BBT BB and T Corporation

WINSTON-SALEM, North Carolina, July 19, 2018 /PRNewswire/ -- BB&T Corporation (NYSE: BBT) today reported record earnings for the second quarter of 2018. Net income available to common shareholders was $775 million. Earnings per diluted common share were $0.99 for the second quarter of 2018, up from $0.94 last quarter. Results for the second quarter produced an annualized return on average assets of 1.49 percent and an annualized return on average common shareholders' equity of 11.74 percent.

Excluding pre-tax merger-related and restructuring charges of $24 million ($17 million after-tax), net income available to common shareholders was $792 million, or $1.01 per diluted share.

Net income available to common shareholders was $745 million ($0.94 per diluted share) for the first quarter of 2018 and $631 million ($0.77 per diluted share) for the second quarter of 2017.

"Strong revenues, improved loan growth and solid expense control resulted in record earnings for the quarter," said Chairman and Chief Executive Officer Kelly S. King. "We produced a strong 3.5 percent annualized growth in average loans held for investment compared to the prior quarter. Our earnings before income taxes exceeded $1.0 billion, which is also a record and was up 4.7 percent over the second quarter of last year.

"Revenue was $2.9 billion as both net interest income and noninterest income were near all-time highs. Total noninterest expenses for the quarter were $1.7 billion, down $22 million from the second quarter of 2017. Excluding merger-related and restructuring charges, noninterest expense was down $36 million, reflecting continued progress on our optimization efforts," King said.

"Asset quality remains excellent and improved further during the second quarter. Nonperforming assets, net charge-offs and loans 90 days or more past due all declined from already very low levels," King said.

"We were pleased the Federal Reserve did not object to our capital plan, which includes a $0.03 per share increase in our dividend, which will be considered at our July Board of Directors meeting, and up to $1.7 billion in share repurchases. A portion of the capital allocated for share repurchases was used to acquire Regions Insurance in early July. The acquisition will be a great strategic fit and increase our retail insurance network in core BB&T markets across the Southeast and newer markets in Texas, Louisiana, Arkansas and Indiana," King said.

Second Quarter 2018 Performance Highlights

• Earnings per diluted common share were $0.99, up $0.05 compared to first quarter of 2018
• • Earnings per diluted common share were $1.01, excluding merger-related and restructuring charges
  • Return on average assets was 1.49 percent
  • Return on average common shareholders' equity was 11.74 percent
  • Return on average tangible common shareholders' equity was 19.78 percent

• Taxable-equivalent revenues were $2.9 billion, up $65 million from the first quarter of 2018
• • Net interest margin was 3.45 percent, up one basis point from the prior quarter
  • Noninterest income was up $42 million primarily due to higher insurance income
  • Fee income ratio was 42.5 percent, compared to 41.9 percent for the prior quarter

• Noninterest expense was $1.7 billion, up $34 million compared to the first quarter of 2018 driven by performance-based incentive expense
• • Noninterest expense was down $22 million compared to the second quarter of 2017
  • GAAP efficiency ratio was 59.7 percent, compared to 60.0 percent for the first quarter of 2018
  • Adjusted efficiency ratio was 57.4 percent, compared to 57.3 percent for the first quarter of 2018

• Average loans and leases held for investment were $144.1 billion, up $1.2 billion, or 3.5 percent annualized compared to the first quarter of 2018
• • Average commercial and industrial loans increased $921 million, or 6.3 percent annualized
  • Average CRE loans increased $148 million, or 2.8 percent annualized
  • Average residential mortgage loans increased $448 million, or 6.2 percent annualized
  • Average direct retail loans decreased $111 million, or 3.8 percent annualized
  • Average indirect loans decreased $110 million, or 2.6 percent annualized

• Average deposits were $157.7 billion compared to $157.1 billion for the first quarter of 2018
• • Average noninterest-bearing deposits increased $567 million, or 4.3 percent annualized
  • Average noninterest-bearing deposits represent 34.2 percent of total deposits, compared to 34.0 percent in the prior quarter
  • Average interest-bearing deposits costs were 0.57 percent, up 11 basis points

• Asset quality remains excellent
• • Nonperforming loans were 0.38 percent of loans held for investment, down four basis points from the first quarter of 2018
  • Loans 90 days or more past due and still accruing were 0.30 percent of loans held for investment, compared to 0.34 percent in the prior quarter
  • Net charge-offs were 0.30 percent of average loans and leases, down 11 basis points
  • The allowance for loan loss coverage ratio was 2.74 times nonperforming loans held for investment, versus 2.49 times in the prior quarter
  • The allowance for loan and lease losses was 1.05 percent of loans held for investment, unchanged compared to the prior quarter

