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BB&T Corporation

BB&T Corporation

200 West Second Street
Winston-Salem, North Carolina 27101
U.S.A.
Telephone: (336) 733-2000
Fax: (336) 733-2209
Web site: http://www.bbandt.com

Public Company
Incorporated:
1968 as Southern National Corporation
Employees: 27,700
Total Assets: $109.16 billion (2005)
Stock Exchanges: New York
Ticker Symbol: BBT
NAIC: 522110 Commercial Banking; 523920 Portfolio Management; 523991 Trust, Fiduciary, and Custody Activities; 524210 Insurance Agencies and Brokerages

BB&T Corporation is one of the leading banking groups in the Southeast. It is the parent company to North Carolina's oldest bank. The regional financial powerhouse also has substantial insurance, brokerage, and asset management businesses. BB&T has grown aggressively by acquisition since the 1980s; the company has a decentralized decision-making structure and strives for a community banking feel.

ORIGINS

BB&T traces its origins to 1872, when Alpheus Branch and Thomas Jefferson Hadley launched a bank called Branch & Hadley in the small farming town of Wilson, North Carolina. In the midst of the Reconstruction, the South was in political and financial chaos. As BB&T Chairman and CEO John A. Allison IV said in a Newcomen Society address, Branch and Hadley helped local cotton farmers stay in business. Branch bought out Hadley in 1887 and renamed the bank Branch & Company, Bankers.

According to Allison, the local economy was thriving by 1900, thanks to the addition of the more lucrative tobacco farming. By this time, the bank had received a North Carolina charter and had gone through a couple of different names (Wilson Banking and Trust Company and the State Bank of Wilson) before becoming known as Branch Banking Company. It was renamed Branch Banking and Trust Company (BB&T) in 1913.

The number of services offered increased steadily in the early decades of the 20th century. The bank began offering insurance and mortgages in the early 1920s. Around the same time, it became one of the first banks in the region to open branch offices. According to Allison, BB&T managed to triple its assets during the Great Depression, a time when many other banks failed.

BB&T handled government bonds during World War II and financed returning soldiers' postwar lifestyles with consumer loans, said Allison. It retained its emphasis on business banking as well.

SLOW GROWTH UNTIL 1981

BB&T had an office in Raleigh by 1959. A new headquarters building was constructed in Wilson, North Carolina, in 1971. These were highlights of a period of relatively slow growth. Assets were about $250 million in the early 1970s, and agriculture accounted for about one-quarter of its lending, according to the Greensboro News-Record. As North Carolina adapted to a changing, technology-driven economy, so would BB&T.

BB&T began the 1980s with deposits of $600 million. It had 81 branches, all in North Carolina. A policy of growth by acquisition was launched in 1981 with the purchase of Gastonia, North Carolina's Independence National Bank. By the mid-1980s, its branches stretched from the mountains to the sea.

BB&T entered South Carolina by merging with Greenville's Community Bancorporation Inc. in 1987, which was renamed BB&T of South Carolina. By the end of the decade, BB&T had assets of $4.7 billion. The holding company, which had been renamed BB&T Financial Corporation, had 187 branches in 105 communities in two states. Though it had grown considerably in the 1980s, it was a distant fourth to North Carolina's Big Three banking giants (NCNB Corp., First Union Corp. and Wachovia Corp.). It did, however, lay claim to the distinction of being the oldest operating bank in the state.

L. Vincent Lowe, Jr., became president and CEO in 1982 upon the death of Thorne Gregory. Lowe himself passed away in 1989. John A. Allison IV was named chairman and CEO after the death of Lowe, who had been his mentor. Allison had started working for the bank in 1971 while studying for an M.B.A. Forbes dubbed Allison the "Philosopher King" for his penchant for citing thinkers from the ancient Greeks to Ayn Rand.

A strong emphasis on reason would permeate the company's literature. Allison quoted Aristotle: "We are what we repeatedly do." What BB&T did repeatedly was buy banks, making it one of the leading consolidators in the Southeast. The company took advantage of the savings and loan crisis of the 1980s by acquiring healthy thrifts at bargain prices, once federal bailout legislation was expanded. Allison's management style stressed decentralization, striving for a community banking feel at the branch level. BB&T also became a specialist in lending to small to medium-sized businesses.

