WINSTON-SALEM,
N.C., July 18, 2019
/PRNewswire/ -- BB&T Corporation (NYSE: BBT) today
reported record earnings for the second quarter of 2019. Net income
available to common shareholders was $842
million, up 8.6 percent, compared with the second quarter
last year. Earnings per diluted common share were $1.09 for the second quarter of 2019, an increase
of 10.1 percent compared with the same period last year. Results
for the second quarter produced an annualized return on average
assets of 1.55 percent and an annualized return on average common
shareholders' equity of 11.98 percent.
Excluding merger-related and restructuring charges of
$23 million ($19 million after-tax) and incremental operating
expenses related to the merger of $9
million ($7 million
after-tax), net income available to common shareholders was a
record $868 million, or $1.12 per diluted share. Adjusted diluted
earnings per common share increased $0.07 compared to the first quarter of 2019.
Adjusted annualized return on average assets and annualized return
on average tangible common shareholders' equity were 1.59 percent
and 20.00 percent, respectively.
"We are very pleased to report strong overall results for
the second quarter, with record earnings of $842 million, or $1.09 per diluted common share," said Chairman
and Chief Executive Officer Kelly S.
King. "These results were driven by strong loan growth,
improved revenues led by record insurance income and a strong
performance in investment banking and brokerage fees and
commissions, as well as continued healthy asset quality.
"This has been an exciting quarter as we made significant
progress building our new company, Truist, with our SunTrust
partners," said King. "One day Truist will be a name that reflects
the rich heritage of both companies and is synonymous with our goal
to provide a better future for our clients, communities and
associates, which will drive strong performance for our
shareholders."
"This quarter, both BB&T and SunTrust made significant
new commitments to the communities in which we are headquartered,
including the $60 billion community
benefit plan with the National Community Reinvestment Coalition
that was announced earlier this week," King said. "Looking to the
future, we also named a location in Charlotte for the Truist headquarters and
named the next layer of talent for the combined
company."
Second Quarter 2019 Performance
Highlights
- Earnings per diluted common share were $1.09, an increase of $0.12 per diluted common share from the first
quarter of this year
-
- Diluted earnings per share were $1.12, excluding merger-related and restructuring
charges and incremental operating expenses related to the
merger
- Return on average assets was 1.55 percent
- Return on average common shareholders' equity was 11.98
percent
- Return on average tangible common shareholders' equity was
19.45 percent
- Taxable-equivalent revenues were $3.1
billion, up $144 million from
the first quarter of 2019
-
- Net interest margin was 3.42 percent, down nine basis
points
- Noninterest income was up $150
million
- Insurance income was a record $566
million, up $56 million
- Fee income ratio was 44.4 percent, compared to 41.5 percent for
the prior quarter
- Noninterest expense was $1.8
billion, down $17 million
compared to the first quarter of 2019
-
- Noninterest expense includes $23
million of merger-related and restructuring charges and
$9 million of incremental operating
expenses related to the merger
- GAAP efficiency ratio was 57.6 percent, compared to 61.0
percent for the prior quarter
- Adjusted efficiency ratio was 55.1 percent, compared to 56.6
percent for the prior quarter
- Average loans and leases held for investment were $150.5 billion, up $2.4
billion, or 6.5 percent annualized compared to the first
quarter of 2019
-
- Average commercial and industrial loans increased $1.2 billion, or 7.8 percent annualized
- Average CRE loans decreased $157
million, or 3.0 percent annualized
- Average residential mortgage loans increased $696 million, or 8.9 percent annualized
- Average indirect loans increased $542
million, or 12.5 percent annualized
- Average deposits were relatively flat compared to the first
quarter of 2019
-
- Average noninterest-bearing deposits increased $397 million, or 3.0 percent annualized
- Average noninterest-bearing deposits represent 32.9 percent of
total deposits, compared to 32.7 percent in the prior quarter
- Cost of average interest-bearing deposits was 1.02 percent
annualized, up seven basis points
- Cost of average total deposits was 0.68 percent annualized, up
four basis points
- Asset quality remains excellent
-
- Nonperforming assets were 0.23 percent of total assets; lower
than levels in 2006
- Loans 90 days or more past due and still accruing were 0.27
percent of loans held for investment, compared to 0.29 percent in
the prior quarter
- Net charge-offs were 0.38 percent of average loans and leases,
down two basis points compared to the prior quarter
- The allowance for loan loss coverage ratio was 3.46 times
nonperforming loans and leases held for investment, versus 2.97
times in the prior quarter
- The allowance for loan and lease losses was 1.05 percent of
loans and leases 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 10.3
percent
- Tier 1 risk-based capital was 12.0 percent
- Total capital was 14.2 percent
- Leverage capital was 10.2 percent
EARNINGS HIGHLIGHTS
|
|
|
|
Change 2Q19 vs.
