, the
carrying amount of such instruments is considered a reasonable estimate of
fair value.
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Securities
BB&T classifies investment securities as held to maturity, available for
sale or trading. Debt securities acquired with both the intent and ability to
be held to maturity are classified as held to maturity and reported at
amortized cost. Gains or losses realized from the sale of securities held to
maturity, if any, are determined by specific identification and are included
in noninterest income.
Debt securities, which may be sold to meet liquidity needs arising from
unanticipated deposit and loan fluctuations, changes in regulatory capital and
investment requirements, or unforeseen changes in market conditions, including
interest rates, market values or inflation rates, are classified as available
for sale. In addition, all investments in equity securities are classified as
available for sale. Securities available for sale are reported at estimated
fair value, with unrealized gains and losses reported as a separate component
of shareholders' equity, net of deferred income taxes. Gains or losses
realized from the sale of securities available for sale are determined by
specific identification and are included in noninterest income.
Trading account securities are primarily held by Scott & Stringfellow,
BB&T's investment banking and full-service brokerage subsidiary. Trading
account securities are reported on the Consolidated Balance Sheets at fair
value. Market adjustments, fees, and gains or losses earned on trading account
securities are included in noninterest income. Interest income on trading
account securities is included in other interest income. Gains or losses
realized from the sale of trading securities are determined by specific
identification.
During 1999 and 1998, BB&T transferred securities with amortized costs of
$231.5 million and $114.4 million, respectively, from the held-to-maturity
portfolio to the available-for-sale portfolio. These securities were
previously classified as held-to-maturity by entities that merged into BB&T
under the pooling-of-interests method of accounting. BB&T transferred these
amounts pursuant to the provisions of Statement of Financial Accounting
Standards ("SFAS") No. 115, "Accounting for Certain Investments in Debt and
Equity Securities," to conform the combined investment portfolios to BB&T's
existing policies.
Loans Held for Sale
Loans held for sale are reported at the lower of cost or market value on an
aggregate loan basis. Gains or losses realized on the sales of loans are
recognized at the time of sale and are determined by the difference between
the net sales proceeds and the carrying value of the loans sold, adjusted for
any servicing asset or liability.
Loans and Leases
Loans and leases that management has the intent and ability to hold for the
foreseeable future are reported at their outstanding principal balances
adjusted for any deferred fees or costs and unamortized premiums or discounts.
The net amount of nonrefundable loan origination fees, commitment fees and
certain direct costs associated with the lending process are deferred and
amortized to interest income over the contractual lives of the loans using
methods which approximate level-yield, with adjustments for prepayments as
they occur. If the loan commitment expires unexercised, the income is
recognized upon expiration of the commitment. Discounts and premiums are
amortized to interest income over the estimated life of the loans using
methods that approximate level-yield.
Commercial loans and substantially all installment loans accrue interest on
the unpaid balance of the loans. Lease receivables consist primarily of direct
financing leases on rolling stock, equipment and real property. Lease
receivables are stated at the total amount of lease payments receivable plus
guaranteed residual values, less unearned income. Recognition of income over
the lives of the lease contracts approximates the level-yield method.
As of January 1, 1995, BB&T adopted SFAS No. 114, "Accounting by Creditors
for Impairment of a Loan," which was amended by SFAS No. 118, "Accounting by
Creditors for Impairment of a Loan-Income
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Recognition and Disclosures." SFAS No. 114, as amended, requires that impaired
loans be measured based on the present value of expected future cash flows
discounted at the loan's effective interest rate, or as a practical expedient,
at the loan's observable market price or the fair value of the collateral if
the loan is collateral-dependent. A loan is impaired when, based on current
information and events, it is probable that BB&T will be unable to collect all
amounts due according to the contractual terms of the loan agreement. When the
fair value of the impaired loan is less than the recorded investment in the
loan, the impairment is recorded through a valuation allowance.
It is BB&T's policy to classify and disclose all commercial loans greater
than $250,000 that are on nonaccrual status as impaired loans. Substantially
all other loans made by BB&T are excluded from the scope of SFAS No. 114 as
they are comprised of large groups of smaller balance homogeneous loans
(residential mortgage and consumer installment) that are collectively
evaluated for impairment.
Allowance for Loan and Lease Losses
The allowance for loan and lease losses is the estimated amount considered
adequate to cover credit losses inherent in the outstanding loan and lease
portfolio at the balance sheet date. The allowance is established through the
provision for loan and lease losses, which is reflected in the Consolidated
Statements of Income.
The allowance is composed of general reserves, specific reserves and an
unallocated reserve. General reserves for commercial loans are determined by
applying loss percentages to the portfolio based on management's evaluation
and "risk grading" of the commercial loan portfolio. General reserves are
provided for noncommercial loan categories based on a three-year weighted
average of actual loss experience, which is applied to the total outstanding
loan balance of each loan category. Specific reserves are provided on all
commercial loans that are classified in the Special Mention, Substandard or
Doubtful risk grades. The specific reserves are determined on a loan-by-loan
basis based on management's evaluation of BB&T's exposure for each credit,
given the current payment status of the loan and the value of any underlying
collateral. Commercial loans for which a specific reserve is provided are
excluded from the calculations of general reserves. The allowance calculation
also incorporates specific reserves based on the results of measuring impaired
loans as required by SFAS No. 114, as described above.
The unallocated reserve consists of an amount deemed appropriate to cover
the elements of imprecision and estimation risk inherent in the general and
specific reserves and an amount determined based on management's evaluation of
various conditions that are not directly measured by any other component of
the allowance. This evaluation includes general economic and business
conditions affecting key lending areas, credit quality trends, collateral
values, loan volumes and concentrations, seasoning of the loan portfolio, the
findings of BB&T's internal credit examiners and results from external bank
regulatory examinations.
While management uses the best information available to establish the
allowance for loan and lease losses, future adjustments to the allowance may
be necessary if economic conditions differ substantially from the assumptions
used in making the valuations or, if required by regulators, based upon
information available to them at the time of their examinations. Such
adjustments to original estimates, as necessary, are made in the period in
which these factors and other relevant considerations indicate that loss
levels may vary from previous estimates.
Nonperforming Assets
Nonperforming assets include loans and leases on which interest is not being
accrued and foreclosed property. Foreclosed property consists of real estate
and other assets acquired through customers' loan defaults. Commercial and
unsecured consumer loans and leases are generally placed on nonaccrual status
when concern exists that principal or interest is not fully collectible, or
when any portion of principal or interest becomes 90 days past due, whichever
occurs first. Mortgage loans and most other consumer loans past due 90 days or
more may remain on accrual status if management determines that concern over
the collectibility of principal and interest is not significant. When loans
are placed on nonaccrual status, interest receivable is reversed against
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<PAGE>
interest income in the current period. Interest payments received thereafter
are applied as a reduction to the remaining principal balance as long as
concern exists as to the ultimate collection of the principal. Loans and
leases are removed from nonaccrual status when they become current as to both
principal and interest and when concern no longer exists as to the
collectibility of principal or interest.
Assets acquired as a result of foreclosure are carried at the lower of cost
or fair value less estimated selling costs. Cost is determined based on the
sum of unpaid principal, accrued but unpaid interest and acquisition costs
associated with the loan. Any excess of unpaid principal over fair value at
the time of foreclosure is charged to the allowance for loan and lease losses.
Generally, such properties are appraised annually and the carrying value, if
greater than the fair value, less selling costs, is adjusted with a charge to
income. Routine maintenance costs, declines in market value and net losses on
disposal are included in other noninterest expense.
Premises and Equipment
Premises, equipment, capital leases and leasehold improvements are stated at
cost less accumulated depreciation or amortization. Depreciation is computed
principally using the straight-line method over the estimated useful lives of
the related assets. Leasehold improvements are amortized on a straight-line
basis over the lesser of the lease terms or the estimated useful lives of the
improvements. Capitalized leases are amortized by the same methods as premises
and equipment over the estimated useful lives of the leased asset or the lease
term, whichever is less. Obligations under capital leases are amortized using
the interest method to allocate payments between principal reduction and
interest expense.
Income Taxes
The provision for income taxes is based upon income for financial statement
purposes, adjusted for nontaxable income and nondeductible expenses. Deferred
income taxes have been provided when different accounting methods have been
used in determining income for income tax purposes and for financial reporting
purposes. Deferred tax assets and liabilities are recognized based on future
tax consequences of the differences arising from their carrying values and
respective tax bases. In the event of changes in the tax laws, deferred tax
assets and liabilities are adjusted in the period of the enactment of those
changes, with effects included in the income tax provision. BB&T and its
subsidiaries file a consolidated Federal income tax return. Each subsidiary
pays its proportional share of Federal income taxes to BB&T based on its
taxable income. Institutions acquired during the current fiscal year file
separate Federal income tax returns for the periods prior to consummation of
the acquisitions.
Derivatives and Off-Balance Sheet Instruments
BB&T utilizes a variety of derivative financial instruments to manage
various financial risks. These instruments include financial forward and
futures contracts, options written and purchased, interest rate caps and
floors and interest rate swaps. Management accounts for these financial
instruments as hedges when the following conditions are met: (1) the specific
assets, liabilities, firm commitments or anticipated transactions (or an
identifiable group of essentially similar items) to be hedged expose BB&T to
interest rate risk or price risk; (2) the financial instrument reduces that
exposure; (3) the financial instrument is designated as a hedge at inception;
and (4) at the inception of the hedge and throughout the hedge period, there
is a high correlation of changes in the fair value or the net interest income
associated with the financial instrument and the hedged items.
The net interest payable or receivable on interest rate swaps, caps and
floors that are designated as hedges is accrued and recognized as an
adjustment to the interest income or expense of the related asset or
liability. For interest rate forwards, futures and options qualifying as a
hedge, gains and losses are deferred and are recognized in income as an
adjustment of yield. Gains and losses from early terminations of derivatives
are deferred and amortized as yield adjustments over the shorter of the
remaining term of the hedged asset or liability or the remaining term of the
derivative instrument. Upon disposition or settlement of the asset or
liability being hedged, deferral accounting is discontinued and any gains or
losses are recognized in income. Derivative financial instruments that fail to
qualify as a hedge are carried at fair value with gains and losses recognized
in current earnings.
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<PAGE>
BB&T utilizes written covered over-the-counter call options on specific
securities in the available-for-sale securities portfolio in order to enhance
returns. Fees received are deferred and recognized in noninterest income upon
exercise or expiration. Written options are carried at estimated fair value.
Unrealized and realized gains and losses on written call options are included
in the Consolidated Statements of Income as securities gains and losses.
BB&T also utilizes over-the-counter purchased put options and net purchased
put options (combination of purchased put option and written call option) in
its mortgage banking activities. These options are used to hedge the mortgage
loan inventory and applications and mortgage loans in process against
increasing interest rates. Written call options are used in tandem with
purchased put options to create a net purchased put option that reduces the
cost of the hedge. Net unrealized gains and losses on purchased put options
and net purchased put options are included with loans held for sale at the
lower of cost or market on an aggregate basis. Realized gains and losses on
purchased put options and net purchased put options are included in mortgage
banking income.
Per Share Data
Effective December 31, 1997, BB&T adopted the provisions of SFAS No. 128,
"Earnings Per Share." This statement established standards for computing and
presenting earnings per share ("EPS") and simplifies the standards for
computation previously found in Accounting Principles Board ("APB") Opinion
No. 15, "Earnings Per Share," making them more comparable to international EPS
standards. It replaces the presentation of primary EPS with a presentation of
basic EPS and requires dual presentation of basic and diluted EPS (which
replaces the former fully diluted EPS) for all entities with complex capital
structures. The EPS information reported herein reflects the implementation of
SFAS No. 128. Prior periods have been restated to include the provisions of
the statement.
Basic net income per common share has been computed by dividing net income
applicable to common shares by the weighted average number of shares of common
stock outstanding during the years presented.
Diluted net income per common share has been computed by dividing net
income, as adjusted for the interest expense related to convertible debt where
applicable, by the weighted average number of shares of common stock, common
stock equivalents and other potentially dilutive securities outstanding.
Restricted stock grants are considered as issued for purposes of calculating
net income per share.
Weighted average numbers of shares were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Basic.................................... 344,598,850 340,318,947 339,171,828
Dilute................................... 350,797,867 347,357,057 345,404,456
</TABLE>
On June 23, 1998, BB&T's Board of Directors approved a 2-for-1 stock split
in the Corporation's common stock effected in the form of a 100% stock
dividend paid August 3, 1998. All per share amounts presented herein and the
weighted average shares reflected above have been restated as appropriate to
retroactively reflect the stock split.
Intangible Assets
BB&T's intangible assets consist of the cost in excess of the fair value of
net assets acquired in transactions accounted for as purchases (goodwill),
premiums paid for acquisitions of deposits (core deposit intangibles) and
other identifiable intangible assets. Such assets are included in other assets
in the Consolidated Balance Sheets, and are being amortized on straight-line
or accelerated bases over periods ranging from 5 to 25 years. At December 31,
1999, BB&T had $632.1 million in unamortized goodwill and $11.9 million in
unamortized core deposit and other intangibles. Negative goodwill is created
when the fair value of the net assets purchased exceeds the purchase price.
Such balances are included in other liabilities in the Consolidated Balance
Sheets and are being amortized over periods ranging from 10 to 15 years. At
December 31, 1999, BB&T had negative goodwill totaling $20.5 million, net of
accumulated amortization.
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Mortgage Servicing Rights
In May 1995, the FASB issued SFAS No. 122, "Accounting for Mortgage
Servicing Rights," which amends SFAS No. 65, "Accounting for Certain Mortgage
Banking Activities." This statement was superseded by SFAS No. 125,
"Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities," which BB&T adopted on January 1, 1997. SFAS
No. 122, as superseded by SFAS No. 125, requires that mortgage banking
enterprises recognize, as separate assets, rights to service mortgage loans
for others, however those servicing rights are acquired. Amounts paid to
acquire the right to service mortgage loans are capitalized and amortized over
the estimated lives of the loans to which they relate. BB&T also capitalizes
servicing rights on loans originated internally as required under the
statement. SFAS No. 122 further requires mortgage banking enterprises to
assess their capitalized mortgage servicing rights for impairment based on the
fair value of those rights. At December 31, 1999, BB&T had capitalized
mortgage servicing rights totaling $185.6 million. Income from mortgage
servicing fees is reflected as mortgage banking income on the Consolidated
Statements of Income.
Changes in Accounting Principles and Effects of New Accounting Pronouncements
In June of 1996, the FASB issued SFAS No. 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities," which
provides accounting and reporting standards for such transactions based on
consistent application of a financial components approach. This approach
recognizes the financial and servicing assets an entity controls and the
liabilities it has incurred, as well as derecognizes financial assets when
control has been surrendered and liabilities when they are extinguished. The
statement requires that liabilities and derivatives incurred or obtained by
transferors as part of a transfer of financial assets be initially measured at
fair value, if practicable. It also requires that servicing assets and other
retained interests in the transferred assets be measured by allocating the
previous carrying amount between the assets sold, if any, and retained
interests, if any, based on their relative fair values at the date of
transfer. In December 1996, the FASB issued SFAS No. 127, "Deferral of the
Effective Date of Certain Provisions of FASB Statement No. 125." This
statement allows the implementation of certain provisions of SFAS No. 125 to
be deferred for one year. BB&T adopted SFAS No. 125, as amended by SFAS No.
127, effective January 1, 1997. The adoption of these statements did not have
a material impact on BB&T's consolidated financial position or consolidated
results of operations.
In February of 1997, the FASB issued SFAS No. 128, "Earnings Per Share," as
discussed above. The statement was effective for financial statements issued
for periods ending after December 15, 1997, including interim periods, and
requires restatement of all prior periods presented. Accordingly, BB&T adopted
the provisions of the statement effective December 31, 1997, including
retroactive restatement of prior periods. The implementation of the statement
did not have a material impact on BB&T's consolidated financial position or
consolidated results of operations.
In February of 1997, the FASB issued SFAS No. 129, "Disclosure of
Information about Capital Structure," which establishes standards for
disclosing information about an entity's capital structure by continuing and
amending existing standards. The statement was effective for financial
statements for periods ending after December 15, 1997. Management determined
that BB&T was and is in compliance with the disclosure requirements of SFAS
No. 129, and, therefore, the implementation of the statement did not affect
the capital structure disclosures made by BB&T.
In June of 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income," which establishes standards for reporting and displaying
comprehensive income (revenues, expenses, gains and losses) in a full set of
general purpose financial statements. Comprehensive income is the
nonshareholder-related change in equity (net assets) of a company during a
period from transactions and other events. SFAS No. 130 is effective for
fiscal years beginning after December 15, 1997, including interim periods, and
requires restatement of all prior periods presented. BB&T adopted the
provisions of the statement effective January 1, 1998, including retroactive
application to prior periods. The standard does not address issues of
recognition or measurement of
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<PAGE>
comprehensive income; therefore, the implementation of the statement did not
have a material impact on BB&T's consolidated financial position or
consolidated results of operations.
In June of 1997, the FASB issued SFAS No. 131, "Disclosures about Segments
of an Enterprise and Related Information," which establishes standards for the
way that business enterprises report information about operating segments in
annual financial statements and requires that those enterprises report
selected information about operating segments in interim financial reports. It
also establishes standards for related disclosures about products and
services, geographic areas and major customers. BB&T adopted the provisions of
the statement effective December 31, 1998. The standard does not address
issues of recognition or measurement and, therefore, the implementation of the
statement did not have an impact on the consolidated financial position or
consolidated results of operations of BB&T. See Note S. in the "Notes to
Consolidated Financial Statements" for disclosures related to the
implementation of this statement.
In March of 1998, the FASB issued SFAS No. 132, "Employers' Disclosures
about Pensions and Other Postretirement Benefits," which revises the
disclosure requirements for pensions and other postretirement benefit plans.
BB&T adopted the provisions of this statement effective December 31, 1998,
including restatement of all prior periods presented. The statement does not
address issues of recognition or measurement and, therefore, the
implementation of the statement did not have an impact on BB&T's consolidated
financial position or consolidated results of operations. See Note L. in the
"Notes to Consolidated Financial Statements" for disclosures related to the
implementation of this statement.
During the first quarter of 1998, the American Institute of Certified Public
Accountants issued Statement of Position ("SOP") No. 98-1, "Accounting for
Costs of Computer Software Developed or Obtained for Internal Use." SOP 98-1
requires capitalization of computer software costs that meet certain criteria.
BB&T adopted the provisions of this statement effective January 1, 1999. This
implementation of the SOP did not have a material effect on BB&T's
consolidated financial position or consolidated results of operations.
In June 1998, the FASB issued 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 the 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
delays the original effective date of SFAS No. 133 until fiscal years
beginning after June 15, 2000. Management has not yet quantified the impact of
adopting SFAS No. 133 and has not determined the timing of or method of
adoption of the statement. However, management does not anticipate that the
implementation of the statement will have a material effect on BB&T's
consolidated financial position or consolidated results of operations.
