WINSTON-SALEM, N.C.,
Jan. 17, 2019 /PRNewswire/ --
BB&T Corporation (NYSE: BBT) today reported earnings for the
fourth quarter of 2018. Net income available to common shareholders
was $754 million. Earnings per
diluted common share were $0.97 for
the fourth quarter of 2018, down from $1.01 last quarter. Results for the fourth
quarter produced an annualized return on average assets of 1.43
percent and an annualized return on average common shareholders'
equity of 11.14 percent.
Excluding merger-related and restructuring charges of
$76 million ($59 million after-tax), net income available to
common shareholders was $813 million,
or $1.05 per diluted share, up from
$1.03 last quarter.
Net income available to common shareholders was $789 million ($1.01
per diluted share) for the third quarter of 2018 and $614 million ($0.77
per diluted share) for the fourth quarter of 2017.
For the full year, net income available to common shareholders
was a record $3.1 billion, or
$3.91 per diluted share. For 2017,
net income available to common shareholders was $2.2 billion, or $2.74 per diluted share. Excluding merger-related
and restructuring charges and selected items, adjusted diluted
earnings per share was $4.05 for
2018, up 29.0 percent compared to $3.14 for 2017.
"We are pleased to report record taxable-equivalent revenues of
$3.0 billion and strong
fourth-quarter and record full-year earnings, while we continue to
make significant investments in our digital platform to enhance our
clients' experiences," said Chairman and Chief Executive Officer
Kelly S. King.
"Our diversified businesses continue to perform well, as
evidenced by quarterly record revenues of $487 million from insurance income and
$139 million from investment banking
income. Our GAAP efficiency ratio increased to 60.7 percent due to
higher merger-related and restructuring charges. Our adjusted
efficiency ratio was 56.5 percent, which is at the lowest level
since 2014. We also delivered solid loan growth for the quarter,"
King said.
"Asset quality remains excellent and nonperforming assets
improved further during the fourth quarter," King said.
Fourth Quarter 2018 Performance
Highlights
- Earnings per diluted common share were $0.97, down $0.04
compared to third quarter of 2018
-
- Diluted earnings per share was $1.05, excluding merger-related and restructuring
charges
- Return on average assets was 1.43 percent
- Return on average common shareholders' equity was 11.14
percent
- Return on average tangible common shareholders' equity was
19.02 percent
- Taxable-equivalent revenues were a record $3.0 billion, up $11
million from the third quarter of 2018
-
- Net interest margin was 3.49 percent, up two basis points from
the prior quarter
- Noninterest income was essentially flat; excluding income from
post-employment assets that are offset by personnel expense,
noninterest income was up $32 million
from the prior quarter
- Insurance income was a record $487
million, up $39 million from
the prior quarter
- Investment banking and brokerage fees and commissions was a
record $139 million, up $23 million from the prior quarter
- Fee income ratio was 42.0 percent, compared to 42.3 percent for
the prior quarter
- Noninterest expense was $1.8
billion, up $42 million
compared to the third quarter of 2018
-
- Noninterest expense was down $71
million compared to the fourth quarter of 2017
- GAAP efficiency ratio was 60.7 percent, compared to 59.5
percent for the prior quarter
- Adjusted efficiency ratio was 56.5 percent, compared to 57.3
percent for the prior quarter
- Average loans and leases held for investment were $147.5 billion, up $1.3
billion, or 3.6 percent annualized compared to the third
quarter of 2018
-
- Average commercial and industrial loans increased $653 million, or 4.3 percent annualized
- Average CRE loans decreased $195
million, or 3.6 percent annualized
- Average residential mortgage loans increased $603 million, or 7.8 percent annualized
- Average indirect loans increased $154
million, or 3.5 percent annualized
- Average revolving credit increased $123
million, or 16.6 percent annualized
- Average deposits were $157.8
billion compared to $157.3
billion for the third quarter of 2018
-
- Average noninterest-bearing deposits decreased $442 million, or 3.2 percent annualized
- Average noninterest-bearing deposits represent 34.0 percent of
total deposits, compared to 34.4 percent in the prior quarter
- Cost of average interest-bearing deposits was 0.78 percent
annualized, up 12 basis points
- Cost of average total deposits was 0.52 percent annualized, up
nine basis points
- Asset quality remains excellent
-
- Nonperforming assets were 0.26 percent of total assets; lower
than levels in 2006
- Loans 90 days or more past due and still accruing were 0.31
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,
up three basis points
- The allowance for loan loss coverage ratio was 2.99 times
nonperforming loans held for investment, versus 2.86 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 11.8 percent
- Total capital was 13.8 percent
- Leverage capital was 9.9 percent
EARNINGS
HIGHLIGHTS
|
|
|
|
Change 4Q18
vs.
