WINSTON-SALEM, N.C.,
Oct. 17, 2019 /PRNewswire/ --
BB&T Corporation (NYSE: BBT) today reported earnings for the
third quarter of 2019. Net income available to common shareholders
was $735 million, down 6.8 percent,
compared with the third quarter last year. Earnings per diluted
common share were $0.95 for the third
quarter of 2019, a decrease of 5.9 percent compared with the same
period last year. Results for the third quarter produced an
annualized return on average assets (ROA) of 1.41 percent, an
annualized return on average common shareholders' equity (ROCE) of
10.04 percent, and an annualized return on tangible common
shareholders' equity (ROTCE) of 16.03 percent.
Adjusted net income available to common shareholders was
$832 million, or $1.07 per diluted share, excluding merger-related
and restructuring charges of $34
million ($26 million
after-tax), incremental operating expenses related to the merger of
$52 million ($40 million after-tax) and an after-tax charge of
$46 million related to the redemption
of preferred stock, partially offset by the after-tax impact from
the sale of residential mortgage loans of $15 million. Adjusted diluted earnings per common
share increased $0.04 compared to the
third quarter of 2018. Adjusted results produced an annualized ROA
of 1.50 percent, an annualized ROCE of 11.36 percent and an
annualized ROTCE of 18.07 percent.
"We are pleased to report strong results for the third quarter,
with improved adjusted earnings driven by stronger revenues and
lower credit costs," said Chairman and Chief Executive Officer
Kelly S. King. "While average loans
held for investment decreased 4.8 percent, this result was due to
our strategic decision to sell approximately $4 billion in mortgage loans during the quarter.
Excluding this sale, our company generated robust loan growth of
6.5 percent on an annualized basis compared with last
quarter.
"In addition, we enjoyed 2.5 percent taxable-equivalent
revenue growth compared with the third quarter last year led by
strong results from our fee income-generating businesses, including
insurance, mortgage banking and investment banking and brokerage,
as well as a resilient net interest margin in this challenging rate
environment. This was due in part to lower deposit costs, which
peaked last quarter.
"We continue to make significant progress laying the groundwork
for our exciting merger of equals with SunTrust," said King. "We
are very pleased the shareholders of both companies strongly
supported the merger at their respective meetings earlier this
quarter. Importantly, we have named approximately 75 percent of
leadership roles for the Truist organization, so we are well
prepared as we look forward to closing the merger."
Third Quarter 2019 Performance
Highlights
- Earnings per diluted common share were $0.95
-
- Adjusted diluted earnings per share were $1.07
- ROA was 1.41 percent; adjusted ROA was 1.50 percent
- ROCE was 10.04 percent; adjusted ROCE was 11.36 percent
- ROTCE was 16.03 percent; adjusted ROTCE was 18.07 percent
- Taxable-equivalent revenues were $3.0
billion, up $73 million from
the third quarter of 2018
-
- Noninterest income increased $64
million, up 5.2 percent
- Insurance income increased $39
million, up 8.7 percent
- Mortgage banking income increased $33
million, up 41.8 percent
- Fee income ratio was 43.4 percent, compared to 42.3
percent
- Net interest margin was 3.37 percent, down five basis points
from the second quarter of 2019
- Noninterest expense was $1.8
billion, up $98 million
compared to the third quarter of 2018
-
- Excluding merger-related and restructuring charges and