During the second quarter of 1998, the American Institute of Certified
Public Accountants issued SOP 98-5, "Accounting for Start-up Costs." SOP 98-5
provides guidance on the financial reporting of start-up costs and
organization costs and requires start-up costs to be expensed as incurred.
BB&T adopted the provisions of the SOP effective January 1, 1999. The adoption
of the statement did not have a material impact on BB&T's consolidated
financial position or consolidated results of operations.
During October 1998, the FASB issued 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." BB&T adopted the
provisions of the statement effective January 1, 1999. The implementation of
the statement did not have a material impact on BB&T's consolidated financial
position or consolidated results of operations.
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<PAGE>
Supplemental Disclosures of Cash Flow Information
As referenced in the Consolidated Statements of Cash Flows, BB&T acquired
assets and assumed liabilities in transactions accounted for under the
purchase method of accounting. The fair values of these assets acquired and
liabilities assumed, at acquisition, were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
--------- --------- ---------
(Dollars in thousands)
<S> <C> <C> <C>
Fair Value of Net Assets acquired......... $ 101,722 $ 116,701 $ 138,029
Purchase Price............................ (288,984) (310,618) (287,031)
--------- --------- ---------
Excess of Purchase Price over Net Assets
acquired................................. $(187,262) $(193,917) $(149,002)
--------- --------- ---------
</TABLE>
Income and Expense Recognition
Items of income and expense are recognized using the accrual basis of
accounting, except for some immaterial amounts that are recognized when
received or paid.
NOTE B. Acquisitions and Mergers
Purchase Transactions
On March 1, 1997, BB&T completed its acquisition of Fidelity Financial
Bankshares Corporation ("Fidelity") of Richmond, Virginia, in a transaction
accounted for as a purchase. BB&T issued 3.2 million shares for all of the
shares of Fidelity's common stock outstanding. In conjunction with the
acquisition, BB&T recorded $37.9 million in goodwill, which is being amortized
using the straight-line method over 15 years.
On March 31, 1997, First Citizens Corporation ("First Citizens"), which
merged into BB&T on July 9, 1999, acquired Tara Bankshares Corporation
("Tara"). To consummate the acquisition, First Citizens issued common stock
that was later converted to approximately 239,000 shares of common stock, and
paid $5.1 million in cash. As a result of the acquisition, goodwill totaling
$2.2 million was recorded and is being amortized using the straight-line
method over 20 years.
On May 20, 1997, BB&T purchased Phillips Factors Corporation ("Phillips")
and its subsidiaries, Phillips Financial Corporation and Phillips Acceptance
Corporation, all of High Point, North Carolina. Phillips purchases and manages
receivables in the temporary staffing industry nationwide. It also provides
payroll processing services to that industry. Phillips also buys and manages
account receivables primarily in the furniture, textiles and home furnishings-
related industries. In conjunction with the acquisition, BB&T recorded $11.1
million of goodwill, which is being amortized using the straight-line method
over 15 years.
On July 31, 1997, BB&T completed its acquisition of Refloat, Inc. of Mount
Airy, North Carolina, and its principal subsidiary, Sheffield Financial Corp.
(collectively, "Refloat"), a finance company that specializes in loans to
small commercial lawn care businesses across the country. The acquisition,
which was completed through the issuance of 750,000 shares of common stock,
was accounted for as a purchase. BB&T recorded $3.0 million of goodwill, which
is being amortized using the straight-line method over 15 years, in
conjunction with this transaction.
On October 1, 1997, BB&T completed its acquisition of Craigie Incorporated
("Craigie"), an investment banking firm located in Richmond, Virginia. Craigie
specializes in the origination, trading and distribution of fixed-income
securities and equity products in both the public and private capital markets.
Craigie also has a public finance department that provides investment banking
services, financial advisory services and municipal bond financing to a
variety of regional tax-exempt issuers. The acquisition, which was accounted
for as a purchase, was accomplished through the issuance of approximately
926,000 shares of BB&T's common stock. In conjunction with the acquisition,
BB&T recorded $6.8 million of goodwill, which is being amortized using the
straight-line method over a period of 25 years.
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<PAGE>
On December 1, 1997, BB&T completed its acquisition of Virginia First
Financial Corporation of Petersburg, Virginia ("Virginia First"), a financial
institution with $822.9 million in assets at the time the merger was
consummated. The merger, which was accounted for under the purchase method of
accounting, was effected through the issuance of 3.8 million shares of BB&T's
common stock and the payment of $44.8 million. In conjunction with the
acquisition, BB&T recorded $89.5 million in goodwill, which is being amortized
using the straight-line method over a period of 15 years.
On February 11, 1998, Mason-Dixon Bancshares, Inc. ("Mason-Dixon"), which
merged into BB&T on July 14, 1999, acquired substantially all of the assets of
Rose Shanis Companies ("Rose Shanis"), a consumer finance company located in
Baltimore, Maryland. Mason-Dixon paid cash totaling $15.4 million to acquire
Rose Shanis. In conjunction with the merger, goodwill totaling $5.5 million
was recorded and is being amortized using the straight-line method over 10
years.
On February 28, 1998, MainStreet Financial Corporation ("MainStreet"), which
merged into BB&T on March 5, 1999, completed the acquisition of Tysons
Financial Corporation ("Tysons") of McLean, Virginia. Tysons, with $102.1
million in assets, was acquired through the issuance of MainStreet common
stock, which was later converted to 721,187 shares of BB&T common stock. In
conjunction with the acquisition, $9.3 million in goodwill was recorded and is
being amortized using the straight-line method over a period of 15 years.
On June 18, 1998, BB&T completed the acquisition of Dealers' Credit Inc.
("DCI"), of Menomonee Falls, Wisconsin. DCI specializes in extending credit to
commercial, agricultural, municipal and consumer users for the purchase of
lawn care equipment. In conjunction with the transaction, BB&T recorded $9.5
million of goodwill, which is being amortized using the straight-line method
over 15 years.
On June 30, 1998, BB&T completed its acquisition of W.E. Stanley & Company
Inc., and its subsidiaries, (collectively, "Stanley"), located in Greensboro,
North Carolina. Stanley, the largest actuarial, consulting and administration
firm headquartered in the Carolinas, primarily manages retirement plans for
companies and has more than 700 clients located mostly in the Carolinas,
Virginia, Maryland and Tennessee. In conjunction with the acquisition, BB&T
recorded $10.3 million of goodwill, which is being amortized using the
straight-line method over 15 years.
On September 30, 1998, BB&T completed its acquisition of Maryland Federal
Bancorp, Inc. ("Maryland Federal") located in Hyattsville, Maryland. In
conjunction with the merger, BB&T issued 8.7 million shares of BB&T common
stock in exchange for all of the outstanding shares of Maryland Federal common
stock. BB&T recorded $158.8 million of goodwill, which is being amortized
using the straight-line method over a period of 15 years.
On January 5, 1999, Mason-Dixon, which merged into BB&T on July 14, 1999,
completed its acquisition of Sterling Bancorp, a privately held commercial
bank headquartered in Baltimore, Maryland. Mason-Dixon paid $10.3 million in
cash to acquire Sterling Bancorp. In conjunction with the acquisition, $3.7
million in goodwill was recorded and is being amortized using the straight-
line method over 15 years.
On March 26, 1999, BB&T completed its acquisition of Scott & Stringfellow
Financial, Inc. ("Scott & Stringfellow"), an investment banking firm based in
Richmond, Virginia. The transaction was accounted for as a purchase. In
conjunction with the acquisition, BB&T issued 3.6 million shares of BB&T
common stock in exchange for all of the outstanding shares of Scott &
Stringfellow common stock. BB&T recorded goodwill totaling $72.8 million,
which is being amortized using the straight-line method over a period of 15
years.
On August 27, 1999, BB&T completed its acquisition of Matewan BancShares,
Inc. ("Matewan") of Williamson, West Virginia. In conjunction with the merger,
BB&T issued 3.2 million shares of common stock in exchange for all of the
outstanding shares of Matewan common and preferred stock. As a result of the
acquisition, BB&T recorded $92.8 million of goodwill, which is being amortized
using the straight-line method over a period of 15 years.
19
<PAGE>
On November 5, 1999, Premier Bancshares, Inc., ("Premier") of Atlanta,
Georgia, which merged into BB&T on January 13, 2000, completed the acquisition
of Farmers & Merchants Bank ("Farmers and Merchants") of Summerville, Georgia.
The transaction was accounted for as a purchase. To complete the acquisition,
Premier issued common stock, which later converted into approximately 1.5
million shares of BB&T common stock, in exchange for all of Farmers and
Merchants.
The above-discussed acquisitions were accounted for under the purchase
method of accounting, and, therefore, the financial information contained
herein includes data relevant to the acquirees since the date of acquisition.
The following unaudited presentation reflects key line items on a Pro Forma
basis as if these purchase transactions had been acquired as of the beginning
of the years presented:
<TABLE>
<CAPTION>
For the Years Ended
--------------------
1999 1998
--------- ----------
(Dollars in
thousands, except
per share data)
<S> <C> <C>
Total revenues.......................................... 2,502,154 $2,285,050
========= ==========
Net income.............................................. 606,507 $ 561,643
========= ==========
Basic EPS............................................... 1.76 $ 1.63
========= ==========
Diluted EPS............................................. 1.73 $ 1.60
========= ==========
</TABLE>
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.
Pooling of Interests Transactions
On July 1, 1997, BB&T completed its merger with United Carolina Bancshares
Corporation ("UCB") of Whiteville, North Carolina, in a stock transaction
accounted for as a pooling of interests. To consummate the merger, BB&T issued
55.4 million shares of common stock in exchange for all of the shares of UCB
common stock outstanding.
On December 1, 1997, MainStreet, which merged into BB&T on March 5, 1999,
completed its merger with Commerce Bank Corporation ("Commerce") in a
transaction accounted for as a pooling of interests. In conjunction with the
merger, MainStreet issued common stock that was later converted into
approximately 676,000 shares of BB&T common stock in exchange for all of the
outstanding common stock of Commerce.
On March 1, 1998, BB&T completed its merger with Life Bancorp, Inc. ("Life")
of Norfolk, Virginia. The transaction was accounted for as a pooling of
interests. In conjunction with the merger, BB&T issued 11.6 million shares of
common stock in exchange for all of the shares of Life common stock
outstanding.
On March 10, 1998, MainStreet, which merged into BB&T on March 5, 1999,
completed its merger with Regency Financial Shares, Incorporated ("Regency")
of Richmond, Virginia, in a transaction accounted for as a pooling of
interests. In conjunction with the merger, MainStreet issued common stock that
was later converted into approximately 801,000 shares of BB&T common stock, in
exchange for all of the shares of Regency.
On July 1, 1998, BB&T completed its merger with Franklin Bancorporation Inc.
("Franklin") of Washington, D.C. in a stock transaction accounted for under
the pooling-of-interests method of accounting. In conjunction with the merger,
BB&T issued 4.9 million shares of common stock in exchange for all of the
shares of Franklin common stock outstanding.
20
<PAGE>
On July 7, 1998, MainStreet, which merged into BB&T on March 5, 1999,
completed a merger with Ballston Bancorp, Inc. ("Ballston") of Washington,
D.C., in a transaction accounted for as a pooling of interests. In conjunction
with the merger, MainStreet issued common stock, which was later converted
into approximately 824,000 shares of BB&T common stock, in exchange for all of
the outstanding common stock of Ballston.
On March 5, 1999, BB&T completed a merger with MainStreet, based in
Martinsville, Virginia. The transaction was accounted for as a pooling of
interests. BB&T issued approximately 16.8 million shares of BB&T common stock
in exchange for all of the outstanding shares of MainStreet.
On April 1, 1999, First Liberty Financial Corporation ("First Liberty"),
which merged into BB&T on November 10, 1999, completed a merger with Vidalia
Bankshares, Inc. ("Vidalia"), based in Vidalia, Georgia. The transaction was
accounted for as a pooling of interests. First Liberty issued common stock,
which was later converted into approximately 568,000 shares of BB&T common
stock, in exchange for all of the outstanding shares of Vidalia.
On July 9, 1999, BB&T completed its merger with First Citizens, of Newnan,
Georgia. The transaction was accounted for as a pooling of interests. BB&T
issued approximately 3.2 million shares of common stock in exchange for all of
the outstanding shares of First Citizens.
On July 14, 1999, BB&T completed its merger with Mason-Dixon of Westminster,
Maryland. The transaction was accounted for as a pooling of interests. BB&T
issued approximately 6.6 million shares of BB&T common stock in exchange for
all of the outstanding shares of Mason-Dixon.
On August 31, 1999, Premier, which merged into BB&T on January 13, 2000,
completed a merger with North Fulton Bancshares, Inc. ("North Fulton") of
Roswell, Georgia. The transaction was accounted for as a pooling of interests.
In conjunction with the merger, Premier issued common stock, which later
converted into approximately 943,000 shares of BB&T common stock, in exchange
for all of the common stock of North Fulton.
On October 27, 1999, Premier, which merged into BB&T on January 13, 2000,
completed a merger with Bank Atlanta, located in Decatur, Georgia. The
transaction was accounted for as a pooling of interests. To consummate the
transaction, Premier issued common stock, which later converted into
approximately 527,000 shares of BB&T common stock, in exchange for all of the
common stock of Bank Atlanta.
On November 10, 1999, BB&T completed its merger with First Liberty of Macon,
Georgia. In conjunction with the transaction, which was accounted for as a
pooling of interests, BB&T issued 12.4 million shares of BB&T common stock in
exchange for all of the outstanding shares of First Liberty common stock.
On January 13, 2000, BB&T completed its merger with Premier. In connection
with the merger, which was accounted for as a pooling of interests, BB&T
issued 16.8 million shares of BB&T common stock in exchange for all of the
outstanding shares of Premier common stock.
21
<PAGE>
The following presentation reflects key line items on an historical basis
for BB&T and Premier on a pro forma combined basis assuming the merger was
effective as of and for the periods presented.
<TABLE>
<CAPTION>
Historical Basis
---------------------- BB&T
BB&T Premier restated
----------- ---------- -----------
(Dollars in thousands, except per
share data)
<S> <C> <C> <C>
As of/For the Year Ended December 31, 1999
Net interest income......................... $ 1,581,715 $ 76,367 $ 1,658,082
Net income.................................. 612,847 1,513 614,360
Net earnings per share
Basic..................................... 1.86 .05 1.78
Diluted................................... 1.83 .05 1.75
Assets...................................... 43,480,996 1,998,060 45,479,056
Deposits.................................... 27,251,142 1,540,432 28,791,574
Shareholders' equity........................ 3,199,159 197,252 3,396,411
As of/For the Year Ended December 31, 1998
Net interest income......................... $ 1,426,653 $ 70,834 $ 1,497,487
Net income.................................. 543,211 23,737 566,948
Net earnings per share
Basic..................................... 1.67 .84 1.67
Diluted................................... 1.63 .81 1.63
Assets...................................... 39,470,135 1,773,614 41,243,749
Deposits.................................... 26,449,632 1,393,354 27,842,986
Shareholders' equity........................ 3,171,145 155,457 3,326,602
</TABLE>
Pending Mergers
On November 17, 1999, BB&T announced plans to merge with Hardwick Holding
Company ("Hardwick") of Dalton, Georgia. For each share of Hardwick common
stock held, Hardwick's shareholders will receive between .9010 and .9320
shares of BB&T common stock depending on the average closing price of BB&T
common stock over a five-day pricing period ending shortly before the
effective time of the merger. The transaction is expected to be completed
during the second quarter of 2000 and accounted for as a pooling of interests.
On December 15, 1999, BB&T announced plans to merge with First Banking
Company of Southeast Georgia ("First Banking Company") of Statesboro, Georgia.
First Banking Company's shareholders will receive .74 shares of BB&T common
stock for each share of First Banking Company common stock held. The
transaction is expected to be completed during the second quarter of 2000 and
accounted for as a pooling of interests.
On February 7, 2000, BB&T announced plans to merge with One Valley Bancorp,
Inc. ("One Valley") of Charleston, West Virginia. The acquisition, which is
expected to be completed in the third quarter of 2000, is expected to be
accounted for as a pooling of interests. One Valley, which has $6.6 billion in
assets, operates 123 branches in West Virginia and Virginia. Shareholders of
One Valley will receive 1.28 shares of BB&T common stock in exchange for each
share of One Valley common stock held.
22
<PAGE>
NOTE C. Securities
The amortized costs and approximate fair values of securities held to maturity
and available for sale were as follows:
<TABLE>
<CAPTION>
December 31, 1999 December 31, 1998
---------------------------------------- ---------------------------------------
Gross Unrealized Gross Unrealized
Amortized ---------------- Estimated Amortized ---------------- Estimated
Cost Gains Losses Fair Value Cost Gains Losses Fair Value
----------- ------- -------- ----------- ---------- -------- ------- -----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Securities held to
maturity:
U.S. Treasury,
government and agency
obligations........... $ 23,117 $ 1 $ 6 $ 23,112 $ 59,656 $ 345 $ 2 $ 59,999
Mortgage-backed
securities............ -- -- -- -- 71,663 953 351 72,265
States and political
subdivisions.......... 74,005 974 21 74,958 235,233 7,232 332 242,133
Other securities....... -- -- -- -- 6,920 215 -- 7,135
----------- ------- -------- ----------- ---------- -------- ------- -----------
Total securities held
to maturity........... 97,122 975 27 98,070 373,472 8,745 685 381,532
----------- ------- -------- ----------- ---------- -------- ------- -----------
Securities available for
sale:
U.S. Treasury,
government and agency
obligations........... 4,823,699 1,548 142,431 4,682,816 3,889,739 57,750 2,961 3,944,528
Mortgage-backed
securities............ 3,997,383 3,970 114,707 3,886,646 4,214,175 42,146 12,978 4,243,343
Equity and other
securities............ 1,809,842 120 176,247 1,633,715 1,264,984 22,081 3,698 1,283,367
States and political
subdivisions.......... 589,836 8,467 30,233 568,070 184,390 3,951 246 188,095
----------- ------- -------- ----------- ---------- -------- ------- -----------
Total securities
available for sale.... 11,220,760 14,105 463,618 10,771,247 9,553,288 125,928 19,883 9,659,333
----------- ------- -------- ----------- ---------- -------- ------- -----------
Total securities....... $11,317,882 $15,080 $463,645 $10,869,317 $9,926,760 $134,673 $20,568 $10,040,865
=========== ======= ======== =========== ========== ======== ======= ===========
</TABLE>
Securities with a book value of approximately $5.6 billion and $5.3 billion
at December 31, 1999 and 1998, respectively, were pledged to secure municipal
deposits, securities sold under agreements to repurchase, Federal Reserve
discount window borrowings and for other purposes as required by law.
At December 31, 1999 and 1998, there were no concentrations of investments
in obligations of states and political subdivisions that were payable from the
same taxing authority or secured by the same revenue source that exceeded ten
percent of shareholders' equity. Trading securities totaling $93.2 million are
excluded from the accompanying tables.