|
(dollars in millions,
except per share data)
|
4Q18
|
3Q18
|
4Q17
|
3Q18
|
4Q17
|
Net income available
to common shareholders
|
$
|
754
|
|
$
|
789
|
|
$
|
614
|
|
$
|
(35)
|
|
$
|
140
|
|
Diluted earnings per
common share
|
0.97
|
|
1.01
|
|
0.77
|
|
(0.04)
|
|
0.20
|
|
|
|
|
|
|
|
Net interest income -
taxable equivalent
|
$
|
1,729
|
|
$
|
1,714
|
|
$
|
1,682
|
|
$
|
15
|
|
$
|
47
|
|
Noninterest
income
|
1,235
|
|
1,239
|
|
1,225
|
|
(4)
|
|
10
|
|
Total
taxable-equivalent revenue
|
$
|
2,964
|
|
$
|
2,953
|
|
$
|
2,907
|
|
$
|
11
|
|
$
|
57
|
|
Less
taxable-equivalent adjustment
|
24
|
|
27
|
|
38
|
|
|
|
Total
revenue
|
$
|
2,940
|
|
$
|
2,926
|
|
$
|
2,869
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return on average
assets
|
|
1.43
|
%
|
|
1.49
|
%
|
|
1.19
|
%
|
|
(0.06)
|
%
|
|
0.24
|
%
|
Return on average
risk-weighted assets
|
|
1.77
|
|
|
1.85
|
|
|
1.50
|
|
|
(0.08)
|
|
|
0.27
|
|
Return on average
common shareholders' equity
|
|
11.14
|
|
|
11.69
|
|
|
9.10
|
|
|
(0.55)
|
|
|
2.04
|
|
Return on average
tangible common shareholders' equity (1)
|
|
19.02
|
|
|
20.00
|
|
|
15.35
|
|
|
(0.98)
|
|
|
3.67
|
|
Net interest margin -
taxable equivalent
|
|
3.49
|
|
|
3.47
|
|
|
3.43
|
|
|
0.02
|
|
|
0.06
|
|
(1)
|
Excludes certain
items as detailed in the non-GAAP reconciliations in the Quarterly
Performance Summary.
|
Fourth Quarter 2018 compared to Third Quarter
2018
Total taxable-equivalent revenues were $3.0 billion for the fourth quarter of 2018, an
increase of $11 million compared to
the prior quarter, primarily driven by an increase of $15 million in taxable-equivalent net interest
income.
The net interest margin was 3.49 percent for the fourth quarter,
up two basis points compared to the prior quarter. Average earning
assets increased $1.0 billion, which
reflects a $968 million increase in
average total loans and leases. Average interest-bearing
liabilities increased $1.2 billion,
driven by a $1.0 billion increase in
average interest-bearing deposits and an increase of $956 million in average short-term borrowings,
partially offset by a decrease of $723
million in average long-term debt.
The annualized yield on the total loan portfolio for the fourth
quarter was 4.96 percent, up 13 basis points, reflecting the impact
of rate increases. The annualized yield on the average securities
portfolio for the fourth quarter was 2.53 percent, up six basis
points compared to the prior quarter.
The average annualized cost of total deposits was 0.52 percent,
up nine basis points compared to the prior quarter. The average
annualized cost of interest-bearing deposits was 0.78 percent, up
12 basis points compared to the prior quarter. The average
annualized rate on long-term debt was 3.19 percent, up 20 basis
points compared to the prior quarter. The average annualized rate
on short-term borrowings was 2.18 percent, up 24 basis points
compared to the prior quarter. The higher rates on interest-bearing
liabilities reflect the impact of rate increases.