incremental operating expenses related to the merger; adjusted
noninterest expenses were up 1.7 percent
- GAAP efficiency ratio was 61.3 percent, compared to 59.5
percent
- Adjusted efficiency ratio was 57.1 percent, compared to 57.3
percent
- Average loans and leases held for investment were $148.7 billion, down $1.8
billion, or 4.8 percent annualized compared to the second
quarter of 2019
-
- Adjusted for the sale of $4.3
billion of residential mortgage loans, average loans held
for investment increased 6.5 percent annualized
- Average commercial and industrial loans increased $1.2 billion, or 7.6 percent annualized
- Average residential mortgage loans decreased $3.7 billion, or 45.2 percent annualized;
adjusted for the sale average residential mortgage loans increased
7.4 percent annualized
- Average indirect loans increased $483
million, or 10.7 percent annualized
- Average deposits were up $2.1
billion, or 5.2 percent annualized, compared to the prior
quarter
-
- Average noninterest-bearing deposits decreased $180 million, or 1.4 percent annualized
- Average noninterest-bearing deposits represent 32.4 percent of
total deposits, compared to 32.9 percent in the prior quarter
- Cost of average interest-bearing deposits was 0.99 percent,
down three basis points
- Cost of average total deposits was 0.67 percent, down one basis
point
- Asset quality remains excellent
-
- Nonperforming assets were 0.22 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, unchanged compared to the
prior quarter
- Net charge-offs were 0.41 percent of average loans and leases,
up three basis points compared to the prior quarter
- The allowance for loan loss coverage ratio was 3.52 times
nonperforming loans and leases held for investment, versus 3.46
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 10.6
percent
- Tier 1 risk-based capital was 12.2 percent
- Total capital was 14.7 percent
- Leverage capital was 10.3 percent
EARNINGS
HIGHLIGHTS
|
|
|
|
Change 3Q19
vs.
|
(dollars in millions,
except per share data)
|
3Q19
|
2Q19
|
3Q18
|
2Q19
|
3Q18
|
Net income available
to common shareholders
|
$
|
735
|
|
$
|
842
|
|
$
|
789
|
|
$
|
(107)
|
|
$
|
(54)
|
|
Diluted earnings per
common share
|
0.95
|
|
1.09
|
|
1.01
|
|
(0.14)
|
|
(0.06)
|
|
|
|
|
|
|
|
Net interest income -
taxable equivalent
|
$
|
1,723
|
|
$
|
1,714
|
|
$
|
1,714
|
|
$
|
9
|
|
$
|
9
|
|
Noninterest
income
|
1,303
|
|
1,352
|
|
1,239
|
|
(49)
|
|
64
|
|
Total
taxable-equivalent revenue
|
$
|
3,026
|
|
$
|
3,066
|
|
$
|
2,953
|
|
$
|
(40)
|
|
$
|
73
|
|
Less
taxable-equivalent adjustment
|
23
|
|
24
|
|
27
|
|
|
|
Total
revenue
|
$
|
3,003
|
|
$
|
3,042
|
|
$
|
2,926
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return on average
assets
|
|
1.41
|
%
|
|
1.55
|
%
|
|
1.49
|
%
|
|
(0.14)
|
%
|
|
(0.08)
|
%
|
Return on average
risk-weighted assets
|
|
1.75
|
|
|
1.92
|
|
|
1.85
|
|
|
(0.17)
|
|
|
(0.10)
|
|
Return on average
common shareholders' equity
|
|
10.04
|
|
|
11.98
|
|
|
11.69
|
|
|
(1.94)
|
|
|
(1.65)
|
|
Return on average
tangible common shareholders' equity (1)
|
|
16.03
|
|
|
19.45
|
|
|
19.74
|
|
|
(3.42)
|
|
|
(3.71)
|
|
Net interest margin -
taxable equivalent
|
|
3.37
|
|
|
3.42
|
|
|
3.47
|
|
|
(0.05)
|
|
|
(0.10)
|
|
(1) Excludes certain
items as detailed in the non-GAAP reconciliations in the Quarterly
Performance Summary.
|
Third Quarter 2019 compared to Second Quarter
2019
Total taxable-equivalent revenues were $3.0 billion for the third quarter of 2019, a
decrease of $40 million compared to
the prior quarter, primarily driven by a decrease of $49 million in noninterest income.