Proceeds from sales of securities during 1999, 1998 and 1997 were $774.1
million, $1.6 billion and $1.9 billion, respectively. Gross gains of $3.6
million, $14.8 million and $8.7 million and gross losses of $8.8 million, $6.0
million and $3.9 million were realized on those sales in 1999, 1998 and 1997,
respectively.
The amortized cost and estimated fair value of the securities portfolio at
December 31, 1999, by contractual maturity, are shown in the accompanying
table. The expected life of mortgage-backed securities will differ from
contractual maturities because borrowers may have the right to call or prepay
the underlying mortgage loans with or without call or prepayment penalties.
For purposes of the maturity table, mortgage-backed securities, which are not
due at a single maturity date, have been allocated over maturity groupings
based on the weighted average contractual maturities of underlying collateral.
<TABLE>
<CAPTION>
December 31, 1999
------------------------------------------
Held to Maturity Available for Sale
-------------------- ---------------------
Amortized Estimated Amortized Estimated
Cost Fair Value Cost Fair Value
--------- ---------- ---------- ----------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Debt Securities:
Due in one year or less........... $45,906 $45,994 $1,007,213 $1,005,736
Due after one year through five
years............................ 46,871 47,548 3,008,711 2,934,141
Due after five years through ten
years............................ 2,151 2,194 1,691,354 1,625,441
Due after ten years............... 2,194 2,334 4,255,102 3,947,491
------- ------- ---------- ----------
Total debt securities........... $97,122 $98,070 $9,962,380 $9,512,809
======= ======= ========== ==========
</TABLE>
23
<PAGE>
NOTE D. Loans and Leases
Loans and leases were composed of the following:
<TABLE>
<CAPTION>
December 31,
------------------------
1999 1998
----------- -----------
(Dollars in thousands)
<S> <C> <C>
Loans:
Commercial, financial and
agricultural............... $ 4,808,742 $ 4,465,713
Real estate--construction
and land development....... 3,672,191 2,803,085
Real estate--mortgage....... 16,784,223 15,163,133
Consumer.................... 3,745,626 3,322,275
----------- -----------
Loans held for
investment............... 29,010,782 25,754,206
Leases:....................... 2,605,911 1,620,326
----------- -----------
Total loans and leases.... 31,616,693 27,374,532
Less: unearned income... (1,243,265) (724,750)
----------- -----------
Loans and leases, net of
unearned income........ $30,373,428 $26,649,782
=========== ===========
</TABLE>
The net investment in direct financing leases was $1.5 billion and $986.9
million at December 31, 1999 and 1998, respectively. BB&T had loans held for
sale at December 31, 1999 and 1998 totaling $363.3 million and $1.3 billion,
respectively.
BB&T had $20.8 billion in loans secured by real estate at December 31, 1999.
However, these loans were not concentrated in any specific market or
geographic area other than the Banks' primary markets.
The following table sets forth certain information regarding BB&T's impaired
loans as defined under SFAS No. 114.
<TABLE>
<CAPTION>
December 31,
------------------------
1999 1998
----------- -----------
(Dollars in thousands)
<S> <C> <C>
Total recorded investment--impaired loans........ $ 30,669 $ 45,824
----------- -----------
Total recorded investment with related valuation
allowance....................................... 30,669 44,443
Valuation allowance assigned to impaired loans... (7,627) (9,346)
----------- -----------
Net carrying value--impaired loans............. $ 23,042 $ 35,097
=========== ===========
Average balance of impaired loans................ $ 28,293 $ 52,060
=========== ===========
Cash basis interest income recognized on impaired
loans........................................... $ 506 $ 289
=========== ===========
</TABLE>
The following table provides an analysis of loans made to directors,
executive officers and their interests, which in the aggregate exceeded
$60,000 at any time during 1999. All amounts shown represent loans made by
BB&T's subsidiary banks in the ordinary course of business at the Banks'
normal credit terms, including interest rate and collateralization prevailing
at the time for comparable transactions with other persons.
<TABLE>
<CAPTION>
(Dollars in thousands)
----------------------
<S> <C>
Balance, December 31, 1998............................ $203,596
Additions........................................... 81,581
Reductions.......................................... (83,464)
--------
Balance, December 31, 1999............................ $201,713
========
</TABLE>
24
<PAGE>
NOTE E. Allowance for Loan and Lease Losses
An analysis of the allowance for loan and lease losses is presented in the
following table:
<TABLE>
<CAPTION>
For the Years Ended December 31,
--------------------------------
1999 1998 1997
--------- --------- ----------
(Dollars in thousands)
<S> <C> <C> <C>
Beginning Balance..................... $ 378,531 $ 332,641 $ 290,039
Provision for losses charged to
expense............................ 104,667 103,148 113,679
Allowances of purchased companies... 10,392 21,258 17,439
Loans and leases charged-off........ (112,234) (104,148) (111,130)
Recoveries of previous charge-offs.. 29,527 25,568 22,614
--------- --------- ---------
Net loans and leases charged-off.. (82,707) (78,580) (88,516)
--------- --------- ---------
Reconciliation of fiscal year of
merged companies to calander year.. 305 64 --
--------- --------- ---------
Ending Balance........................ $ 411,188 $ 378,531 $ 332,641
========= ========= =========
</TABLE>
At December 31, 1999, 1998 and 1997, loans not currently accruing interest
totaled $108.7 million, $110.6 million and $120.1 million, respectively. Loans
90 days or more past due and still accruing interest totaled $54.5 million,
$55.0 million and $50.1 million, at December 31, 1999, 1998 and 1997,
respectively. The gross interest income that would have been earned during
1999 if the outstanding nonaccrual loans and leases had been current in
accordance with the original terms and had been outstanding throughout the
period (or since origination, if held for part of the period) was
approximately $10.2 million. Foreclosed property totaled $28.5 million, $34.3
million and $43.5 million at December 31, 1999, 1998 and 1997, respectively.
NOTE F. Premises and Equipment
A summary of premises and equipment is presented in the accompanying table:
<TABLE>
<CAPTION>
December 31,
-------------------
1999 1998
---------- --------
(Dollars in
thousands)
<S> <C> <C>
Land and land improvements.............................. $ 110,401 $100,102
Buildings and building improvements..................... 431,787 410,141
Furniture and equipment................................. 480,435 466,595
Capitalized leases on premises and equipment............ 2,965 4,089
---------- --------
1,025,588 980,927
Less--accumulated depreciation and amortization......... 435,959 421,029
---------- --------
Net premises and equipment............................ $ 589,629 $559,898
========== ========
</TABLE>
Depreciation expense, which is included in occupancy and equipment expense,
was $86.1 million, $75.3 million and $69.0 million in 1999, 1998 and 1997,
respectively.
25
<PAGE>
BB&T has noncancelable leases covering certain premises and equipment. Total
rent expense applicable to operating leases was $53.4 million, $34.4 million
and $51.2 million for 1999, 1998 and 1997, respectively. Future minimum lease
payments for operating and capitalized leases for years subsequent to 1999 are
as follows:
<TABLE>
<CAPTION>
Leases
---------------------
Operating Capitalized
--------- -----------
(Dollars in
thousands)
<S> <C> <C>
Years ended December 31:
2000............................................... $ 31,404 $ 394
2001............................................... 29,425 394
2002............................................... 26,588 395
2003............................................... 23,530 355
2004............................................... 21,632 303
2005 and years later............................... 104,235 2,784
-------- ------
Total minimum lease payments......................... $236,814 4,625
========
Less--amount representing interest................... 2,129
------
Present value of net minimum payments on capitalized
leases (Note I)..................................... $2,496
======
</TABLE>
NOTE G. Loan Servicing
The following is an analysis of capitalized mortgage servicing rights
included in other assets in the Consolidated Balance Sheets:
<TABLE>
<CAPTION>
For the Year
Ended December
31,
------------------
1999 1998
-------- --------
(Dollars in
thousands)
<S> <C> <C>
Balance, January 1,...................................... $115,218 $ 75,471
Amount capitalized..................................... 78,527 85,113
Amount sold............................................ -- (1,118)
Amortization expense................................... (27,628) (26,817)
Change in valuation allowance.......................... 19,489 (17,431)
-------- --------
Balance, December 31,.................................... $185,606 $115,218
======== ========
</TABLE>
Capitalized mortgage servicing rights are being amortized on a disaggregated
loan basis using an accelerated method over the estimated life of the
underlying loans. The servicing rights portfolio is analyzed each quarter to
identify possible impairment using a disaggregated discounted cash flow
methodology that is stratified by predominant risk characteristics. These
characteristics include stratification based on interest rates in intervals of
150 basis points, type of loan and maturity of loan.
Following is an analysis of the aggregate changes in the valuation allowance
for mortgage servicing rights in 1999 and 1998 including the effects of
related hedging instruments:
<TABLE>
<CAPTION>
Valuation
Allowance for
Mortgage
Servicing Rights
-----------------
1999 1998
-------- -------
(Dollars in
thousands)
<S> <C> <C>
Balance, January 1,....................................... $ 21,031 $ 3,600
Additions............................................... 462 17,704
Reductions.............................................. (19,951) (273)
-------- -------
Balance, December 31,..................................... $ 1,542 $21,031
======== =======
</TABLE>
26
<PAGE>
Mortgage loans serviced for others are not included in loans on the
accompanying Consolidated Balance Sheets. The unpaid principal balances of
mortgage loans serviced for others were $13.9 billion and $11.4 billion at
December 31, 1999 and 1998, respectively.
NOTE H. Short-Term Borrowed Funds
Short-term borrowed funds are summarized as follows:
<TABLE>
<CAPTION>
December 31,
---------------------
1999 1998
---------- ----------
(Dollars in
thousands)
<S> <C> <C>
Federal funds purchased............................... $ 287,131 $ 924,307
Term Federal funds purchased.......................... -- 25,000
Securities sold under agreements to repurchase........ 1,910,524 1,705,519
Master notes.......................................... 698,704 675,141
U.S. Treasury tax and loan deposit notes payable...... 1,205,068 184,222
Short-term Federal Home Loan Bank advances............ 373,544 225,579
Short-term bank notes................................. 1,645,000 73,181
Other short-term borrowed funds....................... 960,911 244,827
---------- ----------
Total short-term borrowed funds..................... $7,080,882 $4,057,776
========== ==========
</TABLE>
Federal funds purchased represent unsecured borrowings from other banks and
generally mature daily. Term Federal funds purchased are identical to Federal
funds; however, maturities vary and are greater than one day. Securities sold
under agreements to repurchase are borrowings collateralized by securities of
the U.S. Government or its agencies and have maturities ranging from one to
ninety days. U.S. Treasury tax and loan deposit notes payable are payable upon
demand to the U.S. Treasury. Master notes are unsecured, non-negotiable
obligations of BB&T (variable rate commercial paper). Short-term Federal Home
Loan Bank advances generally mature daily. Short-term bank notes are unsecured
borrowings issued by the banking subsidiaries that generally mature in less
than one year.
NOTE I. Long-Term Debt
Long-term debt is summarized as follows:
<TABLE>
<CAPTION>
December 31,
---------------------
1999 1998
---------- ----------
(Dollars in
thousands)
<S> <C> <C>
Capitalized leases, varying maturities to 2028 with
rates from 8.11% to 12.65%. Balance represents the
unamortized amounts due on leases of various
facilities............................................. $ 2,496 $ 3,462
Medium-term bank notes, unsecured, varying maturities to
2008 with variable rates from 5.279% to 7.48%.......... 969,945 1,389,890
Advances from Federal Home Loan Bank, varying maturities
to 2018 with rates from 1.00% to 8.75%................. 3,562,207 3,059,702
Subordinated Notes, unsecured, dated May 21, 1996, June
3, 1997 and June 30, 1998 (1); maturing May 23, 2003,
June 15, 2007 and June 30, 2025; with interest rates of
7.05%, 7.25% and 6.375%, respectively (2).............. 857,272 859,303
CMO Bonds, secured by investments, dated 1985, callable
July 1, 2001, with an interest rate of 11.25%.......... 8,128 10,558
Corporation-obligated mandatorily redeemable capital
securities, dated June 15, 1997, maturing June 15,
2027, with interest at 10.07%; June 15, 1997, maturing
June 15, 2028, with interest at 8.40%; November 19,
1997, maturing November 19, 2027, with interest at
8.90%; and November 30, 1997, maturing December 31,
2007, with interest at 9.00% (3)....................... 117,987 116,750
Other mortgage indebtedness............................. 2,449 6,135
---------- ----------
Total long-term debt.................................. $5,520,484 $5,445,800
========== ==========
</TABLE>
27
<PAGE>
- --------
(1) The $ 350 million in subordinated debt, issued June 30, 1998, is
mandatorily puttable to BB&T on June 30, 2005, and contains a remarketing
option that allows the debt to be reissued by the holder of the option to
the stated maturity of June 30, 2025.
(2) Subordinated notes qualify under the risk-based capital guidelines as Tier
2 supplementary capital.
(3)Securities qualify under the risk-based capital guidelines as Tier 1
capital.
Excluding the capitalized leases set forth in Note F, future debt maturities
are $1.1 billion, $554.1 million, $75.7 million, $293.4 million and $.5
million for the next five years. The maturities for 2005 and later years total
$3.5 billion.
NOTE J. Shareholders' Equity
The authorized capital stock of BB&T consists of 500,000,000 shares of
common stock, $5 par value, and 5,000,000 shares of preferred stock, $5 par
value. At December 31, 1999, 347,906,156 shares of common stock and no shares
of preferred stock were issued and outstanding.
Stock Option Plans
At December 31, 1999, BB&T had the following stock-based compensation plans:
the 1994 and 1995 Omnibus Stock Incentive Plans ("Omnibus Plans"), the
Incentive Stock Option Plan ("ISOP"), the Non-Qualified Stock Option Plan
("NQSOP") and the Non-Employee Directors' Stock Option Plan ("Directors'
Plan"), which are described below. BB&T accounts for these plans under APB
Opinion No. 25, under which no compensation cost has been recognized. Had
compensation cost for these plans been determined based on the fair value at
the grant dates for awards under those plans granted after December 31, 1994,
consistent with the method described by SFAS No. 123, BB&T's pro forma net
income and pro forma earnings per share would have been as follows:
<TABLE>
<CAPTION>
For the Years Ended
December 31,
--------------------------
1999 1998 1997
-------- -------- --------
(Dollars in thousands,
except per share data)
<S> <C> <C> <C>
Net income applicable to common shares:
As reported.................................... $614,360 $566,948 $426,098
Pro Forma...................................... 596,101 554,227 416,349
Basic EPS:
As reported.................................... 1.78 1.67 1.26
Pro Forma...................................... 1.73 1.63 1.23
Diluted EPS:
As reported.................................... 1.75 1.63 1.23
Pro Forma...................................... 1.70 1.60 1.21
</TABLE>
The SFAS No. 123 method of accounting has not been applied to options
granted prior to January 1, 1995; therefore, the weighted average fair value
of options granted prior to that date has not been calculated. The fair value
of each option grant was estimated on the date of grant using the Black-
Scholes option-pricing model with the following weighted-average assumptions
used for grants in 1999, 1998 and 1997, respectively: dividend yield of 2.5%
in 1999, 2.4% in 1998 and 2.7% in 1997; expected volatility of 25% in 1999,
24% in 1998 and 22% in 1997; risk free interest rates of 5.3%, 5.7% and 6.2%
for 1999, 1998 and 1997, respectively; and expected lives of 6.0 years, 6.3
years and 6.3 years for 1999, 1998 and 1997, respectively.
Because the SFAS No. 123 method of accounting has not been applied to
options granted prior to January 1, 1995, the resulting pro forma compensation
cost may not be representative of that to be expected in future years.
In April, 1994 and February, 1995, the shareholders approved the Omnibus
Plans which cover the award of incentive stock options, non-qualified stock
options, shares of restricted stock, performance shares and stock
28
<PAGE>
appreciation rights. In April 1996, the shareholders approved an amendment to
the 1995 Omnibus Plan that increased the maximum number of shares issuable
under the terms of the plan, after giving effect to the August 3, 1998, 2-for-
1 stock split, to 12,000,000. The provisions of the 1995 Omnibus Plan also
provide for an automatic increase in the authorized number of shares issuable,
equal to 3% of any increase in the Corporation's outstanding common shares.
Including options authorized under these provisions, the maximum number of
shares issuable under the plan was 16,601,000 at December 31, 1999. The
combined shares issuable under both Omnibus Plans, after giving effect to the
2-for-1 stock split and the automatic increase provided by the terms of the
1995 Omnibus Plan, is 24,601,000 at December 31, 1999. The Omnibus Plans are
intended to allow BB&T to recruit and retain employees with ability and
initiative and to associate the employees' interests with those of BB&T and
its shareholders. At December 31, 1999, 9,448,043 qualified stock options at
prices ranging from $4.29 to $51.41 and 3,430,753 non-qualified stock options
at prices ranging from $.005 to $56.98 were outstanding. The stock options
generally vest over 3 years and have a 10-year term.
The ISOP and the NQSOP were established to retain key officers and key
management employees and to offer them the incentive to use their best efforts
on behalf of BB&T. The plans, which expire on December 19, 2000, further
provide for up to 2,202,000 shares of common stock to be reserved for the
granting of options, which have a four year vesting schedule and must be
exercised within ten years from the date granted. Incentive stock options
granted must have an exercise price equal to at least 100% of the fair market
value of common stock on the date granted, and the non-qualified stock options
must have an exercise price equal to at least 85% of the fair market value on
the date granted. At December 31, 1999, options to purchase 142,526 shares of
common stock at prices ranging from $4.75 to $8.375 were outstanding pursuant
to the NQSOP. At December 31,1999, options to purchase 102,546 shares of
common stock at an exercise price of $9.8885 were outstanding pursuant to the
ISOP.
The Directors' Stock Option Plan is intended to provide incentives to non-
employee directors to remain on the Board of Directors and share in the
profitability of BB&T. The plan creates a deferred compensation system for
participating non-employee directors. Each non-employee director may elect to
defer 0%, 50% or 100% of the annual retainer fee for each calendar year and
apply that percentage toward the grant of options to purchase BB&T common
stock. Such elections are required to be in writing and are irrevocable for
each calendar year. The exercise price at which shares of BB&T common stock
may be purchased shall be equal to 75% of the market value of the common stock
as of the date of grant. Options are vested in six months and may be exercised
anytime thereafter until the expiration date, which is 10 years from the date
of grant. The Directors' Plan provides for the reservation of up to 1,800,000
shares of BB&T common stock. At December 31, 1999, options to purchase 814,370
shares of common stock at prices ranging from $6.3578 to $28.8719 were
outstanding pursuant to the Directors' Plan.
BB&T also has options outstanding that were granted by certain acquired
companies. These options, which have not been included in the plans described
above, totaled 166,742 as of December 31, 1999, with option prices ranging
from $1.3334 to $11.8535.
A summary of the status of the Company's stock option plans at December 31,
1999, 1998 and 1997 and changes during the years then ended is presented
below:
<TABLE>
<CAPTION>
1999 1998 1997
---------------------- --------------------- ---------------------
Wtd. Avg. Wtd. Avg. Wtd. Avg.