The provision for credit losses was $146
million, and net charge-offs were $143 million for the fourth quarter, compared to
$135 million and $127 million, respectively, for the prior
quarter.
Noninterest income was $1.2
billion, flat compared to the prior quarter. Excluding a
$36 million decrease in income
related to assets for certain post-employment benefits, which is
primarily offset by lower personnel expense, noninterest income
increased $32 million, or 10.4
percent annualized.
Insurance income increased $39
million to a record $487
million primarily due to seasonality, as well as higher
production. Investment banking and brokerage fees and commissions
increased $23 million to a record
$139 million due to strong activity
in debt and equity deals and higher managed account fees. Other
income decreased $77 million
primarily due to a $18 million
decrease in income from SBIC private equity investments and a
$36 million decrease in income
related to assets for certain post-employment benefits, which is
primarily offset by lower personnel expense.
Noninterest expense was $1.8
billion for the fourth quarter, up $42 million compared to the prior quarter. This
increase is primarily due to higher charges as a result of
restructuring initiatives, including $50
million of personnel costs for severance and other benefits
and $26 million primarily related to
costs to exit facilities. These restructuring activities will allow
continued investment in the company's digital strategy, while
maintaining disciplined cost control. Noninterest expenses were
lower $36 million related to assets
for certain post-employment benefits, which is primarily offset by
lower noninterest income. Excluding these items, noninterest
expenses were up $20 million compared
to the prior quarter.
Personnel expense was essentially flat compared to the prior
quarter and FTEs were down 381. Incentives expense increased
$36 million due to improved
performance relative to targets. Capitalized employee costs were
lower resulting from efficiencies in the loan closing process.
These increases were offset by a $36
million decrease in certain post-employment benefits expense
and a decrease in equity-based compensation. The lower
post-employment benefits expense is offset in other income.
Regulatory charges decreased $19
million as a result of the deposit insurance fund reaching
the targeted level, which eliminated the special assessment for
larger institutions.
The provision for income taxes was $205
million for the fourth quarter, compared to $210 million for the prior quarter. The effective
tax rate for the fourth quarter was 20.3 percent, compared to 20.0
percent for the prior quarter.
Fourth Quarter 2018 compared to Fourth Quarter
2017
Total taxable-equivalent revenues were $3.0 billion for the fourth quarter of 2018, an
increase of $57 million compared to
the earlier quarter, which reflects an increase of $47 million in taxable-equivalent net interest
income and an increase of $10 million
in noninterest income.
Net interest margin was 3.49 percent, up six basis points
compared to the earlier quarter. Average earning assets increased
$1.9 billion. The increase in average
earnings assets reflects a $4.4
billion increase in average total loans and leases,
partially offset by decreases of $1.5
billion and $977 million in
average securities and average other earning assets, respectively.
Average interest-bearing liabilities increased $1.9 billion compared to the earlier quarter.
Average long-term debt increased $849
million, while average short-term borrowings increased
$637 million and average
interest-bearing deposits increased $439
million. The annualized yield on the total loan portfolio
for the fourth quarter of 2018 was 4.96 percent, up 46 basis points
compared to the earlier quarter, reflecting the impact of rate
increases. The annualized yield on the average securities portfolio
was 2.53 percent, up 11 basis points compared to the earlier
period.
The average annualized cost of total deposits was 0.52 percent,
up 26 basis points compared to the earlier quarter. The average
annualized cost of interest-bearing deposits was 0.78 percent, up
38 basis points compared to the earlier quarter. The average
annualized rate on long-term debt was 3.19 percent, up 83 basis
points compared to the earlier quarter. The average annualized rate
on short-term borrowings was 2.18 percent, up 105 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 $146
million, compared to $138
million for the earlier quarter. Net charge-offs for the
fourth quarter of 2018 totaled $143
million compared to $130
million in the earlier period.
Noninterest income for the fourth quarter of 2018 was up
$10 million compared to the earlier
quarter. Excluding a $37 million
decrease in income related to assets for certain post-employment
benefits, which is primarily offset by lower personnel expense,
noninterest income increased $47
million.
