-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BeDpwoQ4seEMHiFtWg1GUUglaQ/zJRUbPtqRf0DPfXPkPva6bgdnclH19mU3rtiZ MIzECBP/yCiTosgxzeaEfA== 0000950168-99-001296.txt : 19990429 0000950168-99-001296.hdr.sgml : 19990429 ACCESSION NUMBER: 0000950168-99-001296 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19990225 ITEM INFORMATION: FILED AS OF DATE: 19990428 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BB&T CORP CENTRAL INDEX KEY: 0000092230 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] IRS NUMBER: 560939887 STATE OF INCORPORATION: NC FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: SEC FILE NUMBER: 001-10853 FILM NUMBER: 99602933 BUSINESS ADDRESS: STREET 1: 200 WEST SECOND STREET CITY: WINSTON-SALEM STATE: NC ZIP: 27101 BUSINESS PHONE: 3367332000 MAIL ADDRESS: STREET 1: 200 WEST SECOND STREET CITY: WINSTON-SALEM STATE: NC ZIP: 27101 FORMER COMPANY: FORMER CONFORMED NAME: SOUTHERN NATIONAL CORP /NC/ DATE OF NAME CHANGE: 19920703 8-K/A 1 BB&T CORPORATION ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 - -------------------------------------------------------------------------------- FORM 8-K/A CURRENT REPORT Pursuant to Section 13 or 15(d) Of the Securities Exchange Act of 1934 FEBRUARY 25, 1999 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 WINSTON-SALEM, NORTH CAROLINA 27101 (Address of Principal Executive Offices) (Zip Code) (336) 733-2000 (Registrant's Telephone Number, Including Area Code) - -------------------------------------------------------------------------------- This Form 8-K has 34 pages. ================================================================================ Item 5. Other Events The purpose of this amendment to BB&T Corporation's ("BB&T") Current Report on Form 8-K, originally filed February 25, 1999, is to announce that BB&T Corporation ("BB&T") has revised the terms associated with its agreement to acquire Matewan BancShares of Williamson, West Virginia, ("Matewan") and to amend certain information provided to analysts, which was included in the original Form 8-K as Exhibit 99.1, to reflect these revisions. Matewan, with $676 million in assets, operates 22 banking offices and one mortgage loan office in southwestern Virginia, southern West Virginia and eastern Kentucky. On February 25, 1999, BB&T announced that it had entered into a definitive agreement to acquire Matewan. On April 27, 1999, BB&T and Matewan jointly announced a renegotiation of the agreement. The revised terms of the transaction, approved by the boards of directors of both companies, will result in Matewan shareholders receiving .67 shares of BB&T common stock in exchange for each share of Matewan common stock held. Matewan's preferred shareholders will receive .8375 BB&T common shares for each share of Matewan preferred stock held. The transaction is valued at $26.13 per share of Matewan common stock based on BB&T's closing price on Monday, April 26, 1999, or a total value of $124 million. Matewan operates through its banking subsidiaries, Matewan National Bank and Matewan FSB. The corporation also owns insurance and investment subsidiaries. Its market area includes Mingo, Logan, Boone, Lincoln and Wayne counties in West Virginia; Pike, Floyd, Johnson, Martin and Letcher counties in Kentucky; and Buchanan, Tazewell, Wise, Russell and Washington counties in Virginia. Item 7. Exhibits 99.1 Amendment of Information Provided to Analysts SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. BB&T CORPORATION (Registrant) By: /S/ SHERRY A. KELLETT --------------------- Sherry A. Kellett SENIOR EXECUTIVE VICE PRESIDENT AND CONTROLLER (PRINCIPAL ACCOUNTING OFFICER) Date: April 28, 1999. BB&T and Matewan BancShares, Inc. Williamson, West Virginia Expanding a Great Franchise Revised Analyst Presentation February 25, 1999 Forward-Looking Information BB&T has made forward-looking statements in the accompanying analyst presentation materials that are subject to risks and uncertainties. These