No loco motive.

• Author: Gray, Tim
• Position: Merger between BB and T Financial Corp. and Southern National Corp. - Cover Story

Coupling the two banks makes sense. Now our Mover and Shaker of the Year has to pour on the coal.

John Allison loves to build things. As a boy, he created his own board games and fashioned miniature landscapes with toy train sets. He still spends two or three hours a week bent over a 10-by-35-foot model railroad in his upstairs rec room, fitting together pieces of track, connecting wires and adding tiny pieces of landscape.

"I'd hate to finish," the chairman of Wilson-based BB&T Financial Corp. admits. "I've enjoyed learning a lot about electricity. Almost all the bank stuff is intangible. With a train, you get the wire and track hooked up, and the train runs."

With the merger of BB&T and Lumberton-based Southern National Corp., BUSINESS NORTH CAROLINA's Mover and Shaker of the Year is building the 35th-largest bank in the country and, perhaps, the dominant bank in North Carolina. It will have the largest share of Tar Heel deposits, he says, and more branches than any other bank in the state. It will be the third-biggest bank in South Carolina and poised to grow into Virginia. If successful, the merger of equals he and Southern National Chairman Glenn Orr devised might prove to be a model for other midsized banks as they try to stave off out-of-state acquirers.

Since becoming chairman five years ago, Allison, 46, has converted BB&T from an Eastern North Carolina farm bank with about $4.7 billion in assets into one of the biggest and most-profitable institutions in the state, with assets of about $10.2 billion. He has beefed it up partly with a steady diet of healthy savings and loans. Under Allison, BB&T scarfed up 15 thrifts. The Southern National merger will create a bank nearly double BB&T's size.

Despite Allison's zeal for expansion, it was Orr who floated the idea of combining the banks. One hectic morning in early July, he called Allison to chat about a routine business matter. Neither recalls the topic. "Once we talked about the merger of equals, it was like the other conversation didn't matter," Allison says.

Orr suggested they meet to discuss merging. Allison seized on the idea. He, like Orr, had been thinking a lot about mergers in anticipation of new interstate-banking laws. A bill, which the president signed in September, allows banks from outside the Southeast to expand here within three years. The General Assembly rushed that timetable, making it effective immediately in North Carolina. In effect, it invited big out-of-state predators to lumber into the state.

Orr and Allison acknowledged to each other that, by merging their banks, they could create an institution big enough to fend off many potential acquirers. Paradoxically, it may be more attractive to the handful of banks that can afford it because of its beefy share of the Tar Heel market. Potential suitors include San Francisco-based Bank of America and Columbus, Ohio-based Banc One. Allison and Orr aren't opposed to being acquired per se. They simply believe that getting bigger puts them in a better position to negotiate a deal and avoid a hostile takeover.

They agreed to meet Friday morning, July 15, at the Omni Hotel in Richmond, Va., for preliminary negotiations. "We both agreed that we wanted it just the two of us," Allison says. "Neither one of us knew whether that first conversation would be the end or the beginning of something."

At the meeting, they wrestled with what Allison calls the "social issues" of a merger -- thorny questions such as what the bank would be called, where it would be based and, perhaps most important, who would run it. "I thought we'd have a real difference on the social issues," Allison says. "I didn't go into that meeting expecting to make the kind of progress we did."

But that afternoon they ironed out all the major problems. First, they devised a method to ensure that each bank's stockholders received equal value in the new bank. "The way we did it was, we went to a third-party investment bank that neither of us had dealt with to come up with a number that made both of us happy. Then we agreed we'd each get our own investment bank to evaluate it." They picked Lehman Brothers in New York to calculate the exchange ratio.

They selected the name of the new company just as quickly. "We picked Southern National for the corporation because it trades on the New York Stock Exchange. ... We chose BB&T for the branches...