1995 SOUTHERN NATIONAL MERGER

BB&T combined with Winston-Salem's Southern National Corporation in a merger of equals in 1995. Southern National, the fifth largest bank in North Carolina before the merger (BB&T was number four), had been formed in 1897 in Lumberton.

The newly merged company had assets of $18 billion, making it the 35th largest bank in the United States and the sixth largest in the Southeast. While the BB&T brand was kept in use, Southern National Corporation, a holding company formed in 1968, was the surviving entity; it was renamed BB&T Corporation in 1997. Winston-Salem, where Southern National had been based, became BB&T's new home.

The mergers and acquisitions activity continued, bringing the company into Virginia with the January 1995 purchase of Commerce Bank of Hampton Roads. BB&T then bought Richmond's Fidelity Financial Bankshares Corporation.

In 1997, BB&T added Virginia First Financial Corporation, a thrift with a presence in southern and central parts of the state. Another Virginia acquisition, Craigie Inc. of Richmond, brought BB&T into investment banking for the first time, thanks to the loosening of a federal prohibition on banks selling securities. Another Richmond investment bank, the venerable Scott & Stringfellow (established 1893), was acquired later. BB&T set up its own venture capital firm in March 1998.

Sub-prime auto finance company Regional Acceptance of Greenville, North Carolina, was acquired in 1997. The march up the East Coast continued. Washington, D.C.'s Franklin Bancorporation Inc. was added in December 1997. Norfolk's Life Bancorp Inc. followed in March 1998. Several months later Maryland Federal Bancorp Inc. was acquired. The company also bought MainStreet Financial Corporation, a community bank which was based in the southwest Virginia town of Martinsville but had offices as far afield as Washington, D.C.

COMPANY PERSPECTIVES

At BB&T we have two powerful passions. Our fundamental passion is our Vision: To Create The Best Financial Institution PossibleThe "World Standard"The "Best of the Best." We believe that the best can be objectively evaluated by rational performance standards in relation to the accomplishment of our mission.

To be the best of the best, we must constantly find ways to deliver better value to our clients in a highly profitable manner. This requires us to keep our minds focused at all times on innovative ways to enhance our productivity.

BB&T had a very busy year in 1999, as it expanded on all fronts. It arrived in metro Atlanta through the purchase of Newman, Georgia's First Citizens Corporation. Macon's First Liberty Financial Corporation was also added. Premier Bancshares, an Atlanta commercial bank, followed.

At the same time, BB&T was buying Mason-Dixon Bancshares of Westminster, Maryland. The purchase of Williamson, West Virginia-based Matewan BancShares Inc. brought the company into West Virginia and Kentucky.

While making numerous acquisitions, BB&T introduced a number of online services in the latter half of the decade. It also instituted an aggressive sales process that was lifting its fee income faster than that of other major banks, Chairman and CEO John A. Allison IV said in a Newcomen Society address.

BB&T ended the 1990s as one of the two-dozen largest bank holding companies in the United States, with assets of about $43 billion. It employed 13,000 people at 620 branches in seven states in the Southeast and Mid-Atlantic region, as well as Washington, D.C. BB&T had a substantial presence in a number of fields besides commercial banking. It claimed the largest network of independent insurance agents in the Carolinas.

BB&T proposed merging with giant rival Wachovia Corp. in 2000. This fell through, but the shopping spree continued, at the rate of seven to ten banks a year. The purchase of Knoxville's BankFirst Corp. brought BB&T into Tennessee for the first time.

The company typically sought small to mid-sized banks with assets of $250 million to $10 billion. In acquiring banks, it looked for ways to cut costs through layoffs and the like. In August 2000, BB&T formed a special two-person team to ensure the conversions went smoothly, reported American Banker. The process required communicating with hundreds of branches and thousands of customers.

Some wondered if BB&T was paying too much for some of its acquisitions, exceeding the industry average for prices based on book value. However, BB&T defended its role as "acquirer of choice," and stressed the strategic nature of its acquisitions. It had developed a reputation as one of the most successful integrators of acquired banks in the industry. "Darn few have been able to get away with a consolidation strategy, but one of the best is BB&T," an SNL Securities analyst told the Business Journal Serving Charlotte and the Metropolitan Area.