statements are based on the beliefs and assumptions of the management of BB&T, and on the information available to management at the time the analyst presentation materials were prepared. In particular, the analyst materials in this report include statements regarding estimated earnings per share of BB&T on a stand alone basis, expected cost savings from the merger, estimated restructuring charges relating to the merger, estimated increases in Matewan's fee income ratio, the anticipated accretive effect of the merger, and BB&T's anticipated performance in future periods. With respect to estimated cost savings and restructuring charges, BB&T has made assumptions about, among other things, the extent of operational overlap between BB&T and Matewan, the amount of general and administrative expense consolidation, costs relating to converting Matewan's bank operations and data processing to BB&T's systems, the size of anticipated reductions in fixed labor costs, the amount of severance expenses, the extent of the charges that may be necessary to align the companies' respective accounting reserve policies, and the cost related to the merger. The realization of cost savings and the amount of restructuring charges are subject to the risk that the foregoing assumptions are inaccurate. Any statements in the accompanying exhibit regarding the anticipated accretive effect of the merger and BB&T's anticipated performance in future periods are subject to risks relating to, among other things, the following possibilities: (1) expected cost savings from this merger or other previously-announced mergers may not be fully realized or realized within the expected time frame; (2) deposit attrition, customer loss or revenue loss following proposed mergers may be greater than expected; (3) competitive pressure among depository and other financial institutions may increase significantly; (4) costs or difficulties related to the integration of the businesses of BB&T and its merger partners, including Matewan, may be greater than expected; (5) changes in the interest rate environment may reduce margins; (6) general economic or business conditions, either nationally or regionally, may be less favorable than expected, resulting in, among other things, a deterioration in credit quality, or a reduced demand for credit; (7) legislative or regulatory changes, including changes in accounting standards, may adversely affect the businesses in which BB&T and Matewan are engaged; (8) adverse changes may occur in the securities markets; and (9) competitors of BB&T and Matewan may have greater financial resources and develop products that enable such competitors to compete more successfully than BB&T and Matewan. BB&T believes these forward-looking statements are reasonable; however, undue reliance should not be placed on such forward-looking statements, which are based on current expectations. Such statements are not guarantees of performance. They involve risks, uncertainties and assumptions. The future results and shareholder values of BB&T following completion of the merger may differ materially from those expressed in these forward-looking statements. Many of the factors that will determine these results and values are beyond management's ability to control or predict. 2 Outline o Background and transaction terms o Financial data o Rationale and strategic objectives o Investment criteria o Summary 3 BB&T Corporation (BBT) o $40.1 billion bank holding company* o 637 branch locations in NC, SC, VA, MD, GA, WV, KY and the District of Columbia* For Year Ended 12/31/98** ---------------- o ROA 1.58% o Cash Basis ROA 1.67% o ROE 20.16% o Cash Basis ROE 23.70% o Efficiency ratio 51.57% * Includes the pending acquisitions of First Citizens Corporation (GA), Mason-Dixon Bancshares, Inc. and Matewan BancShares. ** Recurring earnings 4 Matewan BancShares, Inc. (MATE) o $684 million bank holding company o 22 banking offices in western Virginia, southern West