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
----------- --------- ---------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning
of year................ 13,949,108 $15.09 14,460,394 $10.99 14,866,966 $ 9.06
Granted................. 2,931,277 34.34 3,185,300 27.91 2,770,557 17.52
Exercised............... (2,487,985) 10.93 (3,551,347) 9.24 (3,008,635) 7.37
Forfeited or Expired.... (287,420) 36.28 (145,239) 22.21 (168,494) 13.15
----------- ------ ---------- ------ ---------- ------
Outstanding at end of
year................... 14,104,980 $19.38 13,949,108 $15.09 14,460,394 $10.99
=========== ====== ========== ====== ========== ======
Options exercisable at
year-end............... 11,646,928 $16.18 10,579,562 $11.61 11,907,043 $ 9.64
=========== ====== ========== ====== ========== ======
</TABLE>
29
<PAGE>
The weighted average fair value of options granted was $9.45, $8.87 and
$4.96 per option at December 31, 1999, 1998 and 1997, respectively.
The following table summarizes information about the options outstanding at
December 31, 1999:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
--------------------------------- ---------------------
Weighted-
Average Weighted- Weighted-
Number Remaining Average Number Average
Range of Outstanding Contractual Exercise Exercisable Exercise
Exercise Prices 12/31/99 Life Price 12/31/99 Price
--------------- ----------- ----------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C>
$ 0.01 to $ 2.50 6,384 4.7 yrs $ 1.13 6,384 $ 1.13
$ 2.51 to $ 3.75 9,202 3.4 3.23 9,202 3.23
$ 3.76 to $ 5.50 91,754 2.6 4.74 91,754 4.74
$ 5.51 to $ 8.25 1,288,133 2.5 6.94 1,288,133 6.94
$ 8.26 to $12.25 4,270,123 4.6 10.37 4,270,123 10.37
$12.26 to $18.25 2,195,903 6.2 13.66 2,195,903 13.66
$18.26 to $27.25 2,029,758 7.6 21.10 1,666,207 21.28
$27.26 to $40.31 3,901,999 8.7 33.85 1,807,498 33.20
$40.32 to $56.98 311,724 8.8 47.44 311,724 47.44
---------- --- ------ ---------- ------
14,104,980 6.3 $19.38 11,646,928 $16.18
========== === ====== ========== ======
</TABLE>
Shareholder Rights Plan
On January 17, 1997, pursuant to the Rights Agreement approved by the Board
of Directors, BB&T distributed to shareholders one preferred stock purchase
right for each share of BB&T's common stock then outstanding. Subsequent to
this date, all shares issued are accompanied by a stock purchase right.
Initially, the rights, which expire in 10 years, are not exercisable and are
not transferable apart from the common stock. The rights will become
exercisable only if a person or group acquires 20% or more of BB&T's common
stock, or BB&T's Board of Directors determines, pursuant to the terms of the
Rights Agreement, that any person or group that has acquired 10% or more of
BB&T's common stock is an "Adverse Person." Each right would then enable the
holder to purchase 1/100th of a share of a new series of BB&T preferred stock
at an initial exercise price of $145.00. The Board of Directors will be
entitled to redeem the rights at $.01 per right under certain circumstances
specified in the Rights Agreement.
Under the terms of the Rights Agreement, if any person or group becomes the
beneficial owner of 25% or more of BB&T's common stock, with certain
exceptions, or if the Board of Directors determines that any 10% or more
stockholder is an "Adverse Person," each right will entitle its holder (other
than the person triggering exercisability of the rights) to purchase, at the
right's then-current exercise price, shares of BB&T's common stock having a
value of twice the right's exercise price. In addition, if after any person or
group has become a 20% or more stockholder, BB&T is involved in a merger or
other business combination transaction with another person in which its common
stock is changed or converted, or sells 50% or more of its assets or earning
power to another person, each right will entitle its holder to purchase, at
the right's then-current exercise price, shares of common stock of such other
person having a value of twice the right's exercise price.
30
<PAGE>
Note K. Income Taxes
The provision for income taxes was composed of the following:
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------
1999 1998 1997
-------- -------- --------
(Dollars in thousands)
<S> <C> <C> <C>
Current expense:
Federal........................................ $109,226 $204,578 $227,330
State.......................................... 7,718 11,942 12,163
-------- -------- --------
116,944 216,520 239,493
Deferred expense (benefit)....................... 179,741 49,179 (17,787)
-------- -------- --------
Provision for income taxes....................... $296,685 $265,699 $221,706
======== ======== ========
</TABLE>
The reasons for the difference between the provision for income taxes and
the amount computed by applying the statutory Federal income tax rate to
income before income taxes were as follows:
<TABLE>
<CAPTION>
Years Ended December 31,
----------------------------
1999 1998 1997
-------- -------- --------
(Dollars in thousands)
<S> <C> <C> <C>
Federal income taxes at statutory rates of
35%.......................................... $318,806 $291,375 $227,647
Tax-exempt income from securities, loans and
leases less related non-deductible interest
expense...................................... (17,993) (14,187) (13,615)
State income taxes, net of Federal tax
benefit...................................... 7,842 9,806 6,877
Other, net.................................... (11,970) (21,295) 797
-------- -------- --------
Provision for income taxes.................... $296,685 $265,699 $221,706
======== ======== ========
Effective income tax rate..................... 32.6% 31.9% 34.2%
======== ======== ========
</TABLE>
The tax effects of temporary differences that gave rise to significant
portions of the net deferred tax assets (liabilities) in the "Consolidated
Balance Sheets" were:
<TABLE>
<CAPTION>
December 31,
--------------------
1999 1998
--------- ---------
(Dollars in
thousands)
<S> <C> <C>
Deferred tax assets:
Allowance for loan and lease losses................ $ 149,987 $ 137,122
Net unrealized depreciation on securities available
for sale.......................................... 168,019 --
Deferred compensation.............................. 38,498 31,026
Postretirement benefits other than pensions........ 19,973 19,343
Other.............................................. 58,075 41,958
--------- ---------
Total tax deferred assets............................ 434,552 229,449
--------- ---------
Deferred tax liabilities:
Depreciation....................................... (15,299) (19,423)
Net unrealized appreciation on securities available
for sale.......................................... -- (41,293)
Lease financing.................................... (254,197) (75,933)
Mortgage servicing rights.......................... (41,359) (3,807)
Other.............................................. (25,696) (28,308)
--------- ---------
Total tax deferred liabilities....................... (336,551) (168,764)
--------- ---------
Net deferred tax asset............................... $ 98,001 $ 60,685
========= =========
</TABLE>
Securities transactions resulted in income tax (benefits) expense of $(2.0
million), $3.4 million and $1.8 million related to securities (losses) gains
for the years ended December 31, 1999, 1998 and 1997, respectively.
31
<PAGE>
NOTE L. Benefit Plans
BB&T provides various benefit plans to existing employees and employees of
acquired entities. Employees of acquired entities generally participate in
existing BB&T plans upon consummation of the business combinations. Credit is
usually given to these employees for years of service at the acquired
institution. The combination of actuarial information for the benefit plans of
acquired entities is typically not meaningful because the benefits offered in
those plans and assumptions used in the calculations related to those plans
are superseded by the benefits offered in the BB&T plans and the assumptions
used in the BB&T calculations. Accordingly, the actuarial information
presented for retirement plans and postretirement benefits in the accompanying
tables is that of BB&T as originally presented.
The following table discloses expenses relating to employee benefit plans
restated for transactions accounted for as poolings of interests.
<TABLE>
<CAPTION>
1999 1998 1997
------- ------- -------
(Dollars in thousands)
<S> <C> <C> <C>
Defined benefit plans............................... $15,717 $ 9,201 $14,225
Defined contribution and ESOP plans................. 16,618 21,269 29,112
------- ------- -------
Total expense related to benefit plans............ $32,335 $30,470 $43,337
======= ======= =======
</TABLE>
Retirement Plans
BB&T provides a defined benefit retirement plan qualified under the Internal
Revenue Code that covers substantially all employees. Benefits are based on
years of service, age at retirement and the employee's compensation during the
five highest consecutive years of earnings within the last ten years of
employment. BB&T's contributions to the plan are in amounts between the
minimum required for funding standard accounts and the maximum deductible for
federal income tax purposes.
Supplemental retirement benefits are provided to certain key officers under
supplemental defined benefit executive retirement plans, which are not
qualified under the Internal Revenue Code. Although technically unfunded
plans, insurance policies on the lives of the covered employees partially fund
future benefits.
The tables below summarize data relative to the plans for the years as
indicated:
<TABLE>
<CAPTION>
Net Periodic Pension Cost 1999 1998 1997
------------------------- -------- -------- --------
(Dollars in thousands)
<S> <C> <C> <C>
Service cost................................... $ 18,935 $ 15,059 $ 12,412
Interest cost.................................. 22,456 19,765 17,971
Estimated return on plan assets................ (26,017) (22,869) (17,987)
Net amortization and other..................... (2,133) 1,257 790
-------- -------- --------
Net periodic pension cost.................... $ 13,241 $ 13,212 $ 13,186
======== ======== ========
</TABLE>
32
<PAGE>
<TABLE>
<CAPTION>
Plans for which Plans for which
assets exceed accumulated
accumulated benefits exceed
benefits assets
------------------ ------------------
Change in Projected Benefit Obligations 1999 1998 1999 1998
- --------------------------------------- -------- -------- -------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Projected benefit obligation, January
1,.................................... $300,136 $244,769 $ 32,820 $ 24,188
Service cost......................... 17,784 13,932 1,151 1,127
Interest cost........................ 20,420 17,765 2,037 2,000
Actuarial (gain) loss................ (57,384) 26,529 (6,606) 6,190
Benefits paid........................ (16,522) (10,502) (669) (685)
Change in plan provisions............ (2,418) 2,813 75 --
Other, net........................... 6,384 4,830 (1) --
-------- -------- -------- --------
Projected benefit obligation, December
31,................................... $268,400 $300,136 $ 28,807 $ 32,820
======== ======== ======== ========
<CAPTION>
Change in Plan Assets 1999 1998 1999 1998
- --------------------- -------- -------- -------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Fair value of plan assets, January 1,.. $321,474 $284,905 $ -- $ --
Actual return on plan assets......... 15,091 35,965 -- --
Employer contributions............... 1,693 5,349 669 685
Benefits paid........................ (16,522) (10,502) (669) (685)
Other, net........................... 6,384 5,757 -- --
-------- -------- -------- --------
Fair value of plan assets, December
31,................................... $328,120 $321,474 $ -- $ --
======== ======== ======== ========
<CAPTION>
Net Amount Recognized 1999 1998 1999 1998
- --------------------- -------- -------- -------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Funded status.......................... $ 59,719 $ 21,338 $(28,807) $(32,820)
Unrecognized transition (asset)
obligation............................ (4,262) (5,400) 191 234
Unrecognized prior service cost........ (20,949) (20,909) 2,781 3,114
Unrecognized net loss.................. (26,890) 19,568 3,678 11,215
-------- -------- -------- --------
Net amount recognized.................. $ 7,618 $ 14,597 $(22,157) $(18,257)
======== ======== ======== ========
<CAPTION>
Reconciliation of Net Pension Asset
(Liability) 1999 1998 1999 1998
- ----------------------------------- -------- -------- -------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Prepaid pension cost, January 1,....... $ 14,597 $ 16,446 $(18,257) $(13,086)
Contributions........................ 1,693 5,349 517 519
Net periodic pension cost............ (8,672) (8,126) (4,452) (4,489)
Other, net........................... -- 928 35 (1,201)
-------- -------- -------- --------
Prepaid (accrued) pension cost,
December 31,.......................... $ 7,618 $ 14,597 $(22,157) $(18,257)
======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
Weighted Average Assumptions December 31,
- ---------------------------- --------------
1999 1998
------ ------
<S> <C> <C>
Weighted average assumed discount rate........................ 7.75% 6.75%
Weighted average expected long-term rate of return on plan
assets....................................................... 8.00 8.00
Assumed rate of annual compensation increases................. 5.50 5.50
</TABLE>
Pension plan assets consist primarily of investments in mutual funds
consisting of equity investments, obligations of the U.S. Treasury and Federal
agencies and corporations. Plan assets included $18.5 million and $26.8
million of BB&T common stock at December 31, 1999 and 1998, respectively. The
market value of total plan assets was $328.1 million and $321.5 million at
December 31, 1999 and 1998, respectively.
33
<PAGE>
Postretirement Benefits
BB&T revised its retiree health care plans in preparation for the
implementation of SFAS No. 106, "Accounting for Postretirement Benefits Other
Than Pensions." The new plan covers employees retiring after December 31, 1995
who are eligible for participation in the BB&T pension plan and have at least
ten years of service. The plan requires retiree contributions, with a subsidy
by BB&T based upon years of service of the employee at the time of retirement.
The subsidy is periodically reviewed for adjustment. The plan provides
flexible benefits to retirees or their dependents.
The following tables set forth the components of the postretirement benefit
plan and the amount recognized in the consolidated financial statements at
December 31, 1999, 1998 and 1997.
<TABLE>
<CAPTION>
Net Periodic Postretirement Benefit Cost: 1999 1998 1997
- ----------------------------------------- ------ ------ ------
(Dollars in
thousands)
<S> <C> <C> <C>
Service cost.............................................. $1,126 $1,550 $ 733
Interest cost............................................. 3,314 3,422 2,586
Amortization and other.................................... 518 519 (37)
------ ------ ------
Total expense........................................... $4,958 $5,491 $3,282
====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
Change in Projected Benefit Obligation 1999 1998
- -------------------------------------- -------- --------
(Dollars in
thousands)
<S> <C> <C>
Projected benefit obligation, January 1,.................. $ 53,630 $ 38,342
Service cost............................................ 1,126 1,550
Interest cost........................................... 3,314 3,422
Plan participants' contributions........................ 727 475
Actuarial loss (gain)................................... (8,286) 4,958
Benefits paid........................................... (1,793) (1,859)
Other, net.............................................. 2,480 6,742
-------- --------
Projected benefit obligation, December 31,................ $ 51,198 $ 53,630
======== ========
<CAPTION>
Change in Plan Assets 1999 1998
- --------------------- -------- --------
(Dollars in
thousands)
<S> <C> <C>
Fair value of plan assets, January 1,..................... $ -- $ --
Actual return on plan assets............................ -- --
Employer contributions.................................. 1,066 1,384
Plan participants' contributions........................ 727 475
Benefits paid........................................... (1,793) (1,859)
-------- --------
Fair value of plan assets, December 31,................... $ -- $ --
======== ========
<CAPTION>
Net Amount Recognized 1999 1998
- --------------------- -------- --------
(Dollars in
thousands)
<S> <C> <C>
Funded status............................................. $(51,198) $(53,630)
Unrecognized prior service cost........................... 5,704 6,223
Unrecognized net (gain) loss.............................. (7,740) 600
-------- --------
Net amount recognized..................................... $(53,234) $(46,807)
======== ========
<CAPTION>
Reconciliation of Postretirement Benefit Cost 1999 1998
- --------------------------------------------- -------- --------
(Dollars in
thousands)
<S> <C> <C>
Prepaid (accrued) postretirement benefit cost, January
1,....................................................... $(46,807) $(42,700)
Contributions........................................... 1,066 1,384
Net periodic postretirement benefit cost................ (4,958) (5,491)
Other, net.............................................. (2,535) --
-------- --------
Prepaid (accrued) postretirement benefit cost, December
31,...................................................... $(53,234) $(46,807)
======== ========
</TABLE>
34
<PAGE>
<TABLE>
<CAPTION>
Weighted Average Assumptions December 31,
- ---------------------------- -----------------
1999 1998
------ ------
<S> <C> <C>
Weighted average assumed discount rate................... 7.75% 6.75%
Medical trend rate--initial year......................... 8.00 9.00
Medical trend rate--ultimate............................. 5.00 5.00
Select period............................................ 3 yrs 4 yrs
</TABLE>
<TABLE>
<CAPTION>
1% Increase 1% Decrease
----------- -----------
<S> <C> <C>
Impact of a 1% change in assumed health care cost on:
Service and interest costs........................... 1.90% (1.70)%
Accumulated postretirement benefit obligation........ 1.80 (1.60)
</TABLE>
401-k Savings Plan
Effective January 1, 1996, BB&T's Employee Stock Ownership Plan was merged
into the former BB&T Financial Corporation Savings and Thrift Plan to form the
BB&T Corporation 401-k Savings Plan. The plan permits employees to contribute
up to 16% of their compensation. BB&T matches up to 6% of the employee's
compensation with a 100% matching contribution.
Settlement Agreement
In 1997, BB&T entered into a settlement and noncompetition agreement with a
retiring executive officer of a merged institution to settle an existing
employment contract and to require the officer not to compete with BB&T. The
settlement agreement provides for annual payments of $769,392 (to be adjusted
annually in accordance with the Consumer Price Index) until the executive
reaches the age of 65 in 2002, at which time the annual payments will be
reduced to 70% of the amount paid during the final year pursuant the
agreement, estimated to be approximately $623,000, less the company-provided
portion of benefits payable under certain existing benefit plans. The reduced
payments will continue for the life of the executive. If the executive's
current wife survives him, payments will continue to her in the annual amount
equal to 35% of the amount paid to the executive during the final year
pursuant to the agreement. The executive officer has agreed not to compete in
a defined geographic area for ten years.
Other
There are various other employment contracts, deferred compensation
arrangements and covenants not to compete with selected members of management
and certain retirees.
NOTE M. Commitments and Contingencies
BB&T is a party to financial instruments with off-balance-sheet risk in the
normal course of business to meet the financing needs of clients and to reduce
exposure to fluctuations in interest rates. These financial instruments
include commitments to extend credit, options written, standby letters of
credit and financial guarantees, interest rate caps and floors written,
interest rate swaps and forward and futures contracts.
BB&T's exposure to credit loss in the event of nonperformance by the
counterparty to the financial instrument for commitments to extend credit and
standby letters of credit and financial guarantees written is represented by
the contractual notional amount of those instruments. BB&T uses the same
credit policies in making commitments and conditional obligations as it does
for on-balance sheet transactions.
35
<PAGE>
<TABLE>
<CAPTION>
Contract or Notional
Amount at December 31,
-----------------------
1999 1998
----------- -----------
(Dollars in thousands)
<S> <C> <C>
Financial instruments whose contract amounts represent
credit risk:
Commitments to extend, originate or purchase
credit............................................. $12,508,253 $11,029,994
Standby letters of credit and financial guarantees
written............................................ 472,700 395,809
Commercial letters of credit........................ 40,417 36,277
Financial instruments whose notional or contract
amounts exceed the amount of credit risk:
Forward and futures contracts....................... $ 319,411 $ 1,274,620
Foreign exchange contracts.......................... 72,228 136,628
</TABLE>
Commitments to extend credit are arrangements to lend to a customer as long
as there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination clauses
and may require payment of a fee. Historically, many commitments expire
without being drawn upon; therefore, the total commitment amounts shown in the
above table are not necessarily indicative of future cash requirements. BB&T
evaluates each customer's creditworthiness on a case-by-case basis. The amount
and type of collateral obtained, if deemed necessary by BB&T upon extension of
credit, is based on management's evaluation of the creditworthiness of the
counterparty.