The net interest margin was 3.37 percent for the third quarter,
down five basis points compared to the prior quarter. Three basis
points of the decrease was due to the residential mortgage loan
sale and the reinvestment into securities during the current
quarter. Average earning assets increased $2.6 billion, which primarily reflects a
$2.8 billion increase in average
securities and a $485 million
increase in average total loans and leases. The increase in average
total loans and leases was impacted by the sale of $4.3 billion of residential mortgage loans during
the third quarter. Average other earning assets decreased
$701 million due to lower average
trading securities. Average interest-bearing liabilities increased
$1.6 billion, driven by an increase
of $2.3 billion in average
interest-bearing deposits, partially offset by a decrease of
$625 million in average long-term
debt.
The yield on the total loan portfolio for the third quarter was
4.98 percent, down seven basis points compared to the prior
quarter, primarily due to the impact on variable rate loans from
the decrease in short-term rates. The yield on the average
securities portfolio for the third quarter was 2.60 percent, down
two basis points compared to the prior quarter.
The average cost of total deposits was 0.67 percent, down one
basis point compared to the prior quarter. The average cost of
interest-bearing deposits was 0.99 percent, down three basis points
compared to the prior quarter. The average rate on long-term debt
was 3.42 percent, up nine basis points compared to the prior
quarter. The average rate on short-term borrowings was 2.55
percent, up 15 basis points compared to the prior quarter. The
increases in rates on short-term borrowings and long-term debt
were due to higher costs from
hedging activities.
The provision for credit losses was $117
million, and net charge-offs were $153 million for the third quarter, compared to
$172 million and $142 million, respectively, for the prior
quarter. The decrease in the provision for credit losses was
primarily due to the sale of residential mortgage loans and a
decrease in the reserve for unfunded commitments.
Noninterest income was $1.3
billion, a decrease of $49
million compared to the prior quarter. Insurance income
decreased $79 million primarily due
to seasonality. Mortgage banking income was essentially flat
compared to the prior quarter, as increases from production and
servicing related revenues in the residential and commercial
mortgage banking businesses of $24
million were offset by a decline of $25 million for the net valuation of mortgage
services rights valuation adjustments in the prior quarter. Other
income increased $35 million,
primarily due to a $23 million
increase in income related to assets for certain post-employment
benefits, which is offset by higher personnel expense, and an
increase from client derivatives.
Noninterest expense was $1.8
billion for the third quarter, up $89
million compared to the prior quarter. Noninterest expense
includes $34 million of
merger-related and restructuring charges primarily related to the
merger of equals with SunTrust and $52
million of incremental operating expenses related to the
merger. Excluding these items, noninterest expense was up
$35 million.
Personnel expense increased $41
million compared to the prior quarter. Excluding an increase
of $35 million in incremental
operating expenses related to the merger, personnel expense
increased $6 million. This includes a
$23 million increase for certain
post-employment benefits expense, which is offset by higher
noninterest income. Production-based incentives expense and
equity-based compensation decreased compared to the prior quarter.
Professional services expense increased $16
million partially due to incremental operating expenses
related to the merger. Other expense increased $20 million due to higher advertising and
marketing expenses and other sundry items.
The provision for income taxes was $218
million for the third quarter, compared to $234 million for the prior quarter. The effective
tax rate for the third quarter was 20.8 percent, compared to 20.9
percent for the prior quarter.
Third Quarter 2019 compared to Third Quarter
2018
Total taxable-equivalent revenues were $3.0 billion for the third quarter of 2019, an
increase of $73 million compared to
the earlier quarter, which reflects an increase of $9 million in taxable-equivalent net interest
income and an increase of $64 million
in noninterest income.
Net interest margin was 3.37 percent, down ten basis points
compared to the earlier quarter. Average earning assets increased
$7.2 billion. The increase in average
earning assets reflects a $4.6
billion increase in average total loans and leases and a
$2.6 billion increase in average
securities. Average interest-bearing liabilities increased
$7.1 billion compared to the earlier
quarter. Average interest-bearing deposits increased $6.4 billion and average short-term borrowings
increased $2.3 billion, while average
long-term debt decreased $1.6
billion. The yield on the total loan portfolio for the third
quarter of 2019 was 4.98 percent, up 15 basis points compared to
the earlier quarter, reflecting the impact of rate increases. The
yield on the average securities portfolio was 2.60 percent, up 13
basis points compared to the earlier period.