Insurance income increased $69
million to a record due to higher production and the
acquisition of Regions Insurance, which contributed $34 million. Mortgage banking income decreased
$18 million primarily due to lower
gain-on-sale margins and retaining more production on the balance
sheet. Investment banking and brokerage fees and commissions
increased $28 million to a record,
primarily as a result of strong activity in debt and equity deals
and higher managed account fees. Other income decreased
$73 million primarily due to a
$15 million decrease in income from
SBIC private equity investments, and a $37
million decrease due to lower income related to assets for
certain post-employment benefits. The decrease in post-employment
benefit income is primarily offset by lower personnel expense.
Noninterest expense for the fourth quarter of 2018 was down
$71 million compared to the earlier
quarter. The current quarter includes $28
million of additional operating expenses associated with the
Regions Insurance acquisition and an increase of $54 million in merger-related and restructuring
charges. The earlier quarter included $136
million of expenses due to actions taken in connection with
the passage of tax reform legislation. Noninterest expenses were
lower $37 million related to assets
for certain post-employment benefits, which is primarily offset by
lower noninterest income. Excluding these items, noninterest
expense was up $20 million compared
to the earlier quarter.
Personnel expense increased $24
million compared to the earlier quarter. This increase
included $20 million of personnel
expense resulting from the Regions Insurance acquisition. In
addition, capitalized employee costs were $29 million lower due to efficiencies in the loan
closing process and defined benefit plan expenses were higher.
These increases were partially offset by a $37 million decrease for certain post-employment
benefits. Incentive expenses were slightly lower compared to the
earlier quarter. The earlier quarter included $36 million for a one-time bonus paid to
associates who do not generally receive incentives or commissions,
which was partially offset by higher performance-based incentive
expense in the current quarter. Regulatory charges decreased
$20 million as a result of the
deposit insurance fund reaching the targeted level. Other expense
decreased $124 million compared to
the earlier quarter primarily due to a $100
million contribution to BB&T's philanthropic fund made
in the earlier quarter and an increase in income on pension plan
assets.
The provision for income taxes was $205
million for the fourth quarter of 2018, compared to
$209 million for the earlier quarter.
This produced an effective tax rate for the fourth quarter of 2018
of 20.3 percent, compared to 23.9 percent for the earlier quarter.
The provision for income taxes for the current quarter reflects the
new lower federal tax rate, while the earlier quarter included a
net benefit of $43 million related to
the impact of tax reform.
LOANS AND
LEASES
|
|
|
|
|
(dollars in
millions)
|
|
|
|
|
Average
balances
|
4Q18
|
3Q18
|
Change
|
%
Change
|
|
|
|
|
(annualized)
|
Commercial:
|
|
|
|
|
Commercial and
industrial
|
$
|
60,553
|
|
$
|
59,900
|
|
$
|
653
|
|
4.3
|
%
|
CRE
|
21,301
|
|
21,496
|
|
(195)
|
|
(3.6)
|
|
Lease
financing
|
1,990
|
|
1,941
|
|
49
|
|
10.0
|
|
Total
commercial
|
83,844
|
|
83,337
|
|
507
|
|
2.4
|
|
Retail:
|
|
|
|
|
Residential
mortgage
|
31,103
|
|
30,500
|
|
603
|
|
7.8
|
|
Direct
|
11,600
|
|
11,613
|
|
(13)
|
|
(0.4)
|
|
Indirect
|
17,436
|
|
17,282
|
|
154
|
|
3.5
|
|
Total
retail
|
60,139
|
|
59,395
|
|
744
|
|
5.0
|
|
Revolving
credit
|
3,070
|
|
2,947
|
|
123
|
|
16.6
|
|
PCI
|
486
|
|
518
|
|
(32)
|
|
(24.5)
|
|
Total loans and leases
held for investment
|
$
|
147,539
|
|
$
|
146,197
|
|
$
|
1,342
|
|
3.6
|
|
Average loans held for investment for the fourth quarter of 2018
were $147.5 billion, up $1.3 billion, or 3.6 percent annualized compared
to the third quarter of 2018.