• Capital levels remained strong across the board
• • Common equity tier 1 to risk-weighted assets was 10.2 percent
  • Tier 1 risk-based capital was 11.9 percent
  • Total capital was 13.9 percent
  • Leverage capital was 10.0 percent

Earnings Presentation and Quarterly Performance Summary

To listen to BB&T's live second quarter 2018 earnings conference call at 8 a.m. ET today, please call 866-519-2796 and enter the participant code 876127. A presentation will be used during the earnings conference call and is available on our website at https://bbt.investorroom.com/webcasts-and-presentations. Replays of the conference call will be available for 30 days by dialing 888-203-1112 (access code 6326592).

The presentation, including an appendix reconciling non-GAAP disclosures, is available at https://bbt.investorroom.com/webcasts-and-presentations. BB&T's Second Quarter 2018 Quarterly Performance Summary, which contains detailed financial schedules, is available on BB&T's website at https://bbt.investorroom.com/quarterly-earnings.

About BB&T

BB&T is one of the largest financial services holding companies in the U.S. with $222.7 billion in assets and market capitalization of approximately $39.1 billion as of June 30, 2018. Building on a long tradition of excellence in community banking, BB&T offers a wide range of financial services including retail and commercial banking, investments, insurance, wealth management, asset management, mortgage, corporate banking, capital markets and specialized lending. Based in Winston-Salem, N.C., BB&T operates more than 1,900 financial centers in 15 states and Washington, D.C. and is consistently recognized for outstanding client service by Greenwich Associates for small business and middle market banking. More information about BB&T and its full line of products and services is available at BBT.com.

Capital ratios are preliminary.

This news release contains financial information and performance measures determined by methods other than in accordance with accounting principles generally accepted in the United States of America ("GAAP"). BB&T's management uses these "non-GAAP" measures in their analysis of the Corporation's performance and the efficiency of its operations. Management believes these non-GAAP measures provide a greater understanding of ongoing operations, enhance comparability of results with prior periods and demonstrate the effects of significant items in the current period. The Corporation believes a meaningful analysis of its financial performance requires an understanding of the factors underlying that performance. BB&T's management believes investors may find these non-GAAP financial measures useful. These disclosures should not be viewed as a substitute for financial measures determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies. Below is a listing of the types of non-GAAP measures used in this news release:

• The adjusted efficiency ratio is non-GAAP in that it excludes securities gains (losses), amortization of intangible assets, merger-related and restructuring charges and other selected items. BB&T's management uses this measure in their analysis of the Corporation's performance. BB&T's management believes this measure provides a greater understanding of ongoing operations and enhances comparability of results with prior periods, as well as demonstrates the effects of significant gains and charges.
• Tangible common equity and related measures are non-GAAP measures that exclude the impact of intangible assets and their related amortization. These measures are useful for evaluating the performance of a business consistently, whether acquired or developed internally. BB&T's management uses these measures to assess the quality of capital and returns relative to balance sheet risk and believes investors may find them useful in their analysis of the Corporation.
• Core net interest margin is a non-GAAP measure that adjusts net interest margin to exclude the impact of purchase accounting. The interest income and average balances for PCI loans are excluded in their entirety as the accounting for these loans can result in significant and unusual trends in yields. The purchase accounting marks and related amortization for a) securities acquired from the FDIC in the Colonial acquisition and b) non-PCI loans, deposits and long-term debt acquired from Susquehanna and National Penn are excluded to approximate their yields at the pre-acquisition rates. BB&T's management believes the adjustments to the calculation of net interest margin for certain assets and liabilities acquired provide investors with useful information related to the performance of BB&T's earning assets.
• The adjusted diluted earnings per share is non-GAAP in that it excludes merger-related and restructuring charges and other selected items, net of tax. BB&T's management uses this measure in their analysis of the Corporation's performance. BB&T's management believes this measure provides a greater understanding of ongoing operations and enhances comparability of results with prior periods, as well as demonstrates the effects of significant gains and charges.
• The adjusted operating leverage ratio is non-GAAP in that it excludes securities gains (losses), amortization of intangible assets, merger-related and restructuring charges and other selected items. BB&T's management uses this measure in their analysis of the Corporation's performance. BB&T's management believes this measure provides a greater understanding of ongoing operations and enhances comparability of results with prior periods, as well as demonstrates the effects of significant gains and charges.
• The adjusted performance ratios are non-GAAP in that they exclude merger-related and restructuring charges and, in the case of return on average tangible common shareholders' equity, amortization of intangible assets. BB&T's management uses these measures in their analysis of the Corporation's performance. BB&T's management believes these measures provide a greater understanding of ongoing operations and enhances comparability of results with prior periods, as well as demonstrates the effects of significant gains and charges.