The average cost of total deposits was 0.67 percent, up 24 basis
points compared to the earlier quarter. The average cost of
interest-bearing deposits was 0.99 percent, up 33 basis points
compared to the earlier quarter. The average rate on long-term debt
was 3.42 percent, up 43 basis points compared to the earlier
quarter. The average rate on short-term borrowings was 2.55
percent, up 61 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 $117
million, compared to $135
million for the earlier quarter. The decrease in the
provision for credit losses was primarily due to the residential
mortgage loan sale in the current quarter. Net charge-offs for the
third quarter of 2019 totaled $153
million compared to $127
million in the earlier quarter.
Noninterest income for the third quarter of 2019 increased
$64 million compared to the earlier
quarter. Insurance income increased $39
million due to higher production. Mortgage banking income
increased $33 million primarily due
to higher production revenues from both residential and commercial
mortgage banking businesses. Investment banking brokerage fees and
commissions increased $14 million due
to higher managed account fees and higher investment banking
transaction revenues. Other income decreased $29 million primarily due to a decrease in income
from SBIC private equity investments.
Noninterest expense for the third quarter of 2019 was up
$98 million compared to the earlier
quarter. Merger-related and restructuring charges increased
$16 million, 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 and the Regions Insurance
acquisition. The current quarter also included $52 million of incremental operating expenses
related to the merger. Excluding these charges, noninterest expense
was up $30 million, or 1.7 percent
compared to the earlier quarter.
Personnel expense increased $57
million compared to the earlier quarter. Excluding an
increase of $39 million in
incremental operating expenses related to the merger, personnel
expense increased $18 million
compared to the earlier quarter. The remaining increase in
personnel expense was primarily due to an increase in
production-based incentive expense. Professional services expense
increased $14 million primarily due
to incremental operating expenses related to the merger. Regulatory
charges decreased $17 million,
primarily the result of the deposit insurance fund reaching the
targeted level. Other expense increased $35
million due to higher non-service related pension expense,
higher operating charge-offs, higher advertising and marketing
expenses and other sundry items.
The provision for income taxes was $218
million for the third quarter of 2019, compared to
$210 million for the earlier quarter.
This produced an effective tax rate for the third quarter of 2019
of 20.8 percent, compared to 20.0 percent for the earlier
quarter.
LOANS AND
LEASES
|
|
|
|
|
(dollars in
millions)
|
|
|
|
|
Average
balances
|
3Q19
|
2Q19
|
Change
|
%
Change
|
|
|
|
|
(annualized)
|
Commercial:
|
|
|
|
|
Commercial and
industrial
|
$
|
63,768
|
|
$
|
62,563
|
|
$
|
1,205
|
|
7.6
|
%
|
CRE
|
20,767
|
|
20,748
|
|
19
|
|
0.4
|
|
Lease
financing
|
2,260
|
|
2,122
|
|
138
|
|
25.8
|
|
Total
commercial
|
86,795
|
|
85,433
|
|
1,362
|
|
6.3
|
|
Retail:
|
|
|
|
|
Residential
mortgage
|
28,410
|
|
32,066
|
|
(3,656)
|
|
(45.2)
|
|
Direct
|
11,468
|
|
11,506
|
|
(38)
|
|
(1.3)
|
|
Indirect
|
18,362
|
|
17,879
|
|
483
|
|
10.7
|
|
Total
retail
|
58,240
|
|
61,451
|
|
(3,211)
|
|
(20.7)
|
|
Revolving
credit
|
3,218
|
|
3,151
|
|
67
|
|
8.4
|
|
PCI
|
411
|
|
432
|
|
(21)
|
|
(19.3)
|
|
Total loans and leases
held for investment
|
$
|
148,664
|
|
$
|
150,467
|
|
$
|
(1,803)
|
|
(4.8)
|
|
Average loans held for investment for the third quarter of 2019
were $148.7 billion, down
$1.8 billion or 4.8 percent
annualized compared to the second quarter of 2019. Excluding the
sale of $4.3 billion of residential
mortgages in the third quarter, average loans held for investment
increased 6.5 percent annualized compared to the second quarter of
2019.