Virginia and eastern Kentucky o 1 mortgage loan production office in West Virginia For Year Ended 12/31/98** ---------------- o ROA .92% o ROE 9.33% o Efficiency ratio 61.37% *Recurring earnings 5 Pro Forma Company Profile o Size: $40.1 billion in assets* $12.5 billion in market capitalization** o Offices NC: 345 VA: 113 SC: 90 MD: 53 GA: 13 KY: 10 WV: 7 DC: 6 --- Total: 637 * Includes total assets for Mason-Dixon Bancshares, Inc., First Citizens Corporation and Matewan BancShares. ** Based on BB&T's 4/26/99 closing price of $39.00 and includes shares outstanding for Mason-Dixon Bancshares, Inc., First Citizens Corporation and Matewan BancShares, Inc. 6 Terms of the Transaction 7 Terms of the Transaction o Purchase price: $26.47 per share* o Aggregate value: $125.7 million* o Consideration: Fixed exchange ratio of .67 BB&T shares for each Matewan share o Structure: Tax-free exchange of stock equal to 100% of purchase price o Accounting treatment: Transaction will be accounted for as a purchase o Lock-up provision: Stock option agreement *Based on April 23, 1999 BB&T closing stock price of $39.50. 8 Pricing o Purchase price $26.47 o Price / 12-31-98 stated book 1.88 x o Price / LTM EPS 21.35 x o BB&T shares issued 3.2 million* *BB&T shares issued based on MATE common and preferred shares outstanding. BB&T plans to repurchase the shares to be issued in the transaction. 9 Acquisition Comparables(1) Bank Acquisitions with Deal Values between $50 and $500 Million Announced Since 11/01/98
- ------------------------------------------------------------------------------------------------------------------ TOTAL DATE DEAL DEAL DEAL PR/ DEAL PR/ BUYER SELLER ASSETS ANNOUNCED VALUE PR/BK TG BK 4-QTR EPS - ------------------------------------------------------------------------------------------------------------------ ($000) ($M) (%) (%) (X) Independence Cmty Broad National Bncp 622,276 02/01/99 138.3 296.1 297.4 18.7 BB&T Corp. Mason-Dixon Bcshs 1,083,283 01/28/99 247.2 299.2 326.4 23.4 BB&T Corp. First Citizens Corp. 385,582 01/27/99 126.7 297.9 360.6 23.4 First Security Corp. Comstock Bancorp 226,862 01/13/99 65.0 352.2 352.2 20.0 BOK Financial Corp. First Bancshares 233,104 12/29/98 56.1 328.7 328.7 NA First Finl Bancorp Sand Ridge Finl Corp. 503,894 12/17/98 140.7 330.6 330.6 24.6 Valley Natl Bancorp Ramapo Finl Corp. 327,779 12/17/98 105.3 293.4 297.7 29.5 Chittenden Corp. Vermont Financial 2,110,300 12/16/98 454.2 208.2 285.6 27.9 Sky Financial Group First Western Bncp 2,203,139 12/14/98 424.5 280.0 479.9 22.0 BT Financial Corp. First Philson Finl 213,742 12/10/98 80.6 318.8 318.8 29.5 M&T Bank Corp. FNB Rochester Corp. 567,896 12/09/98 128.8 316.2 316.2 25.2 Lakeland Bancorp High Point Finl Corp. 252,746 12/07/98 72.5 293.4 293.4 32.1 - ----------------------------------------------------------------------------------------------------------------- Maximum 2,203,139 454.2 352.2 479.9 32.1 Minimum 213,742 56.1 208.2 285.6 18.7 - ----------------------------------------------------------------------------------------------------------------- AVERAGE 727,550 170.0 301.2 332.3 25.1 - ----------------------------------------------------------------------------------------------------------------- Median 444,738 127.8 298.5 322.6 24.0 - ----------------------------------------------------------------------------------------------------------------- BB&T Corp Matewan * 676,907 157.9 232.2 274.0 23.2 Above/(Below) Comparables (69.1) (58.3) (1.9) - -----------------------------------------------------------------------------------------------------------------