Standby letters of credit and financial guarantees written are conditional
commitments issued by BB&T to guarantee the performance of a customer to a
third party. Those guarantees are primarily issued to support public and
private borrowing arrangements, including commercial paper issuance, bond
financing and similar transactions. The credit risk involved in issuing
letters of credit is essentially the same as that involved in extending loan
facilities to customers, and letters of credit are collateralized when
necessary.
Forward commitments to sell mortgage loans and mortgage-backed securities
are contracts for delayed delivery of securities in which BB&T agrees to make
delivery at a specified future date of a specified instrument, at a specified
price or yield. Risks arise from the possible inability of counterparties to
meet the terms of their contracts and from movements in securities' values and
interest rates.
Legal Proceedings
The nature of the business of BB&T's banking subsidiaries ordinarily results
in a certain amount of litigation. The subsidiaries of BB&T are involved in
various legal proceedings, all of which are considered incidental to the
normal conduct of business. Management believes that the liabilities, if any,
arising from these proceedings will not have a materially adverse effect on
the consolidated financial position or consolidated results of operations of
BB&T.
NOTE N. Regulatory Requirements and Other Restrictions
BB&T's subsidiary banks are required by the Board of Governors of the
Federal Reserve System to maintain reserve balances in the form of vault cash
or deposits with the Federal Reserve Bank based on certain percentages of
deposit types, subject to various adjustments. At December 31, 1999, the net
reserve requirement amounted to $289.1 million.
BB&T's subsidiary banks are prohibited from paying dividends from their
capital stock and additional paid-in capital accounts and are required by
regulatory authorities to maintain minimum capital levels. Subject to
restrictions imposed by state laws and federal regulations, the Boards of
Directors of the subsidiary banks could have declared dividends from their
retained earnings up to $1.5 billion at December 31, 1999.
BB&T is subject to various regulatory capital requirements administered by
the Federal banking agencies. Failure to meet minimum capital requirements can
initiate certain mandatory--and possibly additional
36
<PAGE>
discretionary--actions by regulators that, if undertaken, could have a direct
material effect on BB&T's financial statements. Under capital adequacy
guidelines and the regulatory framework for prompt corrective action, the
Corporation must meet specific capital guidelines that involve quantitative
measures of BB&T's assets, liabilities and certain off-balance-sheet items
calculated pursuant to regulatory directives. BB&T's capital amounts and
classification are also subject to qualitative judgments by the regulators
about components, risk weightings and other factors. BB&T was in compliance
with these requirements at December 31, 1999.
Quantitative measures established by regulation to ensure capital adequacy
require BB&T to maintain minimum amounts and ratios of total and Tier 1
capital (as defined in the regulations) to risk-weighted assets (as defined),
and of Tier 1 capital to average assets.
The following table provides summary information regarding regulatory
capital for BB&T and its significant banking subsidiaries as of December 31,
1999 and 1998:
<TABLE>
<CAPTION>
December 31, 1999 December 31, 1998
----------------------------- -----------------------------
For Minimum For Minimum
Actual Capital Actual Capital
----------------- Adequacy ----------------- Adequacy
Ratio Amount Purposes Ratio Amount Purposes
----- ---------- ----------- ----- ---------- -----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Tier 1 Capital
BB&T................ 9.4% $3,037,105 $1,290,532 10.6% $2,906,707 $1,101,675
BB&T-NC............. 9.8 1,977,275 806,531 10.9 1,839,894 675,643
BB&T-SC............. 9.7 366,991 151,036 12.7 421,891 133,225
BB&T-VA............. 11.3 373,412 132,495 14.8 477,894 129,551
First Liberty....... 9.3 122,272 52,684 10.3 111,660 43,321
Premier............. 11.6 144,673 49,779 12.8 135,562 42,356
- ----------------------------------------------------------------------------------
Total Capital
BB&T................ 13.0% $4,198,145 $2,581,064 14.8% $4,080,191 $2,203,350
BB&T-NC............. 11.0 2,209,849 1,613,062 12.2 2,059,494 1,351,286
BB&T-SC............. 11.0 413,911 302,071 13.9 463,895 266,451
BB&T-VA............. 12.5 415,120 264,990 16.0 518,525 259,103
First Liberty....... 10.5 138,046 105,369 11.6 125,185 86,642
Premier............. 12.9 160,269 99,558 13.9 147,417 84,711
- ----------------------------------------------------------------------------------
Leverage Capital
BB&T................ 6.8% $3,037,105 $1,345,346 7.3% $2,906,707 $1,200,667
BB&T-NC............. 6.7 1,977,275 879,741 7.2 1,839,894 764,608
BB&T-SC............. 7.7 366,991 142,148 9.3 421,891 135,789
BB&T-VA............. 7.5 373,412 148,745 9.4 477,894 153,013
First Liberty....... 6.9 122,272 53,018 7.5 111,660 44,843
Premier............. 9.6 144,673 45,125 11.1 135,562 36,517
- ----------------------------------------------------------------------------------
</TABLE>
37
<PAGE>
NOTE O. Parent Company Financial Statements
Condensed Balance Sheets
December 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
---------- ----------
(Dollars in
thousands)
<S> <C> <C>
Assets
Cash and due from banks.................................. $ 8,307 $ 14,709
Interest-bearing bank balances........................... 551,694 607,389
Securities............................................... 15,924 21,547
Investment in banking subsidiaries....................... 3,419,981 3,668,894
Investment in other subsidiaries......................... 555,638 170,855
---------- ----------
Total investments in subsidiaries.................... 3,975,619 3,839,749
---------- ----------
Advances to subsidiaries................................. 348,000 359,600
Premises and equipment................................... 5,900 5,366
Receivables from subsidiaries and other assets........... 268,748 191,342
---------- ----------
Total assets......................................... $5,174,192 $5,039,702
========== ==========
Liabilities and Shareholders' Equity
Short-term borrowed funds................................ $ 698,704 $ 677,141
Dividends payable........................................ 69,785 52,110
Accounts payable and accrued liabilities................. 29,453 28,620
Long-term debt........................................... 979,839 955,229
---------- ----------
Total liabilities.................................... 1,777,781 1,713,100
---------- ----------
Total shareholders' equity........................... 3,396,411 3,326,602
---------- ----------
Total liabilities and shareholders' equity........... $5,174,192 $5,039,702
========== ==========
</TABLE>
Condensed Income Statements
For the Years Ended December 31, 1999, 1998 and 1997
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
(Dollars in thousands)
<S> <C> <C> <C>
Income
Dividends from subsidiaries................... $603,671 $421,774 $272,520
Interest and other income from subsidiaries... 91,815 95,776 75,077
Interest on investment securities............. 322 971 1,782
Other income.................................. 524 19,311 3,748
-------- -------- --------
Total income................................ 696,332 537,832 353,127
-------- -------- --------
Expenses
Interest expense.............................. 84,871 92,712 56,870
Other expenses................................ 39,485 46,645 32,346
-------- -------- --------
Total expenses.............................. 124,356 139,357 89,216
-------- -------- --------
Income before income taxes and equity in
undistributed earnings of subsidiaries......... 571,976 398,475 263,911
Income tax benefit.............................. (5,547) (6,419) (1,915)
-------- -------- --------
Income before equity in undistributed earnings
of subsidiaries................................ 577,523 404,894 265,826
Equity in undistributed earnings of
subsidiaries................................... 36,837 162,054 160,385
-------- -------- --------
Net income...................................... $614,360 $566,948 $426,211
======== ======== ========
</TABLE>
38
<PAGE>
Condensed Statements of Cash Flows
For the Years Ended December 31, 1999, 1998 and 1997
<TABLE>
<CAPTION>
1999 1998 1997
--------- --------- ---------
(Dollars in thousands)
<S> <C> <C> <C>
Cash Flows From Operating Activities:
Net income................................... $ 614,360 $ 566,948 $ 426,211
Adjustments to reconcile net income to net
cash provided by operating activities:
Net income of subsidiaries less than (in
excess of) dividends from subsidiaries..... (36,837) (162,054) (160,385)
Depreciation of premises and equipment...... 202 180 285
Amortization of unearned compensation....... 3,873 1,171 8,133
Discount accretion and premium
amortization............................... -- 142 431
Loss (gain) on sales of securities.......... 955 (37) 47
Loss on disposals of other real estate
owned...................................... -- 191 --
Reconciliation of fiscal year of merged
company to calendar year................... -- (158) --
Decrease (increase) in other assets......... (87,900) (119,664) (30,136)
Increase (decrease) in accounts payable and
accrued liabilities........................ (25) 5,832 (38)
--------- --------- ---------
Net cash provided by operating
activities............................... 494,628 292,551 244,548
--------- --------- ---------
Cash Flows From Investing Activities:
Proceeds from sales of securities available
for sale................................... 4,729 64,984 10,206
Proceeds from maturities, calls and paydowns
of securities available for sale........... -- -- 35,482
Purchases of securities available for sale.. -- (54,804) (214,064)
Investment in subsidiaries.................. (81,371) (82,677) (13,913)
Advances to subsidiaries.................... (728,586) (677,728) (446,844)
Proceeds from repayment of advances to
subsidiaries............................... 740,186 530,967 369,435
Net cash (paid) received in purchase
accounting transactions.................... 588 (6,051) (45,852)
Other, net.................................. -- 583 1,394
--------- --------- ---------
Net cash used in investing activities..... (64,454) (224,726) (304,156)
--------- --------- ---------
Cash Flows From Financing Activities:
Net increase in long-term debt.............. 19,806 393,178 422,831
Net increase in short-term borrowed funds... 21,563 27,750 155,938
Advances from subsidiaries.................. -- 4,191 --
Repayment of advances from subsidiaries..... -- (3,260) --
Net proceeds from common stock issued....... 42,337 38,417 29,851
Redemption of common stock.................. (326,008) (345,029) (327,983)
Cash dividends paid on common and preferred
stock...................................... (249,969) (211,171) (175,331)
Other, net.................................. -- 141 (1,832)
--------- --------- ---------
Net cash (used in) provided by financing
activities............................... (492,271) (95,783) 103,474
--------- --------- ---------
Net (Decrease) Increase in Cash and Cash
Equivalents.................................. (62,097) (27,958) 43,866
Cash and Cash Equivalents at Beginning of
Year......................................... 622,098 650,056 606,190
--------- --------- ---------
Cash and Cash Equivalents at End of Year...... $ 560,001 $ 622,098 $ 650,056
========= ========= =========
</TABLE>
39
<PAGE>
NOTE P. Disclosures about Fair Value of Financial Instruments
SFAS No. 107, "Disclosures about Fair Value of Financial Instruments,"
requires disclosure of the estimated fair value of on- and off-balance sheet
financial instruments. A financial instrument is defined by SFAS No. 107 as
cash, evidence of an ownership interest in an entity or a contract that
creates a contractual obligation or right to deliver or receive cash or
another financial instrument from a second entity on potentially favorable or
unfavorable terms.
Fair value estimates are made at a point in time, based on relevant market
data and information about the financial instrument. SFAS No. 107 specifies
that fair values should be calculated based on the value of one trading unit
without regard to any premium or discount that may result from concentrations
of ownership of a financial instrument, possible tax ramifications, estimated
transaction costs that may result from bulk sales or the relationship between
various financial instruments. No readily available market exists for a
significant portion of BB&T's financial instruments. Fair value estimates for
these instruments are based on judgments regarding current economic
conditions, currency and interest rate risk characteristics, loss experience
and other factors. Many of these estimates involve uncertainties and matters
of significant judgment and cannot be determined with precision. Therefore,
the calculated fair value estimates in many instances cannot be substantiated
by comparison to independent markets and, in many cases, may not be realizable
in a current sale of the instrument. Changes in assumptions could
significantly affect the estimates.
The following methods and assumptions were used by BB&T in estimating the
fair value of its financial instruments:
Cash and cash equivalents: For these short-term instruments, the carrying
amounts are a reasonable estimate of fair values.
Securities: Fair values for securities are based on quoted market prices, if
available. If quoted market prices are not available, fair values are based on
quoted market prices for similar securities.
Loans receivable: The fair values for loans are estimated using discounted
cash flow analyses, using interest rates currently being offered for loans
with similar terms and credit quality. The carrying amounts of accrued
interest approximate fair values.
Deposit liabilities: The fair values for demand deposits, interest-checking
accounts, savings accounts and certain money market accounts are, by
definition, equal to the amount payable on demand at the reporting date, i.e.,
their carrying amounts. Fair values for certificates of deposit are estimated
using a discounted cash flow calculation that applies current interest rates
to aggregate expected maturities.
Short-term borrowed funds: The carrying amounts of Federal funds purchased,
borrowings under repurchase agreements, master notes and other short-term
borrowed funds approximate their fair values.
Long-term debt: The fair values of long-term debt are estimated based on
quoted market prices for similar instruments or by using discounted cash flow
analyses, based on BB&T's current incremental borrowing rates for similar
types of instruments.
Interest rate swap agreements: The fair values of interest rate swaps (used
for hedging purposes) are the estimated amounts that BB&T would receive or pay
to terminate the swap agreements at the reporting date, taking into account
current interest rates and the current creditworthiness of the swap
counterparties.
Commitments to extend credit, standby letters of credit and financial
guarantees written: The fair values of commitments are estimated using the
fees charged to enter into similar agreements, taking into account the
remaining terms of the agreements and the present creditworthiness of the
counterparties. For fixed-rate loan commitments, fair values also consider the
difference between current levels of interest rates and the committed rates.
The fair values of guarantees and letters of credit are estimated based on
fees currently charged for similar agreements.
40
<PAGE>
Other off-balance sheet instruments: The fair values for off-balance sheet
instruments (futures, forwards, options, and commitments to sell or purchase
financial instruments) are estimated based on quoted prices, if available. For
instruments for which there are no quoted prices, fair values are estimated
using current settlement values or pricing models.
The following is a summary of the carrying amounts and fair values of BB&T's
financial assets and liabilities as of the periods indicated:
<TABLE>
<CAPTION>
1999 1998
------------------------ ------------------------
Carrying Carrying
Amount Fair Value Amount Fair Value
----------- ----------- ----------- -----------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Financial assets:
Cash and cash equivalents.. $ 1,522,928 $ 1,522,928 $ 1,456,164 $ 1,456,164
Trading securities......... 93,221 93,221 60,422 60,422
Securities available for
sale...................... 10,771,247 10,771,247 9,659,333 9,659,333
Securities held to
maturity.................. 97,122 98,070 373,472 381,532
Loans and leases:
Loans.................... 29,262,397 28,805,300 26,959,212 27,553,658
Leases................... 1,474,286 986,885
Allowance for losses..... (411,188) (378,531)
----------- -----------
Net loans and leases... $30,325,495 $27,567,566
----------- -----------
Financial liabilities:
Deposits................... $28,791,574 28,793,639 $27,842,986 27,896,845
Short-term borrowed funds.. 7,080,882 7,080,882 4,057,776 4,057,776
Long-term debt............. 5,517,988 5,500,277 5,442,338 5,505,473
Capitalized leases......... 2,496 3,462
</TABLE>
The following is a summary of the notional or contractual amounts and fair
values of BB&T's off-balance sheet financial instruments as of the periods
indicated:
<TABLE>
<CAPTION>
1999 1998
-------------------- --------------------
Notional/ Notional/
Contract Fair Contract Fair
Amount Value Amount Value
----------- -------- ----------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Off balance sheet financial
instruments:
Interest rate swaps, caps and
floors.......................... $ 1,301,611 $ (301) $ 3,825,596 $ 35,938
Commitments to extend, originate
or purchase credit.............. 12,508,253 373,414 11,029,994 726,639
Standby and commercial letters of
credit and financial guarantees
written......................... 513,117 2,041 432,086 5,008
Forward and futures contracts.... 319,411 2,544 1,274,620 196,952
Foreign exchange contracts....... 72,228 1,149 136,628 319
Option contracts purchased....... 15,000 (10) 35,000 623
Option contracts written......... 47,250 236 1,267,250 (257)
</TABLE>
- --------
N/A--not applicable.
41
<PAGE>
NOTE Q. Derivatives and Off-Balance Sheet Financial Instruments
BB&T utilizes interest rate swaps, caps, floors and collars in the
management of interest rate risk. Interest rate swaps are contractual
agreements between two parties to exchange a series of cash flows representing
interest payments. A swap allows both parties to alter the repricing
characteristics of assets or liabilities without affecting the underlying
principal positions. Through the use of a swap assets and liabilities may be
transformed from fixed to a floating rate, from floating rates to fixed rates,
or from one type of floating rate to another. Swap terms generally range from
one year to ten years depending on the need. At December 31, 1999, derivatives
with a total notional value of $1.3 billion, with terms ranging up to sixteen
years, were outstanding.
The following tables set forth certain information concerning BB&T's
interest rate swaps at December 31, 1999:
Interest Rate Swaps, Caps, Floors and Collars
December 31, 1999
<TABLE>
<CAPTION>
Notional Receive
Type Amount Rate Pay Rate Fair Value
- ---- ---------- ----------- ---------- -----------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Receive fixed swaps............ $ 745,000 6.35% 6.20% $ (6,712)
Pay fixed swaps................ 494,361 5.74 5.31 6,411
Caps, Floors & Collars......... 62,250 -- -- --
---------- ----------- ---------- -----------
Total........................ $1,301,611 6.11% 5.84% $ (301)
========== =========== ========== ===========
<CAPTION>
Receive Caps,
Fixed Pay Fixed Floors &
Year-to-date Activity Swaps Swaps Collars Total
- --------------------- ---------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Balance, December 31, 1998..... $1,286,200 $ 1,242,146 $1,297,250 $ 3,825,596
Additions...................... 40,000 385,175 15,000 440,175
Maturities/amortizations....... (581,200) (1,051,553) (550,000) (2,182,753)
Terminations................... -- (81,407) (700,000) (781,407)
---------- ----------- ---------- -----------
Balance, December 31, 1999... $ 745,000 $ 494,361 $ 62,250 $ 1,301,611
========== =========== ========== ===========
<CAPTION>
One Year One to Five After Five
Maturity Schedule or Less Years Years Total
- ----------------- ---------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Receive fixed swaps............ $ 185,000 $ 270,000 $ 290,000 $ 745,000
Pay fixed swaps................ 18,215 445,397 30,749 494,361
Caps, Floors & Collars......... 15,000 47,250 -- 62,250
---------- ----------- ---------- -----------
Total........................ $ 218,215 $ 762,647 $ 320,749 $ 1,301,611
========== =========== ========== ===========
</TABLE>
As of December 31, 1999, deferred gains from new swap transactions initiated
during 1999 were $195,000. There were no unamortized deferred gains or losses
from terminated transactions remaining at year end. Active transactions
resulted in a pretax net loss of $2.9 million.