Average commercial and industrial loans increased $1.2 billion driven by strong growth in mortgage
warehouse lending, premium finance, corporate banking and equipment
finance.
Average residential mortgage loans held for investment decreased
$3.7 billion primarily due to the
sale of $4.3 billion of residential
mortgage loans. Excluding the sale, average residential mortgage
loans increased 7.4 percent annualized compared to the prior
quarter.
Average indirect retail loans increased $483 million. The increase was across all
categories of indirect lending. Growth was led by power sports,
recreational and automobile lending.
DEPOSITS
|
|
|
|
|
(dollars in
millions)
|
|
|
|
|
Average
balances
|
3Q19
|
2Q19
|
Change
|
%
Change
|
|
|
|
|
(annualized)
|
Noninterest-bearing
deposits
|
$
|
52,500
|
|
$
|
52,680
|
|
$
|
(180)
|
|
(1.4)
|
%
|
Interest
checking
|
27,664
|
|
27,708
|
|
(44)
|
|
(0.6)
|
|
Money market and
savings
|
64,920
|
|
63,394
|
|
1,526
|
|
9.6
|
|
Time
deposits
|
16,643
|
|
15,730
|
|
913
|
|
23.0
|
|
Foreign office
deposits - interest-bearing
|
265
|
|
379
|
|
(114)
|
|
(119.3)
|
|
Total
deposits
|
$
|
161,992
|
|
$
|
159,891
|
|
$
|
2,101
|
|
5.2
|
|
Average deposits for the third quarter were $162.0 billion, up $2.1
billion compared to the prior quarter. Average money market
and savings deposits increased $1.5
billion and average time deposits increased $913 million primarily due to increases in
commercial balances.
Noninterest-bearing deposits represented 32.4 percent of total
average deposits for the third quarter, compared to 32.9 percent
for the prior quarter and 34.4 percent for the same quarter a year
ago. The cost of average total deposits was 0.67 percent for the
third quarter, down one basis point compared to the prior quarter.
The cost of average interest-bearing deposits was 0.99 percent for
the third quarter, down three basis points compared to the prior
quarter.
SEGMENT
RESULTS
|
|
|
|
Change 3Q19
vs.
|
(dollars in
millions)
|
|
|
|
Segment Net
Income
|
3Q19
|
2Q19
|
3Q18
|
2Q19
|
3Q18
|
Community Banking
Retail and Consumer Finance
|
$
|
446
|
|
$
|
445
|
|
$
|
396
|
|
$
|
1
|
|
$
|
50
|
|
Community Banking
Commercial
|
338
|
|
319
|
|
311
|
|
19
|
|
27
|
|
Financial Services
and Commercial Finance
|
185
|
|
169
|
|
149
|
|
16
|
|
36
|
|
Insurance
Holdings
|
61
|
|
111
|
|
43
|
|
(50)
|
|
18
|
|
Other, Treasury &
Corporate
|
(202)
|
|
(159)
|
|
(60)
|
|
(43)
|
|
(142)
|
|
Total net
income
|
$
|
828
|
|
$
|
885
|
|
$
|
839
|
|
$
|
(57)
|
|
$
|
(11)
|
|
Third Quarter 2019 compared to Second 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 $446
million for the third quarter of 2019, a slight increase
compared to the prior quarter. Segment net interest income
increased $36 million primarily due
to higher credit spreads on loans, higher loans held for sale
balances and an additional day in the current quarter. Noninterest
income decreased $15 million
primarily due to decreases in mortgage banking income resulting
from net residential mortgage servicing rights valuation
adjustments in the prior quarter. The allocated provision for
credit losses decreased $8 million
primarily due to declines in average loan balances resulting from
the residential mortgage portfolio sale, partially offset by
increased incurred loss estimates in various retail portfolios and
seasonally higher net charge-offs. Noninterest expense increased
$27 million primarily due to
incremental operating expenses related to the merger in the current
quarter.