|
|
(dollars in millions,
except per share data)
|
2Q19
|
1Q19
|
2Q18
|
1Q19
|
2Q18
|
|
Net income available
to common shareholders
|
$
|
842
|
|
$
|
749
|
|
$
|
775
|
|
$
|
93
|
|
$
|
67
|
|
Diluted earnings per
common share
|
1.09
|
|
0.97
|
|
0.99
|
|
0.12
|
|
0.10
|
|
|
|
|
|
|
|
|
Net interest income -
taxable equivalent
|
$
|
1,714
|
|
$
|
1,720
|
|
$
|
1,679
|
|
$
|
(6)
|
|
$
|
35
|
|
Noninterest
income
|
1,352
|
|
1,202
|
|
1,222
|
|
150
|
|
130
|
|
Total
taxable-equivalent revenue
|
$
|
3,066
|
|
$
|
2,922
|
|
$
|
2,901
|
|
$
|
144
|
|
$
|
165
|
|
Less
taxable-equivalent adjustment
|
24
|
|
24
|
|
22
|
|
|
|
|
Total
revenue
|
$
|
3,042
|
|
$
|
2,898
|
|
$
|
2,879
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return on average
assets
|
|
1.55
|
%
|
|
1.43
|
%
|
|
1.49
|
%
|
|
0.12
|
%
|
|
0.06
|
%
|
Return on average
risk-weighted assets
|
|
1.91
|
|
|
1.78
|
|
|
1.85
|
|
|
0.13
|
|
|
0.06
|
|
Return on average
common shareholders' equity
|
|
11.98
|
|
|
11.08
|
|
|
11.74
|
|
|
0.90
|
|
|
0.24
|
|
Return on average
tangible common shareholders' equity (1)
|
|
19.45
|
|
|
18.36
|
|
|
19.52
|
|
|
1.09
|
|
|
(0.07)
|
|
Net interest margin -
taxable equivalent
|
|
3.42
|
|
|
3.51
|
|
|
3.45
|
|
|
(0.09)
|
|
|
(0.03)
|
|
(1)
Excludes certain items as detailed in the non-GAAP reconciliations
in the Quarterly Performance Summary.
|
|
Second Quarter 2019 compared to First Quarter
2019
Total taxable-equivalent revenues were $3.1 billion for the second quarter of 2019, an
increase of $144 million compared to
the prior quarter, primarily driven by an increase of $150 million in noninterest income.
The net interest margin was 3.42 percent for the second
quarter, down nine basis points compared to the prior quarter. This
includes a four basis point decline attributable to income from
certain post-employment benefit plans that was recorded in the
prior quarter. Average earning assets increased $3.1 billion, which reflects a $2.8 billion increase in average total loans and
leases. Average interest-bearing liabilities increased $2.2 billion, driven by an increase of
$2.7 billion in average short-term
borrowings, partially offset by a decrease of $551 million in average interest-bearing
deposits.
The annualized yield on the total loan portfolio for the
second quarter was 5.05 percent, down one basis point compared to
the prior quarter. The annualized yield on the average securities
portfolio for the second quarter was 2.62 percent, up two basis
points compared to the prior quarter.
The average annualized cost of total deposits was 0.68
percent, up four basis points compared to the prior quarter. The
average annualized cost of interest-bearing deposits was 1.02
percent, up seven basis points compared to the prior quarter. The
average annualized rate on long-term debt was 3.33 percent, up
three basis points compared to the prior quarter. The average
annualized rate on short-term borrowings was 2.40 percent, up eight
basis points compared to the prior quarter.
The provision for credit losses was $172 million, and net charge-offs were
$142 million for the second quarter,
compared to $155 million and
$147 million, respectively, for the
prior quarter. The increase in the provision for credit losses was
primarily due to loan growth.