* Based on September 30, 1998 financial statements. Book value multiples include Matewan's preferred stock. (1) Source for Acquisition Comparables: SNL Securities 10 Financial Data 11 Financial Summary FOR THE FOR THE YEAR ENDED YEAR ENDED 12/31/98 12/31/98 BB&T* MATE* ----- ----- ROA 1.58% .92% ROE 20.16 9.33 Net interest margin (FTE) 4.34 5.10 Efficiency ratio 51.57 61.37 Net charge-offs / avg. loans .28 .90 Allowance / nonperf. loans 367.75 120.91 Nonperf. assets / total assets .33 .89 *Recurring earnings 12 Capital Strength BB&T* MATE* 12/31/98 12/31/98 -------- ------- Shareholders' equity / total assets 8.0% 9.8% Leverage capital ratio 6.8% 8.6% Total risk-based capital ratio 14.7% 13.8% 13 Rationale for Acquisition o BB&T has an announced strategy to pursue in-market (Carolinas/Virginia/Maryland/Metro DC) and contiguous state (Georgia/West Virginia/Tennessee) acquisitions of high quality banks and thrifts in the $250 million to $10 billion range. The acquisition of Matewan is consistent with this strategy. o This acquisition is very consistent with past acquisitions which we have successfully executed, i.e. it fits our model. o BB&T and Matewan share similar cultures. o Matewan's branch network overlaps BB&T's western Virginia franchise and expands BB&T into the economically attractive markets in southern West Virginia and eastern Kentucky. 14 Strategic Objectives o The key strategic objectives in this acquisition are: - Improve efficiency o Cost savings equal to 25% of MATE's noninterest expenses, fully realized in the year 2000 - Expand and strengthen BB&T's existing western Virginia franchise o Entry into the contiguous markets of southern West Virginia and eastern Kentucky - Grow fee income using BB&T's wider array of fee-based services - Develop additional commercial relationships using BB&T's product offerings 15 Efficiency Improvement Targeted Annual Cost Savings ---------------------------- $5.4 million or approximately 25% of MATE's expense base 16 Franchise Enhancement o Extends our western Virginia franchise acquired through the MainStreet transaction o Market expansion into southern West Virginia and eastern Kentucky 17 Grow Fee Income BB&T* MATE* 12/31/98 12/31/98 -------- ------- Fee income ratio 28.4% 14.3% Goal to raise MATE's fee income ratio by leveraging BB&T's sales management system and broader product selection 18 Economic Vitality [MAP OF ECONOMIC VITALITY BY COUNTY] 19 Branch Locations [MAP OF BRANCH LOCATIONS] 20 BB&T Investment Criteria o EPS and Cash Basis EPS (accretive by year 2) o Internal rate of return (15% or better) o Return on equity and Cash Basis ROE (accretive by year 3) o Return on assets and Cash Basis ROA (accretive by year 3) o Book value per share (accretive by year 5) o Must not cause combined leverage capital ratio to go below 7% Criteria are listed in order of importance. There are sometimes trade-offs among criteria. 21 Assumptions o BB&T's 1999 and 2000 EPS numbers are based on First Call estimates of $1.94 and $2.18 respectively, and subsequent years are based on 9% income statement and balance sheet growth. o $5.4 million in cost savings (25% of MATE's expense base). Cost savings will be recognized over 2 years with 25% of total cost savings achieved in 1999 and the remaining 75% in 2000. o Fee income improvement - MATE's fee income is assumed to grow by 9% annually by leveraging BB&T's sales management system and expanded product offerings. o MATE's net interest margin (non-FTE) is maintained annually at 4.50%. o For MATE, we have assumed income statement and balance sheet growth of 5% annually except for the enhancements cited above. 22 Impact on Earnings Per Share Accretion Accretion (Dilution) Pro Forma (Dilution) Pro Forma Pro Forma Cash Basis Pro Forma EPS Shares EPS Shares --- ------ --- ------ 1999* $ 1.93 $ (0.01) $ 2.06 $ 0.01 2000 2.18 0.00 2.32 0.02 2001 2.36 0.00 2.50 0.02 2002 2.58 0.01 2.71 0.03 2003 2.81 0.01 2.94 0.03 2004 3.07 0.02 3.18 0.03 2005 3.35 0.02 3.46 0.04 2006 3.65 0.02 3.76 0.04 2007 4.00 0.03 4.09 0.05 2008 4.35 0.03 4.46 0.05 2009 4.74 0.04 4.85 0.06 Internal rate of return 15.54% *Recurring earnings 23 Impact on ROE* Pro Forma Pro Forma Cash Basis ROE(%) Change ROE(%) Change --- ------ ---- ------ 1999** 20.07 (0.03) 25.74 0.99 2000 20.07 0.04 24.71 0.95 2001 19.35 0.03 23.02 0.73 2002 18.86 0.04 