CB-Retail average loans and leases held for investment decreased
$2.5 billion, or 14.5 percent on an
annualized basis, compared to the prior quarter. The decrease was
primarily driven by decreases in average residential mortgage loans
of $3.7 billion due to the
residential mortgage portfolio sale, partially offset by increases
in average mortgage warehouse lending of $652 million and average indirect lending of
$483 million.
CB-Retail average total deposits decreased $141 million, or 0.7 percent on an annualized
basis, compared to the prior quarter. The decrease was primarily
driven by declines in average interest checking of $425 million, or 11.5 percent annualized,
partially offset by growth in time deposits of $186 million, or 6.6 percent annualized,
noninterest-bearing deposits of $51
million, or 1.2 percent annualized, and money market and
savings of $47 million, or 0.5
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 $338
million for the third quarter of 2019, an increase of
$19 million compared to the prior
quarter. The allocated provision for credit losses decreased
$27 million primarily due to
decreased incurred loss estimates. Noninterest expense increased
primarily due to higher allocated corporate expenses.
CB-Commercial average loans and leases held for investment
decreased $109 million, or 0.8
percent on an annualized basis, compared to the prior quarter.
Average commercial and industrial loans declined $165 million, or 2.0 percent annualized, while
average commercial real estate loans increased $66 million, or 1.4 percent annualized.
Average total deposits increased $1.1
billion, or 7.1 percent on an annualized basis, compared to
the prior quarter driven by increases in money market and savings
of $762 million, or 18.8 percent
annualized, and interest checking of $464
million, or 19.7 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 $185
million for the third quarter of 2019, an increase of
$16 million compared to the prior
quarter. Noninterest income increased $22
million primarily due to higher commercial mortgage banking
income due to higher production volumes, and client derivatives
largely due to decreased valuation reserves and higher sales
volumes. The allocated provision for credit losses decreased
$11 million due to lower net
charge-offs and decreased incurred loss estimates primarily
attributable to the asset based lending portfolio. Noninterest
expense increased $16 million
primarily due to higher performance-based incentives, depreciation
on property under operating leases and professional services in the
current quarter.
FS&CF average loans and leases held for investment increased
$569 million, or 7.6 percent on an
annualized basis, compared to the prior quarter. The increase was
primarily driven by growth in Equipment Finance of $320 million, or 38.1 percent annualized and
Corporate Banking loans of $302
million, or 6.9 percent annualized.
FS&CF average total deposits increased $632 million, or 8.9 percent on an annualized
basis, compared to the prior quarter primarily driven by growth in
average total deposits for Corporate Banking of $408 million, or 20.8 percent annualized, and
Wealth and Retirement Services of $371
million, or 8.9 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 $61 million for
the third quarter of 2019, a decrease of $50
million compared to the prior quarter. Noninterest income
decreased $79 million primarily due
to seasonality. Noninterest expense decreased $9 million primarily due to lower
performance-based incentives in the current quarter, which was
partially offset by an increase in incremental operating expenses
related to the merger.
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 $202
million for the third quarter of 2019, compared to a net
loss of $159 million for the prior
quarter. Segment net interest income decreased $33 million primarily due to decreases in the net
charge for funds provided to other operating segments from the
prior quarter. Noninterest income increased $21 million primarily due to an increase in
income related to certain post-employment benefits. The allocated
provision for credit losses decreased $9
million primarily due to the provision for unfunded
commitments. Noninterest expense increased $51 million primarily due to higher expense
related to assets for certain post-employment benefits, higher
merger-related charges and other sundry items. The benefit for
income taxes increased primarily due to lower net income in the
current quarter.