In addition to interest rate swaps, BB&T utilizes written covered over-the-
counter call options on specific securities in the available-for-sale
portfolio in order to enhance returns. During 1999, options were written on
securities totaling $1.7 billion. Option fee income was $2.5 million for 1999.
There were no unexercised options outstanding at December 31, 1999 or 1998.
BB&T also utilizes over-the-counter purchased put options and net purchased
put options (combination of purchased put option and written call option) in
its mortgage banking activities. These options are used to hedge the mortgage
warehouse and mortgage applications and loans in process against increasing
interest rates. Written call options are used in tandem with purchased put
options to create a net purchased put option that reduces the cost of the
hedge. At December 31, 1999, net purchased put option contracts with a
notional value of $15.0 million were outstanding.
42
<PAGE>
The $1.3 billion notional amount of derivatives used in interest rate risk
management are primarily used to hedge variable rate commercial loans,
adjustable rate mortgage loans, retail certificates of deposit and fixed rate
notes. BB&T does not utilize derivatives for trading purposes.
Although off-balance sheet derivative financial instruments do not expose
BB&T to credit risk equal to the notional amount, such agreements generate
credit risk to the extent of the fair value gain in an off-balance sheet
derivative financial instrument if the counterparty fails to perform. Such
risk is minimized based on the creditworthiness of the counterparties and the
consistent monitoring of these agreements. The counterparties to these
arrangements were primarily large commercial banks and investment banks. All
counterparties are reviewed annually for creditworthiness by BB&T's credit
policy group. Where appropriate, master netting agreements are arranged or
collateral is obtained in the form of rights to securities. At December 31,
1999, BB&T's interest rate swaps, caps, floors and collars reflected an
unrealized loss of $301,000.
Other risks associated with interest-sensitive derivatives include the
impact on fixed rate positions during periods of changing interest rates.
Indexed amortizing swaps' notional amounts and maturities change based on
certain interest rate indices. Generally, as rates fall the notional amounts
decline more rapidly, and as rates increase notional amounts decline more
slowly. Under unusual circumstances, financial derivatives also increase
liquidity risk, which could result from an environment of rising interest
rates in which derivatives produce negative cash flows while being offset by
increased cash flows from variable rate loans. Such risk is considered
insignificant due to the relatively small derivative positions held by BB&T.
At December 31, 1999, BB&T had no indexed amortizing swaps outstanding.
Note R. Calculations of Earnings Per Share
The basic and diluted earnings per share calculations are presented in the
following table:
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------------------
1999 1998 1997
------------ ------------ ------------
(Dollars in thousands, except per
share data)
<S> <C> <C> <C>
Basic Earnings Per Share:
Net income............................ $ 614,360 $ 566,948 $ 426,211
Less:
Preferred dividend requirement...... -- -- 113
------------ ------------ ------------
Income available for common shares.... $ 614,360 $ 566,948 $ 426,098
============ ============ ============
Weighted average number of common
shares outstanding during the
period............................... 344,598,850 340,318,947 339,171,828
------------ ------------ ------------
Basic earnings per share.............. $ 1.78 $ 1.67 $ 1.26
============ ============ ============
Diluted Earnings Per Share:
Net income............................ $ 614,360 $ 566,948 $ 426,211
============ ============ ============
Weighted average number of common
shares............................... 344,598,850 340,318,947 339,171,828
Add:
Shares issuable assuming conversion
of convertible preferred stock..... -- 90,202 395,572
Dilutive effect of outstanding
options (as determined by
application of treasury stock
method)............................ 6,199,017 6,947,908 5,692,468
Issuance of additional shares under
share repurchase agreement,
contingent upon market price....... -- -- 144,588
------------ ------------ ------------
Weighted average number of common
shares, as adjusted.................. 350,797,867 347,357,057 345,404,456
============ ============ ============
Diluted earnings per share............ $ 1.75 $ 1.63 $ 1.23
============ ============ ============
</TABLE>
43
<PAGE>
NOTE S. Operating Segments
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 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 these business segments.
BB&T measures and presents information for internal reporting purposes in a
variety of different ways. Information for BB&T's reportable segments is
available based on organizational structure, product offerings and customer
relationships. The internal reporting system presently utilized by management
in the planning and measuring of operating activities, as well as the system
to which most managers are held accountable, is based on organizational
structure.
BB&T emphasizes revenue growth by focusing on client service, sales
effectiveness and relationship management. The segment results contained
herein are presented based on internal management accounting policies, which
were 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 segments is not necessarily 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.
BB&T's internal reporting system was significantly modified during 1999 and
1998, and information from 1997 has not been presented herein to reflect the
new reporting system because it is not practicable to restate prior period
results. During 1999, BB&T revised the methods used to allocate noninterest
expenses among the various segments. The information presented for 1998 has
been restated to reflect these revisions. Also, BB&T has completed various
mergers and acquisitions accounted for as poolings of interests, which present
additional practical limitations to the presentation of comparable 1997
information.
The management accounting process uses various estimates and allocation
methodologies to measure the performance of the operating segments. To
determine financial performance for each segment, BB&T allocates capital,
funding charges and credits, an economic provision for loan and lease losses,
certain noninterest expenses and income tax provisions to each segment, as
applicable. Also, to promote revenue growth, certain revenues of Mortgage
Banking, Trust Services, Agency Insurance and the Investment Banking and
Brokerage segments are reflected in the individual segments and also allocated
to the Banking Network. This double counting of revenue is reflected in
intersegment noninterest revenues and eliminated to arrive at consolidated
results. Allocation methodologies are subject to periodic adjustment as the
internal management accounting system is revised and business or product lines
within the segments change. Also, because the development and application of
these methodologies is a dynamic process, the financial results presented may
be periodically revised.
BB&T's overall objective is to maximize shareholder value by optimizing
return on equity and limiting risk. Allocations of capital and the economic
provision for loan and lease losses are designed to address this objective.
Capital is assigned to each segment on an economic basis, using management's
assessment of the inherent risks associated with the segment. Required
economic capital allocations are made to cover the following risk categories:
credit risk, funding risk, interest rate risk, option risk, basis risk, market
risk and operational risk. Each segment is evaluated based on a risk-adjusted
return on capital. Capital assignments are not equivalent to regulatory
capital guidelines and the total amount assigned to all segments may vary from
consolidated shareholders' equity. All unallocated capital is retained in the
Treasury segment.
The economic provision for loan and lease losses is also allocated to the
relevant segments based on management's assessment of the segments' risks as
described above. Unlike the provision for loan and lease losses recorded
pursuant to generally accepted accounting principles, the economic provision
adjusts for the
44
<PAGE>
impact of expected credit losses over the effective lives of the related loans
and leases. Any unallocated provision for loan and lease losses is retained in
the Corporate Office, reflected in the accompanying tables as "other revenues
and expenses."
BB&T has implemented an extensive noninterest expense allocation process to
support organizational and product profitability. BB&T allocates expenses to
the reportable segments based on various cost allocation methodologies,
including the number of items processed, overall percentage of time spent,
full-time equivalent employees assigned to functions, functional position
surveys and activity-based costing. A portion of corporate overhead expenses
is not allocated, but is retained in corporate accounts reflected as other
expenses in the accompanying tables. Income taxes are allocated to the various
segments using effective tax rates.
BB&T utilizes a funds transfer pricing ("FTP") system to eliminate the
effect of interest rate risk from the segments' net interest income because
such risk is centrally managed within the Treasury segment. The FTP system
credits or charges the segments with the true value or cost of the funds the
segments create or use. The FTP system provides a funds credit for sources of
funds and a funds charge for the use of funds by each segment. The net FTP
credit or charge is reflected as net intersegment interest income (expense) in
the accompanying tables.
Banking Network
BB&T's Banking Network, which operates in North Carolina, South Carolina,
Virginia, Maryland, Georgia, West Virginia, Kentucky and Washington, D.C.,
serves commercial and retail clients by offering a variety of loan and deposit
products and other financial services. The Banking Network is primarily
responsible for client relationships, and, therefore, is credited with revenue
from the Mortgage Banking, Trust Services, Agency Insurance and Investment
Banking and Brokerage segments, which is reflected in intersegment noninterest
income. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations" for additional discussion concerning the functions of
the Banking Network.
Mortgage Banking
The Mortgage Banking segment retains and services mortgage loans originated
by the Banking Network and purchased from various correspondent originators.
Mortgage loan products include fixed- and adjustable-rate government and
conventional loans for the purpose of constructing, purchasing or refinancing
owner-occupied properties. Fixed-rate mortgage loans are typically sold to
government agencies and private investors with servicing rights retained by
BB&T, while adjustable-rate loans are typically held in the portfolio. The
Mortgage Banking segment earns interest on loans held in the warehouse and
portfolio, fee income from the origination and servicing of mortgage loans and
reflects gains or losses from the sale of mortgage loans. The Banking Network
receives an interoffice credit for the origination of loans and servicing
rights, with the corresponding charge remaining in the Corporate Office.
Trust Services
BB&T's Trust Services segment provides personal trust administration and
estate planning, investment counseling and management, employee benefits
services, and corporate trust services to individuals, corporations,
institutions, foundations and government entities. The Banking Network
receives an interoffice credit for trust fees in the initial year the account
is referred, with the corresponding charge remaining in the Corporate Office.
Agency Insurance
BB&T has the largest independent insurance agency network in the Carolinas.
BB&T Insurance Services provides property and casualty, life and health
insurance to businesses and individuals. It also provides small business and
corporate products, such as workers compensation and professional liability,
as well as provides surety coverage and title insurance. The Banking Network
receives credit for insurance commissions on referred accounts, with the
corresponding charge retained in the Corporate Office. These revenues and
expenses are reflected in the accompanying tables as intersegment noninterest
income and expense.
45
<PAGE>
Investment Banking and Brokerage
BB&T's Investment Banking and Brokerage segment offers customers investment
alternatives, including discount brokerage services, fixed-rate and variable-
rate annuities, mutual funds and government and municipal bonds and various
other investment products through BB&T Investment Services, Inc., a subsidiary
of BB&T-NC. The Investment Banking and Brokerage segment includes Scott &
Stringfellow, Inc., a full-service brokerage and investment banking firm
headquartered in Richmond, Virginia. Scott & Stringfellow specializes in the
origination, trading and distribution of fixed-income securities and equity
products in both the public and private capital markets. Scott & Stringfellow
also has a public finance department that provides investment banking
services, financial advisory services and municipal bond financing to a
variety of regional tax-exempt issuers. The Banking Network is credited for
investment service revenues on referred accounts, with the corresponding
charge retained in the Corporate Office. These revenues and expenses are
reflected in the accompanying tables as intersegment noninterest income and
expense.
Treasury
BB&T's Treasury segment is responsible for the management of the securities
portfolios, overall balance sheet funding and liquidity, and overall
management of interest rate risk. See the Market Risk Management section of
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" for additional information about the responsibilities of the
Treasury segment.
46
<PAGE>
The following tables disclose selected financial information for BB&T's
reportable business segments:
<TABLE>
<CAPTION>
For the Year Ended December 31, 1999
-----------------------------------------------------------------------------------------------
Investment All Total
Banking Mortgage Trust Agency Banking Other Segment
Network Banking Services Insurance and Brokerage Treasury Segments /1/ Results
----------- ---------- -------- --------- ------------- ----------- ------------ -----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net interest
income (expense)
from external
customers........ $ 992,320 $ 423,158 $(33,668) $ -- $ 7,561 $ 162,459 $ 222,397 $ 1,774,227
Net intersegment
interest income
(expense)....... 327,072 (307,484) 42,197 -- -- (22,111) -- 39,674
----------- ---------- -------- ------- -------- ----------- ---------- -----------
Net interest
income.......... 1,319,392 115,674 8,529 -- 7,561 140,348 222,397 1,813,901
----------- ---------- -------- ------- -------- ----------- ---------- -----------
Provision for
loan and lease
losses........... 119,518 3,802 -- -- -- 90 16,631 140,041
Noninterest
income from
external
customers........ 354,977 114,811 57,290 78,125 132,519 1,031 28,850 767,603
Intersegment
noninterest
income.......... 123,549 -- -- -- -- -- -- 123,549
Noninterest
expense.......... 713,348 61,161 38,022 59,688 124,900 4,783 53,406 1,055,308
Intersegment
noninterest
expense......... 261,420 18,918 2,532 2,748 1,792 8,258 4,910 300,578
----------- ---------- -------- ------- -------- ----------- ---------- -----------
Income before
income taxes..... 703,632 146,604 25,265 15,689 13,388 128,248 176,300 1,209,126
Provision for
income taxes.... 235,338 45,128 8,039 6,278 6,506 32,403 47,284 380,976
----------- ---------- -------- ------- -------- ----------- ---------- -----------
Net income....... $ 468,294 $ 101,476 $ 17,226 $ 9,411 $ 6,882 $ 95,845 $ 129,016 $ 828,150
=========== ========== ======== ======= ======== =========== ========== ===========
Identifiable
segment assets... $25,832,827 $5,689,889 $ 31,469 $63,873 $699,100 $11,510,760 $1,056,125 $44,884,043
=========== ========== ======== ======= ======== =========== ========== ===========
<CAPTION>
Other Reconciling
Revenues Items & Consolidated
and Expenses /2/ Eliminations Totals
----------------- ------------------ ------------
<S> <C> <C> <C>
Net interest
income (expense)
from external
customers........ $ 90,143 $ (206,288)(/4/) $ 1,658,082
Net intersegment
interest income
(expense)....... (12,170) (27,504)(/3/) --
----------------- ------------------ ------------
Net interest
income.......... 77,973 (233,792) 1,658,082
----------------- ------------------ ------------
Provision for
loan and lease
losses........... 5,690 (41,064)(/4/) 104,667
Noninterest
income from
external
customers........ 15,721 10,362 (/4/) 793,686
Intersegment
noninterest
income.......... -- (123,549)(/3/) --
Noninterest
expense.......... 288,278 92,470 (/4/) 1,436,056
Intersegment
noninterest
expense......... (60,682) (239,896)(/3/) --
----------------- ------------------ ------------
Income before
income taxes..... (139,592) (158,489) 911,045
Provision for
income taxes.... (45,814) (38,477)(/4/) 296,685
----------------- ------------------ ------------
Net income....... $ (93,778) $ (120,012) $ 614,360
================= ================== ============
Identifiable
segment assets... $2,835,382 $(2,240,369)(/4/) $45,479,056
================= ================== ============
</TABLE>
- ----
(1) Financial data from segments below the quantitative thresholds requiring
disclosure are attributable to a number of smaller operating segments.
Those segments include BB&T's nonbank consumer finance operations, a
factoring subsidiary, a subsidiary specializing in financing commercial
lawn care equipment and a leasing company.
(2) Other revenues and expenses include amounts incurred by BB&T's support
functions not allocated to the various segments. Amounts include any
unallocated provision for loan and lease losses and unallocated general
corporate expenses, as well as costs associated with BB&T's Year 2000
compliance efforts.
(3) BB&T's reconciliation of total segment results to consolidated results
requires the elimination of the internal management accounting practices.
These adjustments include the elimination of the FTP credits and charges,
the elimination of the intersegment noninterest income described above and
the elimination of intersegment noninterest expense allocated to the
various segments.
(4) To reflect elimination entries necessary to consolidate the segment data.
47
<PAGE>
<TABLE>
<CAPTION>
For the Year Ended December 31, 1998
----------------------------------------------------------------------------------------------------------
Investment
Banking Total Other
Banking Mortgage Trust Agency and All Other Segment Revenues and
Network Banking Services Insurance Brokerage Treasury Segments(/1/) Results Expenses(/2/)
----------- ---------- -------- --------- ---------- ---------- ------------- ----------- -------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net interest
income (expense)
from external
customers........ $ 916,866 $ 411,227 $(33,717) $ -- $ 1,127 $ 126,762 $ 203,497 $ 1,625,762 $ 59,802
Net intersegment
interest income
(expense)....... 286,820 (270,173) 37,989 -- -- (135) -- 54,501 (12,238)
----------- ---------- -------- ------- -------- ---------- ---------- ----------- ----------
Net interest
income.......... 1,203,686 141,054 4,272 -- 1,127 126,627 203,497 1,680,263 47,564
----------- ---------- -------- ------- -------- ---------- ---------- ----------- ----------
Provision for
loan and lease
losses........... 105,154 4,171 -- -- -- 103 20,557 129,985 1,829
Noninterest
income from
external
customers........ 312,411 103,937 43,635 50,252 48,604 11,631 24,648 595,118 (30,172)
Intersegment
noninterest
income.......... 150,672 -- -- -- -- -- -- 150,672 --
Noninterest
expense.......... 616,239 76,365 28,666 39,420 37,472 4,325 49,109 851,596 265,921
Intersegment
noninterest
expense......... 209,820 16,207 1,947 2,415 948 5,383 7,279 243,999 (55,464)
----------- ---------- -------- ------- -------- ---------- ---------- ----------- ----------
Income before
income taxes..... 735,556 148,248 17,294 8,417 11,311 128,447 151,200 1,200,473 (194,894)
Provision for
income taxes.... 275,813 56,125 6,528 3,367 4,524 46,415 9,990 402,762 (71,359)
----------- ---------- -------- ------- -------- ---------- ---------- ----------- ----------
Net income....... $ 459,743 $ 92,123 $ 10,766 $ 5,050 $ 6,787 $ 82,032 $ 141,210 $ 797,711 $ (123,535)
=========== ========== ======== ======= ======== ========== ========== =========== ==========
Identifiable
segment assets... $23,637,286 $6,344,073 $ 26,664 $40,262 $238,622 $9,417,056 $2,374,665 $42,078,628 $1,651,609
=========== ========== ======== ======= ======== ========== ========== =========== ==========
<CAPTION>
Reconciling
Items & Consolidated
Eliminations Totals
------------------ ------------
<S> <C> <C>
Net interest
income (expense)
from external
customers........ $ (188,077)(/4/) $ 1,497,487
Net intersegment
interest income
(expense)....... (42,263)(/3/) --
------------------ ------------
Net interest
income.......... (230,340) 1,497,487
------------------ ------------
Provision for
loan and lease
losses........... (28,666)(/4/) 103,148
Noninterest
income from
external
customers........ 56,586(/4/) 621,532
Intersegment
noninterest
income.......... (150,672)(/3/) --
Noninterest
expense.......... 65,707(/4/) 1,183,224
Intersegment
noninterest
expense......... (188,535)(/3/) --
------------------ ------------
Income before
income taxes..... (172,932) 832,647
Provision for
income taxes.... (65,704)(/4/) 265,699
------------------ ------------
Net income....... $ (107,228) $ 566,948
================== ============
Identifiable
segment assets... $(2,486,488)(/4/) $41,243,749
================== ============
</TABLE>
(1) Financial data from segments below the quantitative thresholds requiring
disclosure are attributable to a number of smaller operating segments.