21.79 0.60 2003 18.43 0.05 20.78 0.49 2004 18.05 0.07 19.85 0.41 * The decrease in ROE results from the build up in equity relative to assets. ** Recurring earnings 24 Impact on ROA Pro Forma Pro Forma Cash Basis ROA(%) Change ROA(%) Change --- ------ ---- ------ 1999* 1.50 (0.03) 1.62 (0.02) 2000 1.56 (0.03) 1.67 (0.01) 2001 1.55 (0.03) 1.65 (0.01) 2002 1.55 (0.02) 1.65 (0.01) 2003 1.56 (0.02) 1.64 (0.01) 2004 1.56 (0.02) 1.63 (0.01) *Recurring earnings 25 Impact on Book Value / Leverage Ratio Pro Forma Book Value Per Share ------------------------- Pro Forma Accretion Leverage Accretion Stated (Dilution) Ratio (Dilution) ------ ---------- ----- ---------- 1999 $ 10.23 $ 0.00 6.81% (0.35) 2000 11.52 0.00 7.27 (0.32) 2001 12.92 0.01 7.68 (0.29) 2002 14.44 0.01 8.05 (0.26) 2003 16.10 0.02 8.39 (0.24) 2004 17.94 0.03 8.69 (0.22) 2005 19.96 0.05 8.98 (0.19) 2006 22.20 0.07 9.25 (0.17) 2007 24.68 0.09 9.51 (0.15) 2008 27.43 0.11 9.76 (0.14) 2009 30.61 0.14 10.05 (0.12) 26 Summary o The acquisition of Matewan BancShares, Inc. is a strong strategic fit: - It helps accomplish our goal of expansion into contiguous markets - It fits culturally and geographically - This is the type of merger we have consistently successfully executed o Overall Investment Criteria are met: - EPS accretive in 2000; Cash Basis EPS accretive in 1999 - IRR 15.54% - ROE positive in 2000; Cash Basis ROE positive in 1999 - ROA and Cash Basis ROA are permanently, but not materially, dilutive due to the effect of the share buyback - Book value accretive in 1999 - Combined leverage ratio in excess of 7% in 2000 - Accelerated dividend growth potential beginning in 1999 27 Appendix o Historical Financial Data o Glossary 28
MATEWAN BANCSHARES, INC. FINANCIAL SUMMARY 1996 1997 1998 --------------------------------------- EARNINGS SUMMARY (IN THOUSANDS) INTEREST INCOME (FTE) Interest on loans & leases $ 36,583 $ 41,146 $ 44,652 Interest & dividends on securities 8,667 9,686 10,138 Interest on temporary investments 1,134 1,165 561 ---------- --------- ---------- Total interest income (FTE) 46,384 51,997 55,351 ---------- --------- ---------- INTEREST EXPENSE Interest expense on deposit accounts 17,875 21,376 23,430 Interest on short-term borrowings 994 1,149 1,444 Interest on long-term debt - - - ---------- --------- ---------- Total interest expense 18,869 22,525 24,874 ---------- --------- ---------- Net interest income (FTE) 27,515 29,472 30,477 Less taxable equivalency adjustment - - - ---------- --------- ---------- Net interest income 27,515 29,472 30,477 Provision for loan losses 2,945 2,609 4,887 ---------- --------- ---------- Net interest income after provision 24,570 26,863 25,590 ---------- --------- ---------- NONINTEREST INCOME Service charges on deposit accounts 3,011 4,096 4,047 Non-deposit fees and commissions 484 338 722 G / (L) on sale of real estate & securities - - 237 Other operating income 1,204 932 334 ---------- --------- ---------- Total noninterest income 4,699 5,366 5,340 ---------- --------- ---------- NONINTEREST EXPENSE Personnel 7,877 8,759 8,277 Occupancy & equipment 2,368 2,849 2,928 FDIC premiums 206 411 436 Other operating expenses 8,649 10,100 10,196 ---------- --------- ---------- Total noninterest expense 19,100 22,119 21,838 ---------- --------- ---------- Net income before taxes 10,169 10,110 9,092 Income taxes 3,707 3,495 2,969 ---------- --------- ---------- Net income as originally reported 6,462 6,615 6,123 ---------- --------- ---------- Prior period adjustments, net of tax (144) (116) - ---------- --------- ---------- Net income $ 6,318 $ 6,499 $ 6,123 ========== ========= ========== Basic EPS $ 1.26 $ 1.28 $ 1.24 Diluted EPS 1.26 1.28 1.24 Diluted EPS before restatement 1.30 1.31 1.24 EOP shares 4,026 3,998 3,978 Basic shares 4,030 4,011 3,989 Diluted shares 4,030 4,011 3,989