Third Quarter 2019 compared to Third Quarter
2018
Community Banking Retail and Consumer Finance
CB-Retail net income was $446
million for the third quarter of 2019, an increase of
$50 million compared to the earlier
quarter. Segment net interest income increased $56 million primarily due to average loan growth
and higher funding spreads on deposits, partially offset by lower
credit spreads on loans. Noninterest income increased $25 million primarily due to an increase in
mortgage banking income primarily resulting from an increase in
saleable lock volume and portfolio sales. The allocated provision
for credit losses decreased $6
million primarily due to the impact of the residential
mortgage portfolio sale in the current quarter, partially offset by
higher net charge-offs and incurred loss estimates in the current
quarter. Noninterest expense increased $24
million primarily due to higher allocated corporate
expense.
Community Banking Commercial
CB-Commercial net income was $338
million for the third quarter of 2019, an increase of
$27 million compared to the earlier
quarter. Segment net interest income increased $17 million primarily driven by higher funding
spreads, partially offset by lower credit spreads on loans and
declines in average loans. Noninterest income increased compared to
the earlier quarter primarily due to higher referral fees and
service charges on deposits in the current quarter. The allocated
provision for credit losses decreased primarily due to lower
incurred loss estimates, partially offset by higher net
charge-offs. Noninterest expense decreased primarily due to lower
allocated corporate expenses, partially offset by lower credits for
capitalized employee costs.
Financial Services and Commercial Finance
FS&CF net income was $185
million for the third quarter of 2019, an increase of
$36 million compared to the earlier
quarter. Segment net interest income increased $17 million primarily driven by average loan
growth and higher funding spreads, partially offset by lower credit
spreads on loans. Noninterest income increased $43 million primarily due to client derivatives,
an increase in investment banking and brokerage fees and
commissions related to an increase in managed account fees; and
higher commercial mortgage banking income. Noninterest expense
increased $15 million primarily due
to higher performance-based incentives in the current quarter.
Insurance Holdings
IH net income was $61 million for
the third quarter of 2019, an increase of $18 million compared to the earlier quarter.
Noninterest income increased $39
million primarily due to higher production. Noninterest
expense increased $19 million
primarily due to commissions on higher production and incremental
operating expenses related to the merger.
Other, Treasury & Corporate
OT&C generated a net loss of $202
million in the third quarter of 2019, compared to a net loss
of $60 million in the earlier
quarter. Segment net interest income decreased $82 million primarily due to increases in the net
credit for funds provided to other operating segments and rates on
long-term debt. Noninterest income decreased $49 million primarily due to a decrease in income
from SBIC private equity investments and income related to assets
for certain post-employment benefits. The allocated provision for
credit losses decreased $5 million
primarily due to the provision for unfunded commitments.
Noninterest expense increased $43
million primarily due to higher merger-related charges and
other sundry items. The benefit for income taxes increased
$27 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
|
3Q19
|
2Q19
|
1Q19
|
4Q18
|
3Q18
|
Risk-based:
|
(preliminary)
|
|
|
|
|
Common equity Tier
1
|
10.6
|
%
|
10.4
|
%
|
10.3
|
%
|
10.2
|
%
|
10.2
|
%
|
Tier 1
|
12.2
|
|
12.0
|
|
12.0
|
|
11.8
|
|
11.9
|
|
Total
|
14.7
|
|
14.2
|
|
14.2
|
|
13.8
|
|
13.9
|
|
Leverage
|
10.3
|
|
10.2
|
|
10.1
|
|
9.9
|
|
10.0
|
|
Capital levels remained strong at September 30, 2019. BB&T declared common
dividends of $0.450 per share during
the third quarter of 2019, this represents an 11.1 percent increase
compared to the prior quarter. The dividend and total payout ratios
for the third quarter of 2019 were 46.9 percent. As previously
communicated, BB&T has suspended its share repurchase program
until after the completion of the merger of equals.
BB&T issued $1.7 billion of
preferred stock during the quarter and redeemed a similar amount
from two higher-cost issuances. In connection with the redemptions,
net income available to common shareholders was reduced by
$46 million to recognize the
difference in the redemption price and the carrying value.