Average commercial and industrial loans increased $653 million driven by strong growth in corporate
banking and dealer floor plan, partially offset by a decline in
mortgage warehouse lending. Average residential mortgage loans
increased $603 million primarily due
to the retention of a portion of the conforming mortgage
production.
Average indirect retail loans increased $154 million. This increase was primarily due to
strong growth in automobile lending.
Average revolving credit increased $123
million due to a new product launched early in the third
quarter and higher seasonal spending.
DEPOSITS
|
|
|
|
|
(dollars in
millions)
|
|
|
|
|
Average
balances
|
4Q18
|
3Q18
|
Change
|
%
Change
|
|
|
|
|
(annualized)
|
Noninterest-bearing
deposits
|
$
|
53,732
|
|
$
|
54,174
|
|
$
|
(442)
|
|
(3.2)
|
%
|
Interest
checking
|
26,921
|
|
26,655
|
|
266
|
|
4.0
|
|
Money market and
savings
|
62,261
|
|
62,957
|
|
(696)
|
|
(4.4)
|
|
Time
deposits
|
14,682
|
|
13,353
|
|
1,329
|
|
39.5
|
|
Foreign office
deposits - interest-bearing
|
246
|
|
132
|
|
114
|
|
NM
|
|
Total
deposits
|
$
|
157,842
|
|
$
|
157,271
|
|
$
|
571
|
|
1.4
|
|
Average deposits for the fourth quarter were $157.8 billion, up $571
million compared to the prior quarter. Average
noninterest-bearing deposits decreased $442
million, driven by decreases in commercial balances.
Average interest checking increased $266
million primarily due to increases in commercial and public
fund balances, partially offset by a decrease in personal balances.
Average money market and savings deposits decreased $696 million primarily due to a decrease in
commercial balances. Average time deposits increased $1.3 billion primarily due to increases in
commercial balances. Average foreign office deposits increased
$114 million due to changes in the
overall funding mix.
Noninterest-bearing deposits represented 34.0 percent of total
average deposits for the fourth quarter, compared to 34.4 percent
for the prior quarter and 34.4 percent a year ago. The cost of
total deposits was 0.52 percent for the fourth quarter, up nine
basis points compared to the prior quarter. The cost of
interest-bearing deposits was 0.78 percent for the fourth quarter,
up 12 basis points compared to the prior quarter.
SEGMENT
RESULTS
|
|
|
|
Change 4Q18
vs.
|
(dollars in
millions)
|
|
|
|
Segment Net
Income
|
4Q18
|
3Q18
|
4Q17
|
3Q18
|
4Q17
|
Community Banking
Retail and Consumer Finance
|
$
|
384
|
|
$
|
393
|
|
$
|
264
|
|
$
|
(9)
|
|
$
|
120
|
|
Community Banking
Commercial
|
329
|
|
310
|
|
234
|
|
19
|
|
95
|
|
Financial Services
and Commercial Finance
|
155
|
|
149
|
|
136
|
|
6
|
|
19
|
|
Insurance
Holdings
|
77
|
|
43
|
|
33
|
|
34
|
|
44
|
|
Other, Treasury &
Corporate
|
(140)
|
|
(56)
|
|
—
|
|
(84)
|
|
(140)
|
|
Total net
income
|
$
|
805
|
|
$
|
839
|
|
$
|
667
|
|
$
|
(34)
|
|
$
|
138
|
|
Fourth Quarter 2018 compared to Third Quarter
2018
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 $384
million for the fourth quarter of 2018, a decrease of
$9 million compared to the prior
quarter. Segment net interest income increased primarily due to
higher funding spreads on deposits and average loan growth,
partially offset by lower credit spreads on loans and a decline in
average deposits. The allocated provision for credit losses
increased $30 million due to
seasonally higher net charge-offs and higher incurred loss
estimates.
CB-Retail average loans and leases held for investment increased
$624 million, or 3.8 percent on an
annualized basis, compared to the prior quarter. The increase was
primarily driven by growth in average residential mortgage loans of
$607 million, or 7.9 percent
annualized, indirect loans of $154
million, or 3.5 percent annualized, and revolving credit of
$123 million, or 16.6 percent
annualized. These increases were partially offset by a decline in
average mortgage warehouse lending of $224
million, or 58.1 percent annualized.