Noninterest income was $1.4
billion, an increase of $150
million compared to the prior quarter. Insurance income
increased $56 million to a record
$566 million primarily due to
seasonality and organic growth. Service charges on deposit accounts
increased $10 million primarily due
to more revenue days. Mortgage banking income increased
$50 million primarily due to an
increase of $29 million from net
mortgage servicing rights valuation adjustments and higher
residential and commercial mortgage sales volumes. Investment
banking and brokerage fees and commissions increased $20 million due to higher revenue from investment
banking transactions and higher managed account fees. Other income
was down slightly compared to the prior quarter, primarily due to a
$20 million decrease from SBIC
private equity investments, which was partially offset by sundry
items.
Noninterest expense was $1.8
billion for the second quarter, down $17 million compared to the prior quarter.
Noninterest expense includes $23
million of merger-related and restructuring charges
primarily related to the merger of equals with SunTrust and
$9 million of incremental operating
expenses related to the merger. Excluding these items, noninterest
expense was up $33 million primarily
due to higher personnel expense.
Personnel expense increased $33
million compared to the prior quarter. The increase was
driven by higher performance-based incentive expense due to
improved performance from fee income businesses, partially offset
by lower payroll taxes. Full-time equivalent employees decreased
563 compared to the prior quarter.
The provision for income taxes was $234 million for the second quarter, compared to
$177 million for the prior quarter.
The effective tax rate for the second quarter was 20.9 percent,
compared to 18.2 percent for the prior quarter. The increase in the
effective tax rate was primarily due to excess tax benefits from
equity-based compensation plans recorded in the prior
quarter.
Second Quarter 2019 compared to Second Quarter
2018
Total taxable-equivalent revenues were $3.1 billion for the second quarter of 2019, an
increase of $165 million compared to
the earlier quarter, which reflects an increase of $35 million in taxable-equivalent net interest
income and an increase of $130
million in noninterest income.
Net interest margin was 3.42 percent, down three basis
points compared to the earlier quarter. Average earning assets
increased $5.7 billion. The increase
in average earning assets reflects a $5.8
billion increase in average total loans and leases. Average
interest-bearing liabilities increased $6.1
billion compared to the earlier quarter. Average
interest-bearing deposits increased $3.5
billion and average short-term borrowings increased
$3.0 billion, while average long-term
debt decreased $406 million. The
annualized yield on the total loan portfolio for the second quarter
of 2019 was 5.05 percent, up 35 basis points compared to the
earlier quarter, reflecting the impact of rate increases. The
annualized yield on the average securities portfolio was 2.62
percent, up nine basis points compared to the earlier
period.
The average annualized cost of total deposits was 0.68
percent, up 31 basis points compared to the earlier quarter. The
average annualized cost of interest-bearing deposits was 1.02
percent, up 45 basis points compared to the earlier quarter. The
average annualized rate on long-term debt was 3.33 percent, up 52
basis points compared to the earlier quarter. The average
annualized rate on short-term borrowings was 2.40 percent, up 63
basis points compared to the earlier quarter. The higher rates on
interest-bearing liabilities reflect the impact of rate
increases.
The provision for credit losses was $172 million, compared to $135 million for the earlier quarter. Net
charge-offs for the second quarter of 2019 totaled $142 million compared to $109 million in the earlier period.
Noninterest income for the second quarter of 2019 was up
$130 million compared to the earlier
quarter. Insurance income increased $85
million to record levels due to higher production and the
acquisition of Regions Insurance. Mortgage banking income increased
$19 million primarily due to an
increase of $28 million for net
mortgage servicing servicing rights valuation adjustments, which
was partially offset by lower residential and commercial mortgage
banking revenues. Investment banking and brokerage fees and
commissions increased $22 million
primarily due to higher revenue from investment banking
transactions and higher managed account fees.
Noninterest expense for the second quarter of 2019 was up
$31 million compared to the earlier
quarter. Merger-related and restructuring charges was essentially
flat, as the current quarter included charges in connection with
the announced merger of equals with SunTrust, whereas the earlier
quarter included charges associated with facilities optimization.
The current quarter also included $9
million of incremental operating expenses related to the
merger. Excluding these charges, noninterest expense was up
$23 million, or 1.4 percent compared
to the earlier quarter.
Personnel expense increased $46
million compared to the earlier quarter, primarily due to
higher incentives, partially due to the Regions Insurance
acquisition, and lower capitalized employee costs. The lower
capitalized employee costs reflect efficiencies in the loan closing
process. Regulatory charges decreased $20
million as a result of the deposit insurance fund reaching
the targeted level.