KEY DATES

1872:
Alpheus Branch and Thomas Jefferson Hadley begin banking in Wilson, North Carolina.
1897:
Southern National is founded in Lumberton, North Carolina.
1913:
Branch & Hadley is renamed Branch Banking and Trust Company (BB&T).
1921:
BB&T begins opening branch offices.
1923:
BB&T's assets exceed $4 million.
1968:
Southern National Corporation holding company is incorporated.
1971:
BB&T's assets are $250 million; new home office building is constructed.
1974:
Holding company Branch Corporation is formed.
1987:
BB&T enters South Carolina by merging with Greenville's Community Bancorporation Inc.
1988:
Branch Corporation is renamed BB&T Financial Corporation.
1989:
BB&T's assets are about $5 billion.
1995:
BB&T merges with Winston-Salem's Southern National Corporation; company enters Virginia.
1997:
BB&T acquires United Carolina Bancshares; company enters Washington, D.C. market, buys first investment bank.
1998:
BB&T sets up venture capital firm.
1999:
BB&T makes several acquisitions, enters metro Atlanta, West Virginia, and Kentucky.
2000:
Company enters Tennessee via acquisition of Knoxville bank.
2002:
BB&T enters the Florida Panhandle and Gulf Coast markets.
2003:
After buying First Virginia for $3 billion, BB&T slows hectic M&A activity.
2005:
Assets reach $109 billion.

BB&T continued to acquire more than banks. It picked up Cooney Rikard & Curtin (later renamed CRC Insurance Services Inc.), a Birmingham, Alabama-based insurance wholesaler, in January 2002 for stock worth $86 million. CRC specialized in excess and surplus insurance. Matching CRC with BB&T's existing retail agencies made sense for both parties, observed American Banker. BB&T announced the purchase of a large Birmingham insurance agency, McGriff, Seibels & Williams, in November 2003. By this time, the company owned 72 agencies in the South and Mid-Atlantic.

CUTTING DOWN ON M&A AFTER 2003

The pace of M&A activity was increasing, thanks in part to favorable changes in accounting rules. The company got a toehold in Florida with the acquisition of First South Bank in September 2002. However, after its largest deal yet, buying Virginia's largest independent bank, First Virginia Banks Inc., for $3 billion in 2003, BB&T announced it would largely curtail its acquisition activities.

The First Virginia buy made BB&T the nation's 13th largest bank holding company, according to American Banker, with assets of $91 billion. While it was an attractive investment due to its importance in the Virginia, Maryland, and Washington, D.C. markets (BB&T had been interested in it for ten years, according to Allison), the price of the First Virginia buy had some investors grumbling about price.

BB&T abstained from acquisitions altogether for nearly two years beginning in 2004, shelving a couple of deals in the high-priced Florida market. By the end of 2005, however, the company had already announced another purchase: Atlanta's Main Street Banks Inc., for stock worth about $600 million. The acquisition of another smaller bank, First Citizens Bancorp of eastern Tennessee, was announced in January 2006. BB&T was buying again, but no expensive mega-mergers were on the table.

While on a self-imposed M&A moratorium, the bank had begun to build dozens of new branches every year. The company decided to accelerate its construction even more after a consulting firm identified deposits as a more profitable area of activity than lending, where its traditional emphasis lay. The company had developed a special regimen in the Atlanta market for making new branches profitable within a year, three times faster than average, reported American Banker.

At the end of 2005, assets were up to $109 billion and the bank had 1,400 branches in 11 states and the District of Columbia. There were about 28,000 employees. In early 2006, BB&T was making headlines over Chairman and CEO John Allison's principled stance regarding property rights. He announced a policy of not financing private developments built on land seized through eminent domain.