A reconciliation of these non-GAAP measures to the most directly comparable GAAP measure is included in BB&T's Second Quarter 2018 Quarterly Performance Summary, which is available at https://bbt.investorroom.com/quarterly-earnings.

This news release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, regarding the financial condition, results of operations, business plans and the future performance of BB&T. Forward-looking statements are not based on historical facts but instead represent management's expectations and assumptions regarding BB&T's business, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances difficult to predict. BB&T's actual results may differ materially from those contemplated by the forward-looking statements. Words such as "anticipates," "believes," "estimates," "expects," "forecasts," "intends," "plans," "projects," "may," "will," "should," "could" and other similar expressions are intended to identify these forward-looking statements. Such statements are subject to factors that could cause actual results to differ materially from anticipated results. While there is no assurance any list of risks and uncertainties or risk factors is complete, important factors that could cause actual results to differ materially from those in the forward-looking statements include the following, without limitation, as well as the risks and uncertainties more fully discussed under Item 1A-Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2017 and in any of BB&T's subsequent filings with the Securities and Exchange Commission:

• general economic or business conditions, either nationally or regionally, may be less favorable than expected, resulting in, among other things, slower deposit and/or asset growth, and a deterioration in credit quality and/or a reduced demand for credit, insurance or other services;
• disruptions to the national or global financial markets, including the impact of a downgrade of U.S. government obligations by one of the credit ratings agencies, the economic instability and recessionary conditions in Europe, the eventual exit of the United Kingdom from the European Union;
• changes in the interest rate environment, including interest rate changes made by the Federal Reserve, as well as cash flow reassessments may reduce net interest margin and/or the volumes and values of loans and deposits as well as the value of other financial assets and liabilities;
• competitive pressures among depository and other financial institutions may increase significantly;
• legislative, regulatory or accounting changes, including changes resulting from the adoption and implementation of the Dodd-Frank Act may adversely affect the businesses in which BB&T is engaged;
• local, state or federal taxing authorities may take tax positions that are adverse to BB&T;
• a reduction may occur in BB&T's credit ratings;
• adverse changes may occur in the securities markets;
• competitors of BB&T may have greater financial resources or develop products that enable them to compete more successfully than BB&T and may be subject to different regulatory standards than BB&T;
• cybersecurity risks could adversely affect BB&T's business and financial performance or reputation, and BB&T could be liable for financial losses incurred by third parties due to breaches of data shared between financial institutions;
• higher-than-expected costs related to information technology infrastructure or a failure to successfully implement future system enhancements could adversely impact BB&T's financial condition and results of operations and could result in significant additional costs to BB&T;
• natural or other disasters, including acts of terrorism, could have an adverse effect on BB&T, materially disrupting BB&T's operations or the ability or willingness of customers to access BB&T's products and services;
• costs related to the integration of the businesses of BB&T and its merger partners may be greater than expected;
• failure to execute on strategic or operational plans, including the ability to successfully complete and/or integrate mergers and acquisitions or fully achieve expected cost savings or revenue growth associated with mergers and acquisitions within the expected time frames could adversely impact financial condition and results of operations;
• significant litigation and regulatory proceedings could have a material adverse effect on BB&T;
• unfavorable resolution of legal proceedings or other claims and regulatory and other governmental investigations or other inquiries could result in negative publicity, protests, fines, penalties, restrictions on BB&T's operations or ability to expand its business and other negative consequences, all of which could cause reputational damage and adversely impact BB&T's financial conditions and results of operations;
• risks resulting from the extensive use of models;
• risk management measures may not be fully effective;
• deposit attrition, customer loss and/or revenue loss following completed mergers/acquisitions may exceed expectations; and
• widespread system outages, caused by the failure of critical internal systems or critical services provided by third parties, could adversely impact BB&T's financial condition and results of operations.

Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this report. Actual results may differ materially from those expressed in or implied by any forward-looking statement. Except to the extent required by applicable law or regulation, BB&T undertakes no obligation to revise or update publicly any forward-looking statements for any reason.