CB-Retail average total deposits decreased $787 million, or 4.0 percent on an annualized
basis, compared to the prior quarter. The decrease was primarily
driven by a decline in average noninterest-bearing deposits of
$360 million, or 8.4 percent
annualized, interest checking of $325
million, or 8.3 percent annualized, and time deposits of
$259 million, or 9.2 percent
annualized. These decreases were partially offset by an increase in
money market and savings of $156
million, or 1.8 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 by 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 $329
million for the fourth quarter of 2018, an increase of
$19 million compared to the prior
quarter. Segment net interest income increased $20 million primarily due to higher funding
spreads on deposits. The allocated provision for credit losses
declined slightly due to a decrease in incurred loss estimates,
substantially offset by loan growth. Noninterest expense increased
primarily due to higher restructuring charges as a result of
restructuring initiatives.
CB-Commercial average loans and leases held for investment
increased $54 million, or 0.4 percent
on an annualized basis compared to the prior quarter. Average
commercial and industrial loans increased $279 million, or 3.4 percent annualized, while
average commercial real estate loans declined $213 million, or 4.3 annualized. Average total
deposits decreased slightly compared to the prior quarter. Average
money market and savings decreased $442
million, or 11.0 percent annualized, time deposits decreased
$32 million, or 12.8 percent
annualized, and noninterest-bearing deposits declined $24 million, or 0.3 percent annualized. These
decreases were largely offset by an increase in average interest
checking of $473 million, or 22.9
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 $155
million for the fourth quarter of 2018, an increase of
$6 million compared to the prior
quarter. Segment net interest income increased primarily due to
higher funding spreads and average loan growth, partially offset by
a decline in average deposits. Noninterest income increased
primarily due to record investment banking and brokerage fees and
commissions as a result of strong activity in debt and equity deals
and higher managed account fees, partially offset by a decline in
noninterest fees on loans. Noninterest expense increased
$22 million primarily due to higher
personnel expense driven by performance-based incentives as well as
higher restructuring charges as a result of restructuring
initiatives.
FS&CF average loans and leases held for investment increased
$806 million, or 11.7 percent on an
annualized basis, compared to the prior quarter. The increase was
primarily driven by higher loans held for investment for Corporate
Banking of $692 million, or 17.6
percent annualized; Equipment Finance of $95
million, or 13.0 percent annualized; and BB&T Wealth of
$60 million, or 12.2 percent
annualized.
FS&CF average total deposits decreased $601 million, or 8.4 percent on an annualized
basis, compared to the prior quarter driven by decline in average
total deposits for Corporate Banking of $703
million, or 32.3 percent annualized, partially offset by an
increase for BB&T Wealth of $58
million, or 1.6 percent annualized.
Insurance Holdings ("IH")
BB&T's insurance agency / brokerage network is the fifth
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 $77 million for
the fourth quarter of 2018, an increase of $34 million compared to the prior quarter.
Noninterest income increased $44
million to a record, primarily driven by higher property and
casualty insurance commissions due to seasonality and increased
life insurance commissions driven by improved production and
seasonality. Noninterest expense was essentially flat compared to
the prior 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 $140
million for the fourth quarter of 2018, compared to a net
loss of $56 million for the prior
quarter. Segment net interest income decreased $27 million primarily due to an increase in the
rate and average balance for short-term debt, an increase in the
rate for long-term debt and an increase in the net credit for funds
provided to other operating segments, partially offset by the
increase in the yield for average securities. Noninterest income
decreased $71 million primarily due
to lower income related to assets for certain post-employment
benefits and a decline in income from SBIC private equity
investments. The allocated provision for credit losses decreased
primarily due to a decline in the provision for unfunded
commitments. Noninterest expense increased primarily due to higher
restructuring charges as a result of restructuring initiatives,
partially offset by a decline in personnel expense due to lower
expense related to assets for certain post-employment benefits. The
benefit for income taxes increased primarily due to a higher
pre-tax loss compared to the prior quarter.