The provision for income taxes was $234 million for the second quarter of 2019,
compared to $202 million for the
earlier quarter. This produced an effective tax rate for the second
quarter of 2019 of 20.9 percent, compared to 19.7 percent for the
earlier quarter.
LOANS AND LEASES
|
|
|
|
|
(dollars in
millions)
|
|
|
|
|
Average
balances
|
2Q19
|
1Q19
|
Change
|
% Change
|
|
|
|
|
(annualized)
|
Commercial:
|
|
|
|
|
Commercial and
industrial
|
$
|
62,563
|
|
$
|
61,370
|
|
$
|
1,193
|
|
7.8
|
%
|
CRE
|
20,748
|
|
20,905
|
|
(157)
|
|
(3.0)
|
|
Lease
financing
|
2,122
|
|
2,021
|
|
101
|
|
20.0
|
|
Total
commercial
|
85,433
|
|
84,296
|
|
1,137
|
|
5.4
|
|
Retail:
|
|
|
|
|
Residential
mortgage
|
32,066
|
|
31,370
|
|
696
|
|
8.9
|
|
Direct
|
11,506
|
|
11,493
|
|
13
|
|
0.5
|
|
Indirect
|
17,879
|
|
17,337
|
|
542
|
|
12.5
|
|
Total
retail
|
61,451
|
|
60,200
|
|
1,251
|
|
8.3
|
|
Revolving
credit
|
3,151
|
|
3,110
|
|
41
|
|
5.3
|
|
PCI
|
432
|
|
455
|
|
(23)
|
|
(20.3)
|
|
Total loans and leases
held for investment
|
$
|
150,467
|
|
$
|
148,061
|
|
$
|
2,406
|
|
6.5
|
|
Average loans held for investment for the second quarter
of 2019 were $150.5 billion, up
$2.4 billion or 6.5 percent
annualized, compared to the first quarter of 2019.
Average commercial and industrial loans increased
$1.2 billion driven by strong growth
in mortgage warehouse lending, corporate banking, equipment finance
and dealer floor plan. Average CRE loans decreased $157 million, primarily due to a decrease in
construction loans.
Average residential mortgage loans increased $696 million primarily due to the retention of a
portion of the conforming mortgage production.
Average indirect retail loans increased $542 million. The increase was across all
categories of indirect lending. Growth was led by prime automobile
lending and complemented with seasonally strong growth in power
sports and recreational lending.
DEPOSITS
|
|
|
|
|
(dollars in
millions)
|
|
|
|
|
Average
balances
|
2Q19
|
1Q19
|
Change
|
% Change
|
|
|
|
|
(annualized)
|
Noninterest-bearing
deposits
|
$
|
52,680
|
|
$
|
52,283
|
|
$
|
397
|
|
3.0
|
%
|
Interest
checking
|
27,708
|
|
27,622
|
|
86
|
|
1.2
|
|
Money market and
savings
|
63,394
|
|
63,325
|
|
69
|
|
0.4
|
|
Time
deposits
|
15,730
|
|
16,393
|
|
(663)
|
|
(16.2)
|
|
Foreign office
deposits - interest-bearing
|
379
|
|
422
|
|
(43)
|
|
(40.9)
|
|
Total
deposits
|
$
|
159,891
|
|
$
|
160,045
|
|
$
|
(154)
|
|
(0.4)
|
|
Average deposits for the second quarter were $159.9 billion, down $154
million compared to the prior quarter. Average
noninterest-bearing deposits increased $397
million, primarily due to increases in personal and
commercial balances, partially offset by a seasonal decrease in
public funds balances. Average time deposits decreased $663 million primarily due to a decrease in
commercial balances.
Noninterest-bearing deposits represented 32.9 percent of
total average deposits for the second quarter, compared to 32.7
percent for the prior quarter and 34.2 percent for the same quarter
a year ago. The cost of average total deposits was 0.68 percent for
the second quarter, up four basis points compared to the prior
quarter. The cost of average interest-bearing deposits was 1.02
percent for the second quarter, up seven basis points compared to
the prior quarter.