MATEWAN BANCSHARES, INC. FINANCIAL SUMMARY 1996 1997 1998 ---------------------------------- AVERAGE BALANCE SHEET (IN THOUSANDS) ASSETS Loans $339,865 $381,216 $419,767 Securities 140,354 153,096 160,287 Other earning assets 21,387 23,062 17,193 ------- ------- ------- Total interest-earning assets 501,606 557,374 597,247 ------- ------- ------- Goodwill & other intangibles 8,716 10,659 10,189 ------- ------- ------- Other assets 51,015 54,614 55,384 ------- ------- ------- Total assets $561,337 $622,647 $662,820 ======= ======== ======= Net interest margin 5.49% 5.29% 5.10% Securities as a percent of earning assets 28% 27% 27% LIABILITIES & SHAREHOLDERS' EQUITY Interest-bearing deposits: Money Market & NOW $ 67,256 $ 79,719 $ 75,607 Savings 76,906 76,510 90,462 CD's and other time 262,271 301,376 319,609 ------- ------- ------- Total interest-bearing deposits 406,433 457,605 485,678 Short-term borrowed funds 23,119 22,116 29,797 Long-term debt - - - ------- ------- ------- Total interest-bearing liabilities 429,552 479,721 515,475 Demand deposits 62,931 69,212 73,771 Other liabilities 6,533 7,162 6,800 ------- ------- ------- Total liabilities 499,016 556,095 596,046 ------- ------- ------- Preferred equity 805 805 805 Common equity 61,516 65,747 65,969 ------- ------- ------- Total equity 62,321 66,552 66,774 ------- ------- ------- Total liabilities & shareholders' equity $ 561,337 $ 622,647 $ 662,820 ========= ========= ========= Other int-liab. as a percent of total assets 4% 4% 4% 30 MATEWAN BANCSHARES, INC. FINANCIAL SUMMARY
1996 1997 1998 -------------------------------------------- RATIO ANALYSIS ROA 1.13% 1.04% 0.92% ROE (Includes Preferred) 10.14% 9.77% 9.17% Efficiency ratio 59.3% 63.5% 61.4% Adj. noninterest income / Adj. revenues 14.6% 15.4% 14.3% Average equity / Average assets 11.1% 10.7% 10.1% CREDIT QUALITY (IN THOUSANDS) Beginning $ 2,973 $ 5,986 $ 5,478 --------- --------- --------- Provision 2,945 2,609 4,887 Acquired allowance 3,152 - - Net charge-offs (3,084) (3,117) (3,791) --------- --------- --------- Ending allowance $ 5,986 $ 5,478 $ 6,574 --------- --------- --------- Allowance 1.59% 1.36% 1.47% Charge-off rate 0.91% 0.82% 0.90% Period end loans & leases $ 376,787 $ 403,111 $ 448,404 Period end equity $ 66,537 $ 64,606 $ 66,887
Glossary Return on Assets - recurring earnings for the period as a percentage of average assets for the period. Return on Equity - recurring earnings for the period as a percentage of average common equity for the period. Cash Basis Performance Results and Ratios - These calculations exclude the effect on net income of amortization expense applicable to certain intangible assets. The ratios also exclude the effect of the unamortized balances of these intangibles from assets and equity. Efficiency Ratio - calculated as recurring noninterest expense as a percentage of the sum of recurring net interest income on a fully taxable equivalent basis and recurring noninterest income. Leverage Capital Ratio - Common shareholders' equity excluding unrealized securities gains and losses and certain intangible assets as a percentage of average assets for the most recent quarter less certain intangible assets. Total Risk-Based Capital Ratio - The sum of shareholders' equity, a qualifying portion of subordinated debt and a qualifying portion of the allowance for loan and lease losses as a percentage of risk-weighted assets. Net Charge-Off Ratio - Loan losses net of recoveries as a percentage of average loans and leases. Internal Rate of Return - The interest rate that equates the present value of future returns to the investment outlay. An investment is considered acceptable if its IRR exceeds the required return. The investment is defined as the market value of the stock and/or other consideration to be received by the selling shareholders. Recurring Results or Ratios - earnings excluding charges and expenses principally related to completing mergers and acquisitions. Certain of the ratios discussed above may be annualized if the applicable periods are less than a full year. 32 -----END PRIVACY-ENHANCED MESSAGE-----