BB&T's average modified liquidity coverage ratio was
approximately 139 percent for the three months ended September 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 18.2 percent at September 30, 2019.
ASSET
QUALITY
|
|
|
|
|
|
(dollars in
millions)
|
3Q19
|
2Q19
|
1Q19
|
4Q18
|
3Q18
|
Total nonperforming
assets
|
$
|
509
|
|
$
|
523
|
|
$
|
584
|
|
$
|
585
|
|
$
|
601
|
|
Total performing
TDRs
|
1,057
|
|
1,070
|
|
1,130
|
|
1,119
|
|
1,090
|
|
Total loans 90 days
past due and still accruing
|
403
|
|
407
|
|
431
|
|
462
|
|
431
|
|
Total loans 30-89
days past due
|
992
|
|
1,016
|
|
948
|
|
1,044
|
|
1,075
|
|
Nonperforming loans
and leases as a percentage of loans and leases held for
investment
|
0.30
|
%
|
0.30
|
%
|
0.35
|
%
|
0.35
|
%
|
0.37
|
%
|
Nonperforming assets
as a percentage of total assets
|
0.22
|
|
0.23
|
|
0.26
|
|
0.26
|
|
0.27
|
|
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
|
0.41
|
|
0.38
|
|
0.40
|
|
0.38
|
|
0.35
|
|
Ratio of allowance
for loan and lease losses to net charge-offs, annualized
|
2.59x
|
|
2.80x
|
|
2.62x
|
|
2.76x
|
|
3.05x
|
|
Ratio of allowance
for loan and lease losses to nonperforming loans and leases held
for investment
|
3.52x
|
|
3.46x
|
|
2.97x
|
|
2.99x
|
|
2.86x
|
|
Nonperforming assets totaled $509
million at September 30, 2019,
down $14 million compared to
June 30, 2019. Nonperforming loans
and leases represented 0.30 percent of loans and leases held for
investment, unchanged compared to June 30,
2019.
Performing TDRs were down $13
million during the third quarter primarily in commercial and
industrial loans and residential mortgage loans, which was
partially offset by an increase in indirect loans.
Loans 90 days or more past due and still accruing totaled
$403 million at September 30, 2019, down slightly 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 September 30, 2019, unchanged
compared to 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
September 30, 2019, also unchanged
from the prior quarter.
Loans 30-89 days past due and still accruing totaled
$992 million at September 30, 2019, down $24 million compared to the prior quarter,
primarily due to a decline in residential mortgage loans, which was
partially offset by an expected seasonal increase in indirect
automobile lending.
Net charge-offs during the third quarter totaled $153 million, up $11
million compared to the prior quarter. As a percentage of
average loans and leases, annualized net charge-offs were 0.41
percent, up three basis points compared to the prior quarter.
The allowance for loan and lease losses, excluding the allowance
for PCI loans, was $1.6 billion, down
$22 million compared to the prior
quarter. The decrease in the allowance for loan and lease losses
was primarily due to the sale of residential mortgage loans during
the third quarter. As of September 30,
2019, the total allowance for loan and lease losses was 1.05
percent of loans and leases held for investment, unchanged compared
to June 30, 2019.
The allowance for loan and lease losses was 3.52 times
nonperforming loans and leases held for investment, compared to
3.46 times at June 30, 2019. At
September 30, 2019, the allowance for
loan and lease losses was 2.59 times annualized net charge-offs,
compared to 2.80 times at June 30,
2019.
Earnings Presentation and Quarterly Performance
Summary
To listen to BB&T's live third 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
Third 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 $236.8
billion in assets and market capitalization of approximately
$40.9 billion as of September 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 and return on risk-weighted assets 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 the appendix to
BB&T's Third Quarter 2019 Earnings Presentation, 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, 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 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;
|
•
|
fraud or
misconduct by internal or external parties, which BB&T may not
be able to prevent, detect or mitigate;
|
•
|
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