SEGMENT RESULTS
|
|
|
|
Change 2Q19 vs.
|
(dollars in
millions)
|
|
|
|
Segment Net
Income
|
2Q19
|
1Q19
|
2Q18
|
1Q19
|
2Q18
|
Community Banking
Retail and Consumer Finance
|
$
|
445
|
|
$
|
379
|
|
$
|
383
|
|
$
|
66
|
|
$
|
62
|
|
Community Banking
Commercial
|
319
|
|
328
|
|
278
|
|
(9)
|
|
41
|
|
Financial Services
and Commercial Finance
|
169
|
|
156
|
|
145
|
|
13
|
|
24
|
|
Insurance
Holdings
|
111
|
|
88
|
|
73
|
|
23
|
|
38
|
|
Other, Treasury &
Corporate
|
(159)
|
|
(153)
|
|
(57)
|
|
(6)
|
|
(102)
|
|
Total net
income
|
$
|
885
|
|
$
|
798
|
|
$
|
822
|
|
$
|
87
|
|
$
|
63
|
|
Second Quarter 2019 compared to First Quarter
2019
Community Banking Retail and Consumer Finance
("CB-Retail")
CB-Retail serves retail clients by offering a variety of
loan and deposit products, payment services, bankcard products and
other financial services by connecting clients to a wide range of
financial products and services. CB-Retail includes Dealer Retail
Services, which originates loans on an indirect basis to consumers
for the purchase of automobiles, boats and recreational vehicles.
Additionally, CB-Retail includes specialty finance lending, small
equipment leasing and other products for consumers. CB-Retail also
includes Residential Mortgage Banking, which originates and
purchases mortgage loans to either hold for investment or sell to
third parties. BB&T generally retains the servicing rights to
loans sold. Mortgage products include fixed and adjustable-rate
government guaranteed and conventional loans used for the purpose
of constructing, purchasing or refinancing residential properties.
Substantially all of the properties are owner-occupied. Residential
Mortgage Banking also includes Mortgage Warehouse Lending, which
provides short-term lending solutions to finance first-lien
residential mortgages held-for-sale by independent mortgage
companies.
CB-Retail net income was $445
million for the second quarter of 2019, an increase of
$66 million compared to the prior
quarter. Segment net interest income increased $24 million primarily due to higher loan volume,
additional days in the current quarter and higher funding spreads
on deposits, partially offset by lower credit spreads on loans.
Noninterest income increased $65
million primarily due to increases in mortgage banking
income resulting from net residential mortgage servicing rights
valuation adjustments and seasonally higher volume of loan sales
and higher margins, and service charges on deposits, bankcard fees
and merchant discounts largely resulting from additional revenue
days and seasonality. The allocated provision for credit losses
decreased $7 million primarily due to
seasonally lower net charge-offs and incurred loss estimates in the
dealer retail services portfolio, partially offset by higher
average loan balances. Noninterest expense increased $9 million primarily due to higher operating
charge-offs, loan related expense and personnel expense compared to
the prior quarter.
CB-Retail average loans and leases held for investment
increased $2.1 billion, or 12.7
percent on an annualized basis, compared to the prior quarter. The
increase was primarily driven by increases in average mortgage
warehouse lending of $766 million,
seasonal increases in average residential mortgage loans of
$697 million, or 8.9 percent
annualized, and indirect lending of $545
million, or 12.6 percent annualized.
CB-Retail average total deposits increased $932 million, or 4.8 percent on an annualized
basis, compared to the prior quarter. The increase was primarily
driven by growth in average noninterest-bearing deposits of
$695 million, or 16.7 percent
annualized and money market and savings of $280 million, or 3.1 percent
annualized.
Community Banking Commercial ("CB-Commercial")
CB-Commercial serves large, medium and small business
clients by offering a variety of loan and deposit products and
connecting clients to the combined organization's broad array of
financial services. CB-Commercial includes CRE lending, commercial
and industrial lending, corporate banking, asset-based lending,
dealer inventory financing, tax-exempt financing, cash management
and treasury services, and commercial deposit products.
CB-Commercial net income was $319
million for the second quarter of 2019, a decrease of
$9 million compared to the prior
quarter. Segment net interest income increased primarily due to
additional days in the current quarter. Noninterest income
increased primarily due to higher referral fees and service charges
on deposits predominantly due to commercial account analysis fees.
The allocated provision for credit losses increased $20 million due to increased charge-offs and
incurred loss estimates primarily attributed to portfolio growth
and changes in portfolio risk grade composition. Noninterest
expense increased primarily due to higher allocated corporate
expense and personnel expense largely due to higher incentive
compensation compared to the prior quarter.