PRINCIPAL SUBSIDIARIES

Branch Banking and Trust Company; Regional Acceptance Corporation; Money 24, Inc.; Scott & Stringfellow, Inc.; SHDR Investment Advisors, Inc.; Mid-America Gift Certificate Company; BB&T Bankcard Corporation; BB&T Payroll Services Corporation; Grey Hawk, Inc.; BB&T Capital Trust I; Mason-Dixon Capital Trust; MainStreet Capital Trust I; Premier Capital Trust I; Berg Acquisition Company, LLC; First Virginia Services, Inc.; First Virginia Life Insurance Company; Sheffield Financial, LLC; BB&T Overseas Leasing, Ltd. (Bermuda); BB&T Asset Management, Inc.; BB&T Assurance Company, LTD. (Bermuda); Matewan Venture Fund, Inc.; Liberty Properties, Inc.; One Valley Square, Inc.; Branch Banking and Trust Company of South Carolina; Branch Banking and Trust Company of Virginia; Creative Payment Solutions, Inc.; Wilson Fiduciary Management Corporation; BB&T Charitable Foundation; Sterling Capital Management, LLC.

PRINCIPAL COMPETITORS

Bank of America Corp.; Wachovia Corp.

FURTHER READING

Ackermann, Matt, "BB&T Asset Unit Focuses on Ga.-Fla. Deals, Hiring," American Banker, February 2, 2006, p. 9.

Adams, Jerry, "Fast Start Marks Allison's Ascent; New Chief of BB&T Spurs Modernization," American Banker, July 6, 1987, p. 13.

Allison, John A., IV, "BB&T Corporation," New York: Newcomen Society of the United States, 1999.

"BB&T Chairman Lowe Dies at 53," American Banker, July 11, 1989, p. 6.

"BB&T's New Strategy: We Buy Harder," Business-North Carolina, August 1, 1990, p. 81.

Boraks, David, "The Evolution of a BB&T Deal," American Banker, August 5, 2003, p. 4A.

, "Wholesale Division Changing BB&T's Philosophy," American Banker, October 7, 2003, p. 4A.

Davis, Paul, "After a Long Absence, BB&T Back to Buying: Price of Main Street Wins Over Wall Street," American Banker, December 16, 2005, p. 1.

, "For BB&T, 2d Deal in Month After Long Layoff," American Banker, January 13, 2006, p. 1.

, "A Surprising Study Turns BB&T's Focus to Deposits," American Banker, February 22, 2006, p. 1.

Donsky, Martin, "Banking's Eastern Star," Business-North Carolina, October 1, 1988, p. 38.

Fung, Amanda, "One Size Doesn't Fit All in BB&T Conversion Efforts," American Banker, May 29, 2002, p. 7A.

Gillam, Carey, "Whoops! Southern National Decides It Should Have Called Itself BB&T," American Banker, March 24, 1997, p. 6.

Gjertsen, Lee Ann, "BB&T Shifts Strategy in Its Biggest Deal Yet," American Banker, November 12, 2003, p. 1.

Grant, Lorrie, "BB&T, Southern National to Merge in $2.2 Billion Deal," Reuters News, August 1, 1994.

Hazard, Carol, "BB&T Acquiring First Va.," Richmond Times-Dispatch, January 22, 2003, p. A1.

Kline, Kenneth, "BB&T's Ads Break Taboo, Knock N. Carolina Brethren," American Banker, February 7, 1991, p. 10.

Nowell, Paul, "N.C. Banker Takes Maverick Stance on Eminent Domain Land Seizures," Associated Press Newswires, March 4, 2006.

Price, Dudley, "BB&T Leaving Town Where It Began; Economy, Civic Pride Are at Risk in Wilson," News & Observer (Raleigh), August 2, 1994, p. D1.

Rieker, Matthias, "Even for BB&T, Clear M&A Accounting Helps," American Banker, February 11, 2002, p. 1.

Sams, Rachel, "BB&T Corp. Making a Name for Itself in Florida Banking Market," Knight-Ridder Tribune Business News: Tallahassee Democrat, December 17, 2002.

Scism, Jack, "At 41, Allison Is Old Enough to Head BB&T," Greensboro News & Record, December 18, 1989, p. 4.

Tannenbaum, Fred, "BB&T Paying Top Dollar in Mergers," Business Journal Serving Charlotte and the Metropolitan Area, July 13, 2001, p. 1.

Thompson, Marie, "Allison, John A. IV 1948," International Directory of Business Biographies, ed. Neil Schlager, Vol. 1, Detroit: St. James Press, 2005.

Vardi, Nathan, "Philosopher King," Forbes, June 11, 2001, p. 90.

Wyatt, Edward A., "Found: A Prosperous BankBB&T Financial Extends Its Growth," Barron's, July 23, 1990, p. 17.

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