Fourth Quarter 2018 compared to Fourth Quarter
2017
Community Banking Retail and Consumer Finance
CB-Retail net income was $384
million for the fourth quarter of 2018, an increase of
$120 million compared to the earlier
quarter. Segment net interest income increased $74 million due to higher funding spreads on
deposits, average loan growth and average deposit growth, partially
offset by lower credit spreads on loans. The allocated provision
for credit losses increased due to higher net charge-offs and an
increase in incurred loss estimates. Noninterest expense decreased
$33 million primarily due to a
decline in personnel expense as a result of a one-time bonus in the
earlier quarter to associates who do not generally receive
incentives or commission, as well as decreases in loan-related
expense and professional services. These decreases were partially
offset by an increase in restructuring charges as a result of
restructuring initiatives. The provision for income taxes decreased
$33 million due to the lower federal
tax rate compared to the earlier quarter.
Community Banking Commercial
CB-Commercial net income was $329
million for the fourth quarter of 2018, an increase of
$95 million compared to the earlier
quarter. Segment net interest income increased $45 million primarily driven by higher funding
spreads and average loan growth, partially offset by lower credit
spreads on loans. Noninterest expense decreased primarily due to a
decline in allocated corporate expenses and smaller decreases in
other expenses, partially offset by an increase in personnel
expense driven by lower capitalized employee costs resulting from
efficiencies in the loan closing process and an increase in
restructuring charges. The provision for income taxes decreased
$32 million compared to the earlier
quarter due to the lower federal tax rate.
Financial Services and Commercial Finance
FS&CF net income was $155
million for the fourth quarter of 2018, an increase of
$19 million compared to the earlier
quarter. Segment net interest income increased $32 million primarily driven by higher funding
spreads and average loan growth, partially offset by lower credit
spreads on loans and a decline in average deposits. Noninterest
income increased primarily due to record investment banking and
brokerage fees and commissions as a result of strong activity in
debt and equity deals and higher managed account fees, partially
offset by a decline in noninterest fees on loans and commercial
mortgage banking income. The allocated provision for credit losses
increased primarily due to loan growth and moderating improvement
in incurred loss estimates. Noninterest expense increased
$27 million primarily due to higher
personnel expense, restructuring charges and professional services.
The provision for income taxes decreased $24
million due to the lower federal tax rate.
Insurance Holdings
IH net income was $77 million for
the fourth quarter of 2018, an increase of $44 million compared to the earlier quarter.
Noninterest income increased $68
million to a record, primarily due to higher production and
the acquisition of Regions Insurance, which contributed
$34 million. Noninterest expense
increased $22 million primarily due
to the acquisition of Regions Insurance.
Other, Treasury & Corporate
OT&C generated a net loss of $140
million in the fourth quarter of 2018, a decrease of
$140 million compared to the
break-even results from the earlier quarter. Segment net interest
income decreased $93 million
primarily due to an increase in the rates and average balances for
long-term debt and short-term borrowings, and an increase in the
net credit for funds provided to other operating segments.
Noninterest income decreased $64
million primarily due to lower income related to assets for
certain post-employment benefits and a decline in income from SBIC
private equity investments. The allocated provision for credit
losses decreased primarily due to a decline in the provision for
unfunded commitments and a decline in the provision for PCI loans.
Noninterest expense decreased $78
million primarily due to a $100
million charitable contribution in the earlier quarter to
BB&T's philanthropic fund and lower expense related to assets
for certain post-employment benefits. These decreases were
partially offset by a decline in corporate expenses allocated to
other operating segments and an increase in restructuring charges
as a result of restructuring initiatives. The benefit for income
taxes decreased $80 million primarily
due to the lower federal tax rate in the current quarter and a net
tax benefit of $43 million in the
earlier quarter related to the impact of tax reform.
CAPITAL
RATIOS
|
4Q18
|
3Q18
|
2Q18
|
1Q18
|
4Q17
|
Risk-based:
|
(preliminary)
|
|
|
|
|
Common equity Tier
1
|
10.2
|
%
|
10.2
|
%
|
10.2
|
%
|
10.2
|
%
|
10.2
|
%
|
Tier 1
|
11.8
|
|
11.9
|
|
11.9
|
|
12.0
|
|
11.9
|
|
Total
|
13.8
|
|
13.9
|
|
13.9
|
|
14.0
|
|
13.9
|
|
Leverage
|
9.9
|
|
10.0
|
|
10.0
|
|
9.9
|
|
9.9
|
|
Capital levels remained strong at December 31, 2018.