CB-Commercial average loans and leases held for investment
decreased $248 million, or 1.9
percent on an annualized basis, compared to the prior quarter.
Average commercial real estate loans declined $159 million, or 3.3 percent annualized and
average commercial and industrial loans decreased $81 million, or 1.0 percent
annualized.
Average total deposits increased $781 million, or 5.3 percent on an annualized
basis, compared to the prior quarter driven by an increase in money
market and savings of $706 million,
or 18.4 percent annualized.
Financial Services and Commercial Finance
("FS&CF")
FS&CF provides personal trust administration, estate
planning, investment counseling, wealth management, asset
management, corporate retirement services, capital markets and
corporate banking services, specialty finance and corporate trust
services to individuals, corporations, institutions, foundations
and government entities. In addition, the segment includes BB&T
Securities, a full-service brokerage and investment banking firm,
which offers clients a variety of investment services, including
discount brokerage services, equities, annuities, mutual funds and
government bonds. The Corporate Banking Division originates and
services large corporate relationships, syndicated lending
relationships and client derivatives while the specialty finance
products offered by FS&CF include equipment finance, tax-exempt
financing for local governments and special-purpose entities, and
full-service commercial mortgage banking lending.
FS&CF net income was $169
million for the second quarter of 2019, an increase of
$13 million compared to the prior
quarter. Noninterest income increased $45
million primarily due to higher revenue from investment
banking transactions and managed account fees; and client
derivatives and commercial mortgage banking income due to higher
sales volumes. The allocated provision for credit losses increased
$13 million due to loan growth and
higher charge-offs. Noninterest expense increased $14 million primarily due to higher
performance-based incentives in the current quarter.
FS&CF average loans and leases held for investment
increased $619 million, or 8.6
percent on an annualized basis, compared to the prior quarter. The
increase was primarily driven by growth in Corporate Banking loans
of $383 million, or 9.0 percent
annualized, and Equipment Finance of $260
million, or 33.9 percent annualized; partially offset by a
decline for Governmental Finance of $92
million, or 7.5 percent annualized.
FS&CF average total deposits decreased $567 million, or 7.9 percent on an annualized
basis, compared to the prior quarter primarily driven by declines
in average total deposits for Corporate Banking of $487 million, or 23.7 percent
annualized.
Insurance Holdings ("IH")
BB&T's insurance agency / brokerage network is the
sixth largest in the world. IH provides property and casualty,
employee benefits and life insurance to businesses and individuals.
It also provides small business and corporate services, such as
workers compensation and professional liability, as well as surety
coverage and title insurance. In addition, IH includes commercial
and retail insurance premium finance.
IH net income was $111
million for the second quarter of 2019, an increase of
$23 million compared to the prior
quarter. Noninterest income increased $55
million primarily due to seasonality. Noninterest expense
increased $27 million primarily due
to performance-based incentives in the current quarter.
Other, Treasury & Corporate ("OT&C")
Net income in OT&C can vary due to the changing needs
of the Corporation, including the size of the investment portfolio,
the need for wholesale funding and income received from derivatives
used to hedge the balance sheet.
OT&C generated a net loss of $159 million for the second quarter of 2019,
compared to a net loss of $153
million for the prior quarter. Segment net interest income
decreased $40 million primarily due
to an increase in the net credit for funds provided to other
operating segments and decrease in dividends related to certain
post-employment benefits from the prior quarter. Noninterest income
decreased $20 million primarily due
to a decrease in income from SBIC private equity investments. The
allocated provision for credit losses decreased primarily due to
the provision for unfunded commitments. Noninterest expense
decreased $71 million primarily due
to lower merger-related and restructuring charges and lower expense
related to assets for certain post-employment benefits. The benefit
for income taxes decreased primarily due to a higher tax benefit
from discrete items in the prior quarter.
Second Quarter 2019 compared to Second Quarter
2018
Community Banking Retail and Consumer Finance
CB-Retail net income was $445
million for the second quarter of 2019, an increase of
$62 million compared to the earlier
quarter. Segment net interest income increased $54 million primarily due to average loan growth
and higher funding spreads on deposits, partially offset by lower
credit spreads on loans. Noninterest income increased $32 million primarily due to an increase in
mortgage banking income resulting from net residential mortgage
servicing rights valuation adjustments. The allocated provision for
credit losses increased $13 million
primarily due to higher net charge-offs in the current quarter due
to portfolio growth, partially offset by reserve rate changes at
Regional Acceptance Corporation. Noninterest expense decreased
primarily due to lower personnel expense.