Those segments include BB&T's nonbank consumer finance operations, a
factoring subsidiary, a subsidiary specializing in financing commercial
lawn care equipment and a leasing company.
(2) Other revenues and expenses include amounts incurred by BB&T's support
functions not allocated to the various segments. Amounts include any
unallocated provision for loan and lease losses and unallocated general
corporate expenses, as well as costs associated with BB&T's Year 2000
compliance efforts.
(3) BB&T's reconciliation of total segment results to consolidated results
requires the elimination of the internal management accounting practices.
These adjustments include the elimination of the FTP credits and charges,
the elimination of the intersegment noninterest income described above and
the elimination of intersegment noninterest expense allocated to the
various segments.
(4) To reflect elimination entries necessary to consolidate the segment data.
48
<PAGE>
EXHIBIT 99.3
FIVE YEAR FINANCIAL SUMMARY AND SELECTED RATIOS
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
As of/For the Years Ended December 31,
---------------------------------------------------------------
1999 1998 1997 1996 1995
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Summary of Operations
Interest income........ $ 3,262,261 $ 2,999,395 $ 2,716,850 $ 2,439,329 $ 2,299,880
Interest expense....... 1,604,179 1,501,908 1,333,052 1,182,773 1,158,425
----------- ----------- ----------- ----------- -----------
Net interest income.... 1,658,082 1,497,487 1,383,798 1,256,556 1,141,455
Provision for loan and
lease losses.......... 104,667 103,148 113,679 71,474 47,948
----------- ----------- ----------- ----------- -----------
Net interest income
after provision for
loan and lease
losses................ 1,553,415 1,394,339 1,270,119 1,185,082 1,093,507
Noninterest income..... 793,686 621,532 529,106 395,831 300,890
Noninterest expense.... 1,436,056 1,183,224 1,151,308 988,865 961,668
----------- ----------- ----------- ----------- -----------
Income before income
taxes................. 911,045 832,647 647,917 592,048 432,729
Provision for income
taxes................. 296,685 265,699 221,706 192,929 142,022
----------- ----------- ----------- ----------- -----------
Net income............. $ 614,360 $ 566,948 $ 426,211 $ 399,119 $ 290,707
=========== =========== =========== =========== ===========
Per Common Share
Average shares
outstanding (000's):
Basic.................. 344,599 340,319 339,172 338,216 336,264
Diluted................ 350,798 347,357 345,404 345,843 350,101
Basic earnings per
share................. $ 1.78 $ 1.67 $ 1.26 $ 1.18 $ .85
=========== =========== =========== =========== ===========
Diluted earnings per
share................. $ 1.75 $ 1.63 $ 1.23 $ 1.15 $ .83
=========== =========== =========== =========== ===========
Cash dividends paid.... $ .75 $ .66 $ .58 $ .50 $ .43
Shareholders' equity... 9.76 9.68 8.65 8.00 7.56
Average Balances
Securities............. $11,316,722 $ 9,707,822 $ 8,880,129 $ 8,156,024 $ 7,920,860
Loans and leases *..... 29,118,123 26,266,844 23,366,132 20,938,577 19,487,828
Other assets........... 3,267,528 2,928,989 2,312,405 2,140,173 2,036,939
----------- ----------- ----------- ----------- -----------
Total assets......... $43,702,373 $38,903,655 $34,558,666 $31,234,774 $29,445,627
=========== =========== =========== =========== ===========
Deposits............... $28,422,050 $26,117,721 $24,637,767 $23,348,680 $21,640,549
Other liabilities...... 6,116,419 5,119,942 3,897,586 3,096,108 4,005,588
Long-term debt......... 5,800,764 4,583,995 3,237,492 2,199,316 1,369,453
Common shareholders'
equity................ 3,363,140 3,081,997 2,782,049 2,567,947 2,350,128
Preferred shareholders'
equity................ -- -- 3,772 22,723 79,909
----------- ----------- ----------- ----------- -----------
Total liabilities and
shareholders'
equity.............. $43,702,373 $38,903,655 $34,558,666 $31,234,774 $29,445,627
=========== =========== =========== =========== ===========
Period End Balances
Total assets........... $45,479,056 $41,243,749 $37,489,552 $32,932,082 $30,621,861
Deposits............... 28,791,574 27,842,986 25,858,066 24,165,136 22,812,095
Long-term debt......... 5,520,484 5,445,800 4,113,387 2,564,578 1,667,689
Shareholders' equity... 3,396,411 3,326,602 2,943,060 2,704,077 2,616,156
Selected Ratios
Rate of return on:
Average total assets... 1.41% 1.46% 1.23% 1.28% .99%
Average common
shareholders'
equity................ 18.27 18.40 15.32 15.50 12.12
Dividend payout........ 42.13 39.52 46.03 42.37 50.59
Average equity to
average assets........ 7.70 7.92 8.06 8.29 8.25
</TABLE>
- --------
* Loans and leases are net of unearned income and include loans held for sale.
NM--Not meaningful.
49
<PAGE>
Table 1
Selected Financial Data of Significant Banking & Thrift Subsidiaries
As of / For the Years Ended December 31, 1999, 1998 and 1997
<TABLE>
<CAPTION>
First
BB&T-NC BB&T-SC BB&T-VA Liberty Premier
----------- ---------- ---------- ---------- ----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
1999
Total assets............ $29,631,391 $4,842,462 $5,098,872 $1,765,277 $1,542,443
Securities.............. 7,740,265 477,705 1,308,673 399,005 160,119
Loans and leases, net of
unearned income*....... 19,402,829 3,698,046 3,294,038 1,201,689 802,712
Deposits................ 18,021,189 3,686,484 3,462,041 1,047,686 1,217,053
Shareholder's equity.... 2,130,303 364,060 471,938 123,658 147,098
Net interest income..... 968,187 216,781 188,522 59,626 63,852
Provision for loan and
lease losses........... 43,053 15,491 6,689 9,728 8,824
Noninterest income...... 564,174 68,473 51,170 22,072 8,926
Noninterest expense..... 896,799 126,689 145,242 59,615 44,050
Net income.............. 417,751 91,059 54,457 8,463 14,675
1998
Total assets............ $26,868,711 $4,641,393 $5,257,737 $1,506,352 $ 919,166
Securities.............. 6,735,729 783,727 1,177,446 322,152 80,423
Loans and leases, net of
unearned income*....... 17,845,119 3,266,871 3,321,677 1,034,511 746,185
Deposits................ 17,858,406 3,702,383 3,496,787 1,075,832 805,853
Shareholder's equity.... 2,170,812 429,572 612,083 123,333 94,776
Net interest income..... 902,319 201,132 187,189 49,653 45,596
Provision for loan and
lease losses........... 47,167 13,455 12,227 5,116 480
Noninterest income...... 459,246 71,945 52,550 20,080 7,972
Noninterest expense..... 801,036 119,224 143,515 40,632 26,365
Net income.............. 365,517 89,653 52,526 15,057 17,976
1997
Total assets............ $23,253,933 $4,364,982 $5,260,598 $1,269,997 $ 366,053
Securities.............. 5,590,186 1,020,554 1,469,392 245,277 42,177
Loans and leases, net of
unearned income*....... 15,749,571 3,052,755 3,274,679 910,502 292,194
Deposits................ 16,419,895 3,401,236 3,507,108 936,502 311,328
Shareholder's equity.... 1,816,733 374,871 574,742 101,457 27,365
Net interest income..... 867,392 184,341 123,738 43,105 14,690
Provision for loan and
lease losses........... 54,197 14,109 8,537 6,316 350
Noninterest income...... 439,772 70,916 27,008 15,650 1,994
Noninterest expense..... 825,898 135,018 90,649 35,320 10,520
Net income.............. 285,209 68,024 34,089 8,850 3,692
</TABLE>
- --------
* Includes loans held for sale.
50
<PAGE>
Table 2
Composition of Loan and Lease Portfolio*
<TABLE>
<CAPTION>
December 31,
-----------------------------------------------------------
1999 1998 1997 1996 1995
----------- ----------- ----------- ----------- -----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Loans:
Commercial, financial
and agricultural..... $ 4,808,742 $ 4,465,713 $ 4,086,922 $ 3,554,955 $ 3,042,383
Real estate--
construction and land
development.......... 3,672,191 2,803,085 2,688,239 2,023,971 1,487,937
Real estate--
mortgage............. 16,784,223 15,163,133 13,822,249 12,184,992 11,873,917
Consumer.............. 3,745,626 3,322,275 3,285,231 3,331,258 2,940,155
----------- ----------- ----------- ----------- -----------
Loans held for
investment......... 29,010,782 25,754,206 23,882,641 21,095,176 19,344,392
Loans held for
sale............... 363,255 1,296,315 616,400 293,632 322,271
----------- ----------- ----------- ----------- -----------
Total loans....... 29,374,037 27,050,521 24,499,041 21,388,808 19,666,663
Leases.................. 2,605,911 1,620,326 788,462 576,991 376,152
----------- ----------- ----------- ----------- -----------
Total loans and
leases........... $31,979,948 $28,670,847 $25,287,503 $21,965,799 $20,042,815
=========== =========== =========== =========== ===========
</TABLE>
- --------
* Balances include unearned income.
51
<PAGE>
Table 3
Selected Loan Maturities and Interest Sensitivity *
<TABLE>
<CAPTION>
December 31, 1999
------------------------------------
Commercial,
Financial
and Real Estate:
Agricultural Construction Total
------------ ------------ ----------
(Dollars in thousands)
<S> <C> <C> <C>
Fixed rate:
1 year or less (2)...................... $ 243,500 $ 548,993 $ 792,493
1-5 years............................... 1,033,947 295,611 1,329,558
After 5 years........................... 267,601 -- 267,601
---------- ---------- ----------
Total................................. 1,545,048 844,604 2,389,652
---------- ---------- ----------
Variable rate:
1 year or less (2)...................... 1,708,543 1,922,759 3,631,302
1-5 years............................... 1,406,652 904,828 2,311,480
After 5 years........................... 148,499 -- 148,499
---------- ---------- ----------
Total................................. 3,263,694 2,827,587 6,091,281
---------- ---------- ----------
Total loans and leases (1).......... $4,808,742 $3,672,191 $8,480,933
========== ========== ==========
</TABLE>
- --------
* Balances include unearned income.
Scheduled repayments are reported in the maturity category in which the
payment is due. Determinations of maturities are based upon contract terms.
BB&T's credit policy does not permit automatic renewals of loans. At the
scheduled maturity date (including balloon payment date), the customer must
request a new loan to replace the matured loan and execute a new note with
rate, terms and conditions negotiated at that time.
(1)The table excludes:
<TABLE>
<CAPTION>
(Dollars in
thousands)
-----------
<S> <C>
(i) consumer loans to individuals for household, family
and other personal expenditures....................... $ 3,745,626
(ii)real estate mortgage loans............................ 16,784,223
(iii)loans held for sale.................................. 363,255
(iv)leases................................................ 2,605,911
-----------
$23,499,015
===========
</TABLE>
(2) Includes loans due on demand.
52
<PAGE>
Table 4
Allocation of Allowance for Loan and Lease Losses by Category
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
----------------- ----------------- ----------------- ----------------- -----------------
% Loans % Loans % Loans % Loans % Loans
in each in each in each in each in each
Amount category Amount category Amount category Amount category Amount category
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at end of period
applicable to:
Commercial, financial
and agricultural....... $ 65,278 15% $ 57,934 16% $ 60,181 16% $ 60,583 16% $ 59,906 15%
Real estate:
Construction and land
development........... 41,465 11 34,420 10 26,224 11 18,831 9 23,131 7
Mortgage............... 145,385 52 115,079 53 112,365 55 97,548 55 94,674 59
-------- --- -------- --- -------- --- -------- --- -------- ---
Real estate--total..... 186,850 63 149,499 63 138,589 66 116,379 64 117,805 66
-------- --- -------- --- -------- --- -------- --- -------- ---
Consumer................ 34,940 14 39,148 15 36,247 15 29,708 17 22,890 17
Leases.................. 21,726 8 12,737 6 8,021 3 5,207 3 3,325 2
Unallocated............. 102,394 -- 119,213 -- 89,603 -- 78,162 -- 63,254 --
-------- --- -------- --- -------- --- -------- --- -------- ---
Total.................. $411,188 100% $378,531 100% $332,641 100% $290,039 100% $267,180 100%
======== === ======== === ======== === ======== === ======== ===
</TABLE>
53
<PAGE>
Table 5
Analysis of Allowance for Loan and Lease Losses
<TABLE>
<CAPTION>
December 31,
---------------------------------------------------------------
1999 1998 1997 1996 1995
----------- ----------- ----------- ----------- -----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Balance, beginning of
period................. $ 378,531 $ 332,641 $ 290,039 $ 267,180 $ 256,110
Charge-offs:
Commercial, financial
and agricultural..... (27,094) (16,067) (20,599) (14,893) (14,066)
Real estate........... (16,347) (13,001) (15,027) (12,475) (14,236)
Consumer.............. (67,800) (73,913) (74,833) (53,882) (33,743)
Lease receivables..... (993) (1,167) (671) (768) (614)
----------- ----------- ----------- ----------- -----------
Total charge-offs... (112,234) (104,148) (111,130) (82,018) (62,659)
----------- ----------- ----------- ----------- -----------
Recoveries:
Commercial, financial
and agricultural..... 11,218 8,501 7,372 9,684 7,617
Real estate........... 4,035 3,883 5,366 6,789 4,059
Consumer.............. 14,167 12,759 9,644 9,327 9,602
Lease receivables..... 107 425 232 136 395
----------- ----------- ----------- ----------- -----------
Total recoveries.... 29,527 25,568 22,614 25,936 21,673
----------- ----------- ----------- ----------- -----------
Net charge-offs....... (82,707) (78,580) (88,516) (56,082) (40,986)
----------- ----------- ----------- ----------- -----------
Provision charged to
expense.............. 104,667 103,148 113,679 71,474 47,958
----------- ----------- ----------- ----------- -----------
Allowance of loans
acquired in purchase
transactions......... 10,392 21,258 17,439 7,467 4,098
Reconciliation of
fiscal year of merged
companies to calender
year................. 305 64 -- -- --
----------- ----------- ----------- ----------- -----------
Balance, end of period.. $ 411,188 $ 378,531 $ 332,641 $ 290,039 $ 267,180
=========== =========== =========== =========== ===========
Average loans and leases
*...................... $29,118,123 $26,266,844 $23,366,132 $20,937,716 $19,599,374
Net charge-offs as a
percentage of average
loans and leases....... .28% .30% .38% .27% .21%
=========== =========== =========== =========== ===========
</TABLE>
- --------
* Loans and leases are net of unearned income and include loans held for sale.
54
<PAGE>
Table 6
Composition of Securities Portfolio
<TABLE>
<CAPTION>
December 31,
----------------------------------
1999 1998 1997
----------- ----------- ----------
(Dollars in thousands)
<S> <C> <C> <C>
Trading Securities (at estimated fair
value):................................... $ 93,221 $ 60,422 $ 67,878
----------- ----------- ----------
Securities held to maturity (at amortized
cost):
U.S. Treasury, government and agency
obligations........................... 23,117 59,656 126,608
States and political subdivisions...... 74,005 235,233 272,591
Mortgage-backed securities............. -- 71,663 147,680
Other securities....................... -- 6,920 1,315
----------- ----------- ----------
Total securities held to maturity........ 97,122 373,472 548,194
----------- ----------- ----------
Securities available for sale (at estimated
fair value):
U.S. Treasury, government and agency
obligations........................... 4,682,816 3,944,528 4,755,355
States and political subdivisions...... 568,070 188,095 106,358
Mortgage-backed securities............. 3,886,646 4,243,343 3,421,009
Other securities....................... 1,633,715 1,283,367 507,557
----------- ----------- ----------
Total securities available for sale...... 10,771,247 9,659,333 8,790,279
----------- ----------- ----------
Total securities........................... $10,961,590 $10,093,227 $9,406,351
=========== =========== ==========
</TABLE>
55
<PAGE>
Table 7
Scheduled Maturities of Time Deposits of $100,000 or Greater
December 31, 1999
(Dollars in thousands)
<TABLE>
<S> <C>
Maturity Schedule
Less than three months............................................ $1,576,249
Three through six months.......................................... 755,278
Seven through twelve months....................................... 890,130
Over twelve months................................................ 695,079
----------
Total........................................................... $3,916,736
==========
</TABLE>
56
<PAGE>
Table 8
Short-Term Borrowed Funds
The following information summarizes certain pertinent information for the
past three years on short-term borrowed funds:
<TABLE>
<CAPTION>
1999 1998 1997
---------- ---------- ----------
(Dollars in thousands)
<S> <C> <C> <C>
Maximum outstanding at any month-end
during the year.......................... $7,080,882 $5,850,673 $4,202,356
Average outstanding during the year....... 5,463,467 4,535,876 3,451,085
Average interest rate during the year..... 4.87% 5.23% 5.33%
Average interest rate at end of year...... 4.16 4.87 5.57
</TABLE>
57
<PAGE>
Table 9
Capital Adequacy for BB&T Corporation and Principal Banking and Thrift
Subsidiaries
<TABLE>
<CAPTION>
Regulatory BB&T- BB&T- BB&T- First
Minimums BB&T NC SC VA Liberty Premier
---------- ---- ----- ----- ----- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Risk-based capital ratios:
Tier 1 capital (1)........ 4.0% 9.4% 9.8% 9.7% 11.3% 9.3% 11.6%
Total risk-based capital
(2)...................... 8.0 13.0 11.0 11.0 12.5 10.5 12.9
Tier 1 leverage ratio (3)... 3.0 6.8 6.7 7.7 7.5 6.9 9.6
</TABLE>
- --------
(1) Shareholders' equity less nonqualifying intangible assets; computed as a
ratio of risk-weighted assets, as defined in the risk-based capital
guidelines.
(2) Tier 1 capital plus qualifying loan loss allowance and subordinated debt;
computed as a ratio of risk-weighted assets as defined in the risk-based
capital guidelines.
(3) Tier 1 capital computed as a percentage of fourth quarter average assets
less nonqualifying intangibles.
58
<PAGE>
Table 10
Securities
<TABLE>
<CAPTION>
December 31, 1999
--------------------------------
Carrying Value Average Yield (3)
-------------- -----------------
(Dollars in thousands)
<S> <C> <C>
U.S. Treasury, government and agency
obligations (1):
Within one year............................ $ 1,002,138 6.37%
One to five years.......................... 2,839,249 6.25
Five to ten years.......................... 1,392,834 6.53
After ten years............................ 3,358,358 6.45
----------- ----
Total.................................... 8,592,579 6.39
----------- ----
States and political subdivisions:
Within one year............................ 34,698 8.41
One to five years.......................... 130,085 8.18
Five to ten years.......................... 228,156 7.19
After ten years............................ 249,136 7.53
----------- ----
Total.................................... 642,075 7.59
----------- ----
Other securities:
Within one year............................ 14,806 6.82
One to five years.......................... 11,678 7.34
Five to ten years.......................... 6,602 6.19
After ten years............................ 342,191 6.54
----------- ----
Total.................................... 375,277 6.57
----------- ----
Securities with no stated maturity........... 1,351,659 5.84
----------- ----
Total securities (2)....................... $10,961,590 6.40%
=========== ====
</TABLE>
- --------
(1) Included in U.S. Treasury, government and agency obligations are mortgage-
backed securities totaling $3.9 billion classified as available for sale
and disclosed at estimated fair value. These securities are included in
each of the categories based upon final stated maturity dates. The
original contractual lives of these securities range from five to 30
years; however, a more realistic average maturity would be substantially
shorter because of the monthly return of principal on certain securities.
(2) Includes securities held to maturity of $97.1 million carried at amortized
cost and securities available for sale and trading securities carried at
estimated fair values of $10.8 billion and $93.2 million, respectively.
(3) Taxable equivalent basis as applied to amortized cost.
59
<PAGE>
Table 11
Asset Quality
<TABLE>
<CAPTION>
December 31,
----------------------------
1999 1998 1997
-------- -------- --------
(Dollars in thousands)
<S> <C> <C> <C>
Nonaccrual loans and leases*..................... $108,708 $110,647 $120,129
Restructured loans............................... 1,094 3,214 2,492
Foreclosed property.............................. 28,521 34,277 43,531
-------- -------- --------
Nonperforming assets........................... $138,323 $148,138 $166,152
======== ======== ========
Loans 90 days or more past due and still
accruing...................................... $ 54,493 $ 55,000 $ 50,121
======== ======== ========
Asset Quality Ratios:
Nonaccrual and restructured loans and leases as
a percentage of loans and leases.............. .41% .41% .49%
Nonperforming assets as a percentage of:
Total assets................................. .30 .36 .44
Loans and leases plus foreclosed property.... .45 .53 .66
Net charge-offs as a percentage of average
loans and leases.............................. .28 .30 .38
Allowance for losses as a percentage of loans
and leases.................................... 1.34 1.36 1.33
Ratio of allowance for losses to:
Net charge-offs.............................. 4.97x 4.82x 3.76x
Nonaccrual and restructured loans and
leases...................................... 3.74 3.32 2.71
</TABLE>
- --------
NOTE: Items referring to loans and leases are net of unearned income and
include loans held for sale.
* Includes $30.7 million, $45.8 million and $50.7 million of impaired loans
at December 31, 1999, 1998 and 1997, respectively.
See Note D in the "Notes to Consolidated Financial Statements."
60
<PAGE>
Table 12
FTE Net Interest Income and Rate/Volume Analysis
For the Years Ended December 31, 1999, 1998 and 1997
<TABLE>
<CAPTION>
Average Balances Yield/Rate Income/Expense
------------------------------------ ---------------- --------------------------------
1999 1998 1997 1999 1998 1997 1999 1998 1997
------------ ----------- ----------- ---- ---- ---- ---------- ---------- ----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Assets
Securities (1):
U.S. Treasury,
government and
other (5)....... $ 10,705,676 $ 9,352,840 $ 8,540,926 6.52% 6.70% 6.71% $ 698,455 $ 626,555 $ 573,310
States and
political
subdivisions.... 611,046 354,982 339,203 7.76 8.39 8.31 47,407 29,782 28,193
------------ ----------- ----------- ---- ---- ---- ---------- ---------- ----------
Total securities
(5)............. 11,316,722 9,707,822 8,880,129 6.59 6.76 6.77 745,862 656,337 601,503
Other earning
assets (2)...... 367,113 364,674 232,896 5.05 5.60 6.18 18,544 20,429 14,395
Loans and
leases, net of
unearned income
(1)(3)(4)(5).... 29,118,123 26,266,844 23,366,132 8.88 9.11 9.24 2,584,847 2,392,578 2,158,921
------------ ----------- ----------- ---- ---- ---- ---------- ---------- ----------
Total earning
assets.......... 40,801,958 36,339,340 32,479,157 8.21 8.45 8.54 3,349,253 3,069,344 2,774,819
------------ ----------- ----------- ---- ---- ---- ---------- ---------- ----------
Non-earning
assets.......... 2,900,415 2,564,315 2,079,509
------------ ----------- -----------
Total assets.... $ 43,702,373 $38,903,655 $34,558,666
============ =========== ===========
Liabilities and
Shareholders'
Equity
Interest-bearing
deposits:
Savings and
interest-
checking........ $ 2,183,793 $ 2,335,781 $ 2,767,257 1.69 2.15 1.96 36,843 50,217 54,376
Money rate
savings......... 7,742,709 6,476,392 5,344,760 2.98 3.03 3.20 230,382 196,330 170,975
Other time
deposits........ 14,523,913 13,708,684 13,282,257 5.17 5.49 5.52 750,381 752,785 733,205
------------ ----------- ----------- ---- ---- ---- ---------- ---------- ----------
Total interest-
bearing
deposits........ 24,450,415 22,520,857 21,394,274 4.16 4.44 4.48 1,017,606 999,332 958,556
Short-term
borrowed funds.. 5,463,467 4,535,876 3,451,085 4.87 5.23 5.33 266,275 237,158 183,814
Long-term debt.. 5,800,764 4,583,995 3,237,492 5.52 5.79 5.89 320,298 265,418 190,682
------------ ----------- ----------- ---- ---- ---- ---------- ---------- ----------
Total interest-
bearing
liabilities..... 35,714,646 31,640,728 28,082,851 4.49 4.75 4.75 1,604,179 1,501,908 1,333,052
------------ ----------- ----------- ---- ---- ---- ---------- ---------- ----------
Noninterest-
bearing
deposits........ 3,971,635 3,596,864 3,243,493
Other
liabilities..... 652,952 584,066 446,501
Shareholders'
equity.......... 3,363,140 3,081,997 2,785,821
------------ ----------- -----------
Total
liabilities and
shareholders'
equity.......... $ 43,702,373 $38,903,655 $34,558,666
============ =========== ===========
Average interest
rate spread..... 3.72 3.70 3.79
Net yield on
earning assets.. 4.28% 4.31% 4.44% $1,745,074 $1,567,436 $1,441,767
==== ==== ==== ========== ========== ==========
Taxable
equivalent
adjustment...... $ 86,992 $ 69,949 $ 57,969
========== ========== ==========
<CAPTION>
1998 v. 1997 1997 v. 1996
------------------------------ ------------------------------
Change due to Change due to
Increase ------------------- Increase -------------------
(Decrease) Rate Volume (Decrease) Rate Volume
---------- --------- --------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Assets
Securities (1):
U.S. Treasury,
government and
other (5)....... $ 71,900 $(16,723) $ 88,623 $ 53,245 $ (1,148) $ 54,393
States and
political
subdivisions.... 17,625 (2,394) 20,019 1,589 267 1,322
---------- --------- --------- ---------- --------- ---------
Total securities
(5)............. 89,525 (19,117) 108,642 54,834 (881) 55,715
Other earning
assets (2)...... (1,885) (2,021) 136 6,034 (1,457) 7,491
Loans and
leases, net of
unearned income
(1)(3)(4)(5).... 192,269 (62,096) 254,365 233,657 (30,950) 264,607
---------- --------- --------- ---------- --------- ---------
Total earning
assets.......... 279,909 (83,234) 363,143 294,525 (33,288) 327,813
---------- --------- --------- ---------- --------- ---------
Non-earning
assets..........
Total assets....
Liabilities and
Shareholders'
Equity
Interest-bearing
deposits:
Savings and
interest-
checking........ (13,374) (10,270) (3,104) (4,159) 4,817 (8,976)
Money rate
savings......... 34,052 (3,688) 37,740 25,355 (9,326) 34,681
Other time
deposits........ (2,404) (45,843) 43,439 19,580 (3,854) 23,434
---------- --------- --------- ---------- --------- ---------
Total interest-
bearing
deposits........ 18,274 (59,801) 78,075 40,776 (8,363) 49,139
Short-term
borrowed funds.. 29,117 (16,911) 46,028 53,344 (3,433) 56,777
Long-term debt.. 54,880 (12,791) 67,671 74,736 (3,280) 78,016
---------- --------- --------- ---------- --------- ---------
Total interest-
bearing
liabilities..... 102,271 (89,503) 191,774 168,856 (15,076) 183,932
---------- --------- --------- ---------- --------- ---------
Noninterest-
bearing
deposits........
Other
liabilities.....
Shareholders'
equity..........
Total
liabilities and
shareholders'
equity..........
Average interest
rate spread.....
Net yield on
earning assets.. $177,638 $ 6,269 $171,369 $125,669 $(18,212) $143,881
========== ========= ========= ========== ========= =========
Taxable
equivalent
adjustment......
</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.
61
<PAGE>
Table 13
Noninterest Income
<TABLE>
<CAPTION>
% Change
----------------
Years Ended December 31,
--------------------------- 1999 v. 1998 v.
1999 1998 1997 1998 1997
-------- -------- -------- ------- -------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Service charges on deposits...... $211,491 $190,394 $170,375 11.1% 11.7%
Mortgage banking income.......... 153,020 118,200 75,973 29.5 55.6
Trust income..................... 55,416 42,603 36,849 30.1 15.6
Agency insurance commissions..... 78,945 52,186 40,149 51.3 30.0
Other insurance commissions...... 11,814 11,284 14,069 4.7 (19.8)
Securities (losses) gains, net... (5,202) 8,841 4,843 (158.8) 82.6
Bankcard fees and merchant
discounts....................... 37,707 30,579 24,104 23.3 26.9
Investment banking and brokerage
fees and commissions............ 127,366 44,326 27,180 187.3 63.1
Other bank service fees and
commissions..................... 61,614 57,170 44,037 7.8 29.8
International income............. 6,120 4,563 3,685 34.1 23.8
Amortization of negative
goodwill........................ 6,243 6,243 6,180 -- 1.0
Other noninterest income......... 49,152 55,143 81,662 (10.9) (32.5)
-------- -------- -------- ------ -----
Total noninterest income....... $793,686 $621,532 $529,106 27.7% 17.5%
======== ======== ======== ====== =====
</TABLE>
62
<PAGE>
Table 14
Noninterest Expense
<TABLE>
<CAPTION>
% Change
---------------
Years Ended December 31,
-------------------------------- 1999 v. 1998 v.
1999 1998 1997 1998 1997
---------- ---------- ---------- ------- -------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Salaries and wages........... $ 601,394 $ 503,834 $ 456,367 19.4% 10.4%
Pension and other employee
benefits.................... 129,308 100,953 110,506 28.1 (8.6)
Net occupancy expense on bank
premises.................... 90,834 78,358 94,578 15.9 (17.1)
Furniture and equipment
expense..................... 124,449 104,045 92,316 19.6 12.7
Federal deposit insurance
premiums.................... 9,406 5,522 6,975 70.3 (20.8)
Foreclosed property expense.. 4,483 2,316 3,548 93.6 (34.7)
Amortization of intangibles
and mortgage servicing
rights...................... 74,267 54,769 27,729 35.6 97.5
Software..................... 19,216 11,560 15,494 66.2 (25.4)
Telephone.................... 28,669 23,770 21,669 20.6 9.7
Donations.................... 12,046 6,643 7,536 81.3 (11.8)
Advertising and public
relations................... 23,880 29,441 31,231 (18.9) (5.7)
Travel and transportation.... 14,939 11,168 9,636 33.8 15.9
Professional services........ 72,354 54,514 53,600 32.7 1.7
Supplies..................... 20,857 19,786 18,494 5.4 7.0
Loan and lease expense....... 33,133 26,938 43,560 23.0 (38.2)
Deposit related expense...... 17,075 15,335 17,154 11.3 (10.6)
Other noninterest expenses... 159,746 134,272 140,915 19.0 (4.7)
---------- ---------- ---------- ----- -----
Total noninterest expense.. $1,436,056 $1,183,224 $1,151,308 21.4% 2.8%
========== ========== ========== ===== =====
</TABLE>
63
<PAGE>
Table 15
Interest Rate Sensitivity Gap Analysis
December 31, 1999
<TABLE>
<CAPTION>
Expected Repricing or Maturity Date
-------------------------------------------------------------
Within One to Three to After Five
One Year Three Years Five Years Years Total
----------- ----------- ---------- ---------- -----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Assets
Securities and other
interest-earning
assets*.............. $ 2,899,391 $ 2,770,785 $3,880,017 $1,932,545 $11,482,738
Federal funds sold and
securities purchased
under resale
agreements or similar
arrangements......... 244,520 -- -- -- 244,520
Loans and leases**.... 17,129,553 4,659,681 5,040,816 3,906,633 30,736,683
----------- ----------- ---------- ---------- -----------
Total interest-earning
assets................. 20,273,464 7,430,466 8,920,833 5,839,178 42,463,941
----------- ----------- ---------- ---------- -----------
Liabilities
Savings and interest
checking***.......... -- 1,188,566 396,189 396,189 1,980,944
Money rate
savings***........... 4,240,143 4,240,142 -- -- 8,480,285
Other time deposits... 10,970,202 2,353,880 274,597 62,843 13,661,522
Foreign deposits...... 529,401 -- -- -- 529,401
Federal funds
purchased and
securities sold under
repurchase agreements
or similar
arrangements......... 2,197,655 -- -- -- 2,197,655
Long-term debt and
other borrowings..... 6,427,413 442,158 145,652 3,388,488 10,403,711
----------- ----------- ---------- ---------- -----------
Total interest-bearing
liabilities............ 24,364,814 8,224,746 816,438 3,847,520 $37,253,518
----------- ----------- ---------- ---------- ===========
Asset-liability gap..... (4,091,350) (794,280) 8,104,395 1,991,658
----------- ----------- ---------- ----------
Derivatives affecting
interest rate
sensitivity:
Pay fixed interest
rate swaps........... 476,146 (4,361) (441,036) (30,749)
Receive fixed interest
rate swaps........... (560,000) -- 270,000 290,000
Caps, floors and
collars.............. (47,250) -- 47,250 --
----------- ----------- ---------- ----------
(131,104) (4,361) (123,786) 259,251
----------- ----------- ---------- ----------
Interest rate
sensitivity gap........ $(4,222,454) $ (798,641) $7,980,609 $2,250,909
=========== =========== ========== ==========
Cumulative interest rate
sensitivity gap........ $(4,222,454) $(5,021,095) $2,959,514 $5,210,423
=========== =========== ========== ==========
</TABLE>
- --------
* Securities based on amortized cost.
** Loans and leases include loans held for sale and are net of unearned
income.
*** Projected runoff of deposits that do not have a contractual maturity date
was computed based upon decay rate assumptions developed by bank
regulators to assist banks in addressing FDICIA rule 305.
64
<PAGE>
Table 16
Capital--Components and Ratios
<TABLE>
<CAPTION>
December 31,
------------------------
1999 1998
----------- -----------
(Dollars in thousands)
<S> <C> <C>
Tier 1 capital........................................ $ 3,037,105 $ 2,906,707
Tier 2 capital........................................ 1,161,040 1,173,484
----------- -----------
Total regulatory capital.............................. $ 4,198,145 $ 4,080,191
=========== ===========
Risk-based capital ratios:
Tier 1 capital...................................... 9.4% 10.6%
Total regulatory capital............................ 13.0 14.8
Tier 1 leverage ratio................................. 6.8 7.3
</TABLE>
65
<PAGE>
Table 17
Quarterly Common Stock Summary
<TABLE>
<CAPTION>
1999 1998
------------------------------ ------------------------------
Closing Sales Prices Closing Sales Prices
-------------------- Dividends -------------------- Dividends
High Low Last Paid High Low Last Paid
------ ------ ------ --------- ------ ------ ------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Quarter Ended:
March 31....... $40.44 $34.94 $36.19 $.175 $33.84 $29.03 $33.84 $.155
June 30........ 40.25 33.81 36.69 .175 34.06 32.03 33.81 .155
September 30... 36.63 30.50 32.38 .20 36.03 28.00 29.94 .175
December 31.... 36.94 27.31 27.38 .20 40.63 27.31 40.31 .175
----- -----
Year......... $40.44 $27.31 $27.38 $ .75 $40.63 $27.31 $40.31 $ .66
===== =====
</TABLE>
66
<PAGE>
Table 18
Quarterly Financial Summary--Unaudited
<TABLE>
<CAPTION>
1999 1998
-------------------------------------------------- -----------------------------------------------
Fourth Third Second First Fourth Third Second First
Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Consolidated Summary of
Operations:
Net interest income
FTE.................. $ 455,872 $ 445,899 $ 433,411 $ 409,892 $ 400,531 $ 390,024 $ 398,484 $ 378,397
FTE adjustment........ 22,278 23,149 22,388 19,177 19,106 17,414 17,006 16,423
Provision for loan and
lease losses......... 37,737 21,862 23,499 21,569 25,850 23,029 28,224 26,045
Securities (losses)
gains, net........... (926) (1,575) (2,895) 194 2,126 2,542 1,351 2,822
Other noninterest
income............... 205,426 202,940 207,532 182,990 158,023 157,857 154,396 142,415
Noninterest expense... 380,443 381,241 349,122 325,250 306,207 300,712 292,999 283,306
Provision for income
taxes................ 74,270 71,177 78,166 73,072 65,659 66,072 69,849 64,119
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Net income............ $ 145,644 $ 149,835 $ 164,873 $ 154,008 $ 143,858 $ 143,196 $ 146,153 $ 133,741
=========== =========== =========== =========== =========== =========== =========== ===========
Diluted net income per
share................ $ .41 $ .43 $ .47 $ .44 $ .41 $ .42 $ .42 $ .39
=========== =========== =========== =========== =========== =========== =========== ===========
Selected Average
Balances:
Assets................ $45,292,012 $44,416,597 $43,491,518 $41,560,422 $40,240,901 $38,020,660 $38,491,440 $37,700,027
Securities, at
amortized cost....... 11,529,896 11,851,013 11,516,038 10,351,116 10,223,946 9,404,725 9,602,955 9,447,202
Loans and leases *.... 30,382,190 29,295,979 28,688,111 28,078,948 26,938,336 25,901,741 26,039,929 25,362,679
Total earning assets.. 42,237,405 41,590,038 40,593,748 38,739,454 37,436,001 35,597,872 36,084,042 35,307,295
Deposits.............. 28,955,497 28,683,773 28,210,933 27,822,672 26,753,133 25,451,404 25,888,435 25,421,752
Short-term borrowed
funds................ 6,142,365 5,828,576 5,546,130 4,312,588 4,452,967 4,281,779 4,829,209 4,530,303
Long-term debt........ 6,084,206 5,939,927 5,717,413 5,453,044 5,148,796 4,762,526 4,173,606 4,196,302
Total interest-bearing
liabilities.......... 37,040,541 36,442,901 35,550,763 33,780,461 32,567,493 30,917,956 31,326,542 30,765,957
Shareholders' equity.. 3,429,785 3,302,696 3,374,246 3,345,572 3,304,732 2,942,666 2,991,571 2,975,744
</TABLE>
- ------
* Loans and leases are net of unearned income and include loans held for sale.
67