BB&T declared common dividends of $0.405 per share during the fourth quarter of
2018, which resulted in a dividend payout ratio of 41.1 percent.
BB&T completed $375 million of
share repurchases during the quarter. The total payout ratio for
the fourth quarter of 2018 was 90.8 percent.
BB&T's modified liquidity coverage ratio was approximately
126 percent at December 31, 2018, 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 14.7 percent at December 31,
2018.
ASSET
QUALITY
|
|
|
|
|
|
(dollars in
millions)
|
4Q18
|
3Q18
|
2Q18
|
1Q18
|
4Q17
|
Total nonperforming
assets
|
$
|
585
|
|
$
|
601
|
|
$
|
624
|
|
$
|
669
|
|
$
|
627
|
|
Total performing
TDRs
|
1,119
|
|
1,090
|
|
1,073
|
|
1,042
|
|
1,043
|
|
Total loans 90 days
past due and still accruing
|
462
|
|
431
|
|
435
|
|
490
|
|
548
|
|
Total loans 30-89
days past due
|
1,044
|
|
1,075
|
|
905
|
|
814
|
|
1,052
|
|
|
|
|
|
|
|
Nonperforming loans
and leases as a percentage of loans and
leases held for investment
|
0.35
|
%
|
0.37
|
%
|
0.38
|
%
|
0.42
|
%
|
0.40
|
%
|
Nonperforming assets
as a percentage of total assets
|
0.26
|
|
0.27
|
|
0.28
|
|
0.30
|
|
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
|
|
1.04
|
|
Net charge-offs as a
percentage of average loans and leases,
annualized
|
0.38
|
|
0.35
|
|
0.30
|
|
0.41
|
|
0.36
|
|
Ratio of allowance
for loan and lease losses to net charge-offs,
annualized
|
2.76x
|
|
3.05x
|
|
3.49x
|
|
2.55x
|
|
2.89x
|
|
Ratio of allowance
for loan and lease losses to nonperforming
loans and leases held for investment
|
2.99x
|
|
2.86x
|
|
2.74x
|
|
2.49x
|
|
2.62x
|
|
Nonperforming assets totaled $585
million at December 31, 2018, down $16 million compared to September 30, 2018.
Nonperforming loans and leases represented 0.35 percent of loans
and leases held for investment, a two basis point decrease compared
to September 30, 2018. The decrease in nonperforming assets
was primarily due to a decline in nonperforming commercial and
industrial loans, partially offset by increases in smaller
portfolios.
Performing TDRs were up $29
million during the fourth quarter primarily in commercial
and industrial, indirect lending and residential mortgage.
Loans 90 days or more past due and still accruing totaled
$462 million at December 31,
2018, up $31 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 0.31 percent
at December 31, 2018, 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
December 31, 2018, unchanged from the prior quarter.
Loans 30-89 days past due and still accruing totaled
$1.0 billion at December 31,
2018, down $31 million compared to
the prior quarter.
Net charge-offs during the fourth quarter totaled $143 million, up $16
million compared to the prior quarter driven by indirect
loans. As a percentage of average loans and leases, annualized net
charge-offs were 0.38 percent, up three basis points compared to
the prior quarter.
The allowance for loan and lease losses, excluding the allowance
for PCI loans, was $1.5 billion, up
$21 million compared to the prior
quarter. As of December 31, 2018, the total allowance for loan
and lease losses was 1.05 percent of loans and leases held for
investment, unchanged compared to September 30, 2018.
The allowance for loan and lease losses was 2.99 times
nonperforming loans and leases held for investment, compared to
2.86 times at September 30, 2018. At December 31, 2018,
the allowance for loan and lease losses was 2.76 times annualized
net charge-offs, compared to 3.05 times at September 30,
2018.
Earnings Presentation and Quarterly Performance
Summary
To listen to BB&T's live fourth 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
Fourth 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 $225.7
billion in assets and market capitalization of approximately
$33.1 billion as of December 31,
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 1,800 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 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 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 Fourth
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
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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