Community Banking Commercial
CB-Commercial net income was $319
million for the second quarter of 2019, an increase of
$41 million compared to the earlier
quarter. Segment net interest income increased $43 million primarily driven by higher funding
spreads, partially offset by lower credit spreads on loans.
Noninterest income increased compared to the earlier quarter
primarily due to higher referral fees in the current quarter. The
allocated provision for credit losses decreased primarily due to
the impact of average loan growth in the earlier quarter and
reserve rate changes primarily due to overall credit improvement in
the past year, partially offset by higher net charge-offs.
Noninterest expense was essentially flat compared to the earlier
quarter.
Financial Services and Commercial Finance
FS&CF net income was $169
million for the second quarter of 2019, an increase of
$24 million compared to the earlier
quarter. Segment net interest income increased $22 million primarily driven by average loan
growth and higher funding spreads, partially offset by lower credit
spreads on loans. Noninterest income increased $26 million primarily due to an increase in
investment banking and brokerage fees and commissions related to
several large deals in the current quarter as well as market driven
asset growth. The allocated provision for credit losses increased
$18 million primarily due to the
release of specific reserves in the earlier quarter. Noninterest
expense was essentially flat compared to the earlier
quarter.
Insurance Holdings
IH net income was $111
million for the second quarter of 2019, an increase of
$38 million compared to the earlier
quarter. Noninterest income increased $86
million, primarily due to higher production and the
acquisition of Regions Insurance, which contributed $32 million. Noninterest expense increased
$36 million primarily due to the
acquisition of Regions Insurance and commissions on higher
production.
Other, Treasury & Corporate
OT&C generated a net loss of $159 million in the second quarter of 2019,
compared to a net loss of $57 million
in the earlier quarter. Segment net interest income decreased
$89 million primarily due to an
increase in the net credit for funds provided to other operating
segments, and an increase in the rates on long-term debt.
Noninterest income decreased $18
million primarily due to lower hedge and client derivative
income and income related to assets for certain post-employment
benefits. The benefit for income taxes increased $13 million primarily due to a higher pre-tax
loss, partially offset by a higher tax benefit from discrete items
in the earlier quarter.
CAPITAL RATIOS
|
2Q19
|
1Q19
|
4Q18
|
3Q18
|
2Q18
|
Risk-based:
|
(preliminary)
|
|
|
|
|
Common equity Tier
1
|
10.3
|
%
|
10.3
|
%
|
10.2
|
%
|
10.2
|
%
|
10.2
|
%
|
Tier 1
|
12.0
|
|
12.0
|
|
11.8
|
|
11.9
|
|
11.9
|
|
Total
|
14.2
|
|
14.2
|
|
13.8
|
|
13.9
|
|
13.9
|
|
Leverage
|
10.2
|
|
10.1
|
|
9.9
|
|
10.0
|
|
10.0
|
|
Capital levels remained strong at June 30, 2019.
BB&T declared common dividends of $0.405 per share during the second quarter of
2019 and the Board of Directors will consider a proposal to
increase the dividend 11.1 percent to $0.45 per share at their July meeting. The
dividend and total payout ratios for the second quarter of 2019
were 36.8 percent. As previously communicated, BB&T has
suspended its share repurchase program until after the completion
of the merger of equals.
BB&T's average modified liquidity coverage ratio was
approximately 129 percent for the three months ended June 30,
2019, compared to the regulatory minimum of 100 percent. In
addition, the liquid asset buffer, which is defined as high quality
unencumbered liquid assets as a percentage of total assets, was
14.3 percent at June 30, 2019.
ASSET QUALITY
|
|
|
|
|
|
(dollars in
millions)
|
2Q19
|
1Q19
|
4Q18
|
3Q18
|
2Q18
|
Total nonperforming
assets
|
$
|
523
|
|
$
|
584
|
|
$
|
585
|
|
$
|
601
|
|
$
|
624
|
|
Total performing
TDRs
|
1,070
|
|
1,130
|
|
1,119
|
|
1,090
|
|
1,073
|
|
Total loans 90 days
past due and still accruing
|
407
|
|
431
|
|
462
|
|
431
|
|
435
|
|
Total loans 30-89
days past due
|
1,016
|
|
948
|
|
1,044
|
|
1,075
|
|
905
|
|
Nonperforming loans
and leases as a percentage of loans and
leases held for investment
|
0.30
|
%
|
0.35
|
%
|
0.35
|
%
|
0.37
|
%
|
0.38
|
%
|
Nonperforming assets
as a percentage of total assets
|
0.23
|
|
0.26
|
|
0.26
|
|
0.27
|
|
0.28
|
|
Allowance for loan
and lease losses as a percentage of loans
and leases held for investment
|
1.05
|
|
1.05
|
|
1.05
|
|
1.05
|
|
1.05
|
|
Net charge-offs as a
percentage of average loans and leases,
annualized
|
0.38
|
|
0.40
|
|
0.38
|
|
0.35
|
|
0.30
|
|
Ratio of allowance
for loan and lease losses to net charge-offs,
annualized
|
2.80x
|
2.62x
|
2.76x
|
3.05x
|
3.49x
|
Ratio of allowance
for loan and lease losses to nonperforming
loans and leases held for investment
|
3.46x
|
2.97x
|
2.99x
|
2.86x
|
2.74x
|
Nonperforming assets totaled $523
million at June 30, 2019, down $61 million compared to March 31, 2019.
Nonperforming loans and leases represented 0.30 percent of loans
and leases held for investment, down five basis points compared to
March 31, 2019.
Performing TDRs were down $60
million during the second quarter primarily in residential
mortgage loans, which was partially offset by an increase in
commercial and industrial loans.
Loans 90 days or more past due and still accruing totaled
$407 million at June 30, 2019,
down $24 million compared to the
prior quarter. The ratio of loans 90 days or more past due and
still accruing as a percentage of loans and leases was 0.27 percent
at June 30, 2019, compared to 0.29 percent for the prior
quarter. Excluding government guaranteed and PCI loans, the ratio
of loans 90 days or more past due and still accruing as a
percentage of loans and leases was 0.04 percent at June 30,
2019, unchanged from the prior quarter.
Loans 30-89 days past due and still accruing totaled
$1.0 billion at June 30, 2019,
up $68 million compared to the prior
quarter, primarily due to an expected seasonal increase in indirect
automobile lending.
Net charge-offs during the second quarter totaled
$142 million, down $5 million compared to the prior quarter. As a
percentage of average loans and leases, annualized net charge-offs
were 0.38 percent, down two basis points compared to the prior
quarter.
The allowance for loan and lease losses, excluding the
allowance for PCI loans, was $1.6
billion, up $34 million
compared to the prior quarter. As of June 30, 2019, the total
allowance for loan and lease losses was 1.05 percent of loans and
leases held for investment, unchanged compared to March 31,
2019.
The allowance for loan and lease losses was 3.46 times
nonperforming loans and leases held for investment, compared to
2.97 times at March 31, 2019. At June 30, 2019, the
allowance for loan and lease losses was 2.80 times annualized net
charge-offs, compared to 2.62 times at March 31,
2019.
Earnings Presentation and Quarterly Performance
Summary
To listen to BB&T's live second quarter 2019 earnings
conference call at 8 a.m. ET today,
please call 866-519-2796 and enter the participant code 892418. 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 6759252).
The presentation, including an appendix reconciling
non-GAAP disclosures, is available at
https://bbt.investorroom.com/webcasts-and-presentations. BB&T's
Second Quarter 2019 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 $230.9
billion in assets and market capitalization of approximately
$37.6 billion as of June 30,
2019. 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 1,700 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, net
of deferred taxes, 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 Bank 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, selected
items 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 2019 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, 2018 and in any of BB&T's subsequent
filings with the Securities and Exchange Commission:
•
|
risks, uncertainties and other factors relating to
the merger of SunTrust with and into BB&T, including the
ability to obtain regulatory approvals and meet other closing
conditions to the merger, including approval of the merger by
BB&T shareholders and SunTrust shareholders and delay in
closing the merger;
|
•
|
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;
|
•
|
changes in the interest rate environment, including
interest rate changes made by the Federal Reserve, the
discontinuation of LIBOR as an interest rate benchmark, 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;
|
•
|
cyber security 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 news release. 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.
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SOURCE